No company, whether public quoted, private limited, state owned or community owned, would be happy with an ineffective Board – as a collective or individual Board members. There are many factors that impact the effectiveness of a Board. Most progressive Boards have recently added voluntary Board Performance Evaluation to this list of factors. This piece explores good practices in the area of Voluntary Board Performance Evaluation, covering some key considerations, bearing in mind that it is not a ‘one size fits all’ affair.

Board Performance Dimensions Evaluated

Best practice suggests that Boards should evaluate themselves in performance dimensions indicated below:

Board Composition and Renewal

Good corporate governance demands that in constituting itself, a Board should be alive to issues of gender, expertise, skills, knowledge, integrity and Board member independence. Considerations like Board terms and Voluntary Board performance evaluation are also important in Board renewal.

Board Governance Systems

Board governance systems, namely Board Charters, Board Codes of Ethics and Board Codes of Conduct form the foundation for effective Board leadership. Evaluating this Board performance dimension is key in the Board’s continuous improvement thrust.

Board Learning and Development

Board and Director capacity building is a strategic imperative for Boards. This includes Board Induction, attending Board leadership seminars, conferences and team building sessions. Therefore, Boards need to be evaluated on their effectiveness in this area.

Corporate Control, Fiduciary Duties

This is the traditional responsibility of any Board – monitoring managerial performance and achieving an adequate return for shareholders. Corporate control and fiduciary duties entail:

• Board meetings;
• Review of action points from the last Board meeting;
• Performance reports;
• Board Committees reports; and
• Annual General Meetings.

Enterprise Shaping

This performance dimension, inter alia, entails the following:

• Strategy – setting organisational direction;
• Market and Competitive Landscape Review and Positioning;
• Enterprise Risk Management Review and Positioning;
• Talent Quality Review and Positioning; and
• Organisational Culture Review and Positioning.

Board Financial Oversight

This entails appropriately stewarding the financial resources of an organisation to prevent or minimise financial haemorrhage and ensure financial soundness of an organisation on a sustainable basis.

Board Dynamics and Processes

The following are key to Board effectiveness:

• How well a Board conducts itself when running Board Meetings;
• How Board members are engaged with and committed to Board business,
• The performance of individual Board members; and
• How the Board Chair runs Board affairs.

Managing Key Interfaces

How the Board interfaces with the CEO, Managing Director, shareholders and relevant key stakeholders is another indicator of its effectiveness.

Is there a clear understanding of where the Board’s role ends and the CEO’s begins? Is there an effective system for managing the CEO’s performance?

How is accountability to shareholders and relevant stakeholders managed?

• Sound communication
• Understanding and taking into account their interests
• Monitoring of relations
• Promoting goodwill and support

Board Performance Evaluation Process

Board performance evaluation is voluntary. The importance of buy-in from Board members, informed by a strong business case for adopting the strategy, can therefore not be over emphasised. Should the Board adopt this strategy, it must agree on the following:

• Who should lead the process – Board Chair, a Board member grounded in the functioning of the Board or a Board Committee (usually the HR Committee or the Nominating Committee);
• Whether to use a third party Consultant in the process;
• The methodology to be used in the performance evaluation, that is often a questionnaire, followed by individual interviews and the writing of an aggregate report (for confidentiality) shared with and discussed by the full Board; and
• How Board evaluation should be disclosed.

Board performance evaluation is not just another formality in the Board Leadership Framework of a company. It, amongst other benefits, helps to identify priority areas for the Board, acting as a Board planning tool.