How to Conduct a Board Evaluation in 5 Easy Steps

Most companies conduct a board evaluation process annually. The basis of a good board evaluation process is often detailed in effective board meetings minutes. The minutes provide insight into the challenges the board tackles, and the progress attained in resolving the challenges. Besides the minutes, clear communication plays a vital role in the success of the board evaluation process. 

Consider these 5 steps to plan an effective board evaluation: 

1. Outline the Evaluation Process from Start to Finish

Create a detailed program for the board evaluation process. You can use an agenda building tool to make the process easier. The program should include timelines for each item on the program, leaving most of the time open for the evaluation process. 

Listing the items on the program creates an expectation for the different talking points and how much time each item will take. 

Outlining the process also prevents the board evaluation from being usurped by other less critical agendas.

2. Appoint Evaluation Lead

After laying the groundwork, you need to appoint the evaluation lead. Most companies prefer to use external consulting firms with no ties to the Board of Directors, and bring complete autonomy in examining the appraised parameters and tabulating the results accordingly. 

It’s also common for the board secretary to coordinate the evaluation process. Ideally, the decision on who will conduct the evaluation should be made ahead of the meeting.

3. Identify Evaluation Topics 

Evaluation topics vary according to the goals of the company and current trends. They typically include the following:

Composition and Leadership 

A top priority of the board evaluation involves determining whether the board and its committees have the appropriate composition to address the company’s governance needs now and in the future. 

Refreshment Mechanisms 

The evaluation should determine if the board has appropriate refreshment mechanisms in place. Does the board make active decisions on re-nominations, or are those decisions written in stone? How much effort does that board put in evaluating directors, and does it provide feedback to the evaluated directors? Are these evaluations considered in the re-nomination decisions? 

Agenda and Information 

One of the ways to measure the board’s effectiveness is how it focuses and prioritizes matters affecting the company. Does the board come to an agreement on these matters, and does it have the information necessary to promptly make an informed decision? 

Culture

Culture is a vital evaluation point. It features on almost every board evaluation. It examines whether the board promotes a culture that puts the company’s interests above the interests of the directors. Does the board value informed discussions and diverse views? Is constructive disagreement and debate and timely resolution ingrained in the board’s functioning? 

Within this point, you also want to look at how the board and its committees handle conflict and the board’s relationship with its shareholders and key advisors. 

Governance Structures and Practices 

In this evaluation point, you want to determine if the board utilizes governance structures that support the ability to govern the company effectively and objectively. 

4. Ask for Feedback Post-Evaluation 

After the evaluation, it’s good practice to collect feedback from the participating board directors to inquire about the process and how to improve it. This feedback can include information not addressed in the evaluation points, which can prove crucial when tabulating the results. You can use voting and approval tools or a secure messenger for directors who want to keep their feedback anonymous. 

5. Utilize a Third Party When Applicable 

Using third-party consultants for board evaluation is highly recommended. A third-party consultant is particularly important when: 

• The board wants to test and improve its existing evaluation process. 
• The directors are not forthcoming and transparent with an internal evaluator. 
• The board believes an independent third party can objectively bring new perspectives and issues to the board’s attention.