Board Evaluations Best Practices

Jessica Vaughn: Good afternoon everyone, and thank you for taking the time to join today’s webinar with Diligent, Board Evaluation Best Practices. My name is Jessica Vaughn. I’m the Customer Success Manager for Team Diamond here at Diligent. I’m joined today by our VP of Product Experience and Design, Marco Morsella. We’re glad you all could join the session and hope you’ll find it beneficial.

Before we get started today, I just wanted to go over a few housekeeping items. Today’s webinar will be 25 to 30 minutes long. It will be recorded and a replay will be sent out to all registrants shortly after this session. Please feel free to share the replay with your colleagues. Also, please feel free to ask your questions at any time by utilizing the question’s pane in the GoToWebinar panel. We will try to answer most of these questions at the end of our session, but we’ll follow up individually on those that we do not get to. Now I’d like to hand things over to Marco to start our presentation.

Marco Morsella: Thanks Jessica. Hello everyone. I’m Marco Morsella, VP of Product Experience. Very excited to be here. Very excited to talk about our Diligent evaluations, which we launched end of last year. As Jessica has mentioned, we know that time is valuable. We do want to get through the presentation in about 20 to 25 minutes. We’re going to keep it high level. Unfortunately, we cannot do a demo. This is not going to demo the product. We do have a mixed audience participation of our clients and prospects, but if you are just seeing the demo, please follow your customer success manager or follow up with a demo request and we’d be happy to show you the product in action. As we go through this at any time if you have questions, we are monitoring questions. At the end we’ll turn over the last 5 to 10 minutes to answer as many questions as we can. If we don’t get to all of them we will have an additional follow-up for each of the customer success managers with all of our clients.

Jessica Vaughn: Just one other note. In case you have any difficulties with audio or video today, the best way is just to restart the webinar presentation, and that should resolve any issues.

Marco Morsella: Great. Let’s go ahead and jump in. Really quickly for all of those of you on this call who are not Diligent customers, I just want to showcase our numbers, something that we’re really proud of. We’ve been in business over 16 years. We have over 140,000 users, both board members and executives using our products. We have over 4,700 clients, five data centers in Germany, United States and in Canada, globally 60 countries where we have clients. That’s seven continents. We’ve just signed a client in Antarctica. Worldwide we have 12 offices. When you look at our track record it’s pretty impressive. Not only are we in the business of building board materials and in corporate governance, but obviously as we build out a lot of our additional features and enhancements, we have an impressive track record to really build phenomenal solutions.

Let’s look at what we’re going to focus on today. We’re talking about evaluation. We’re not going to be talking at all about our Boardbooks product. Some of the topics for discussion that we’re going to be covering are one, why are companies doing evaluations. Another topic we’re going to discuss is the different types of evaluations that you can build through Diligent solution. What are some of the benefits that evaluations provide. Some of the evaluation pools and challenges. Lastly, we’re really going to talk about leveraging Diligent for better evaluations.

Why don’t we get started here. The big question is, why are companies doing evaluations? Why should we be doing evaluations? One way companies can respond to increasing pressures is via regular and honest board performance evaluations. When you’re asking who should do them, every company with a board should be conducting evaluations as part of a regular health check for their board performance. We see that it’s best practice to incorporate evaluations as a standard part of any boards operating procedure. In today’s fast-paced business environment investors and other stakeholders increasingly demand their board members are performing to a high standard in order to respond to the dynamic corporate landscape.

There’s different types of evaluations that you can build. Evaluation is designed to help identify the areas where performance can be improved. There are a number of ways to approach this. Board and committee evaluations, they allow directors to rate the board as a whole. These are usually designed to help identify the areas where performance can be improved. As such, questions should be framed around areas such as composition and leadership. In this evaluation for example you’d want to frame a question around how effective is the compensation and leadership of the board, or the agenda or meeting efficiency for example. Does the board spend enough time addressing the right issues?

Self-assessment evaluations, these really should be focused on assessing the directors’ responsibilities. You have to ask questions around director involvement. You might want to frame a question around does the director regularly attend and participate in meetings? Does the director provide meaningful feedback? Or you might want to frame questions around fiduciary duty. For example, does the director understand their legal obligations to the company and its shareholders?

Lastly a common evaluation that is usually distributed are peer assessments. This really allows directors the opportunity to provide feedback on their peers anonymously. This is a great opportunity to ask about director expertise and value. You might want to frame a question for example like, does this director bring expert skills or unique experience to the board?

Jessica Vaughn: And Marco, if I can just interject. One of the more subtle aspects of the peer assessment is getting your directors to really start participating. For any of us that have been reviewed, we all know that we pay a little bit more attention, we’re a little bit more attentive. We get in there and are really doing our job even better if we know someone’s rating us. People want to see how we’re doing throughout the year. This takes a little bit of that checkbox exercise out of this whole assessment or evaluation aspect that we’re talking about. It’s just giving us a little bit more feedback and a little bit more drive to be even better at what we do. No one wants to be rated poorly by their peers. This is a really great way to make sure that you’re getting the best out of your directors.

Marco Morsella: Exactly, and that’s a great point. I mean the value of performing evaluations is to make sure that your board is performing to its best capability, and there’s effectiveness that comes out of this. You don’t want to create an evaluation just for a checkbox exercise. Great point.

Let’s look at what benefits evaluations provide. Evaluations allow the board and its committees the opportunity to assess how the following impacts performance. If you look at some of these themes that we’ve highlighted here, for example, group culture, does your board members work well together? You have to ask questions around how effective are the board relationships. Are expressions of diverse views and respectful disagreement encouraged? Or do you have a complacent board? They work together a while. They’re not really having healthy debates and discussing key important issues that should be brought up at the board meeting. This is all around our group culture team.

Number two on our list is cohesiveness. Here you’d really want to frame questions such as, how is the level or quality of participation? In cohesiveness these questions are really designed to determine how well the board gels and works together. This is really an extension of group culture. You want to make sure that there are healthy debates and that everyone can agree or disagree in a way that meets the most effective needs.

In our third theme, composition, here you would ask questions such as, does the board and its committees have the appropriate composition to address the governance needs of the company? Another question you might want to frame is, does the board have the right mix of skills and experience to perform effectively? The whole point of evaluation is outcome. You want to make sure you have that healthy balance where everyone’s in check, but [inaudible 00:08:34] that skill level to make sure that they are performing effectively and efficiently.

Another theme is leadership. Here are some of the questions you would frame. Is the leadership of the board and its committees effective? These questions are designed to determine how well the board and committees are leading the organization. Another theme we have is meeting and information processes. Here we would ask questions such as, does the board and its committees have the information needed to make informed decisions? Is the use of the board’s time effective? Is the board’s focus aligned on the right issues? These questions are designed to determine whether the board is provided with the information needed to make informed decisions in a timely manner.

Jessica Vaughn: Along those lines coming from the client side of things, again, we find that the boards do struggle to get through all of the information provided. Even if you give them seven days we’re hearing board papers are 1,000 pages long now. It’s really difficult to comprehend all of that and be able to make strategic decisions based on that. Asking questions around, are we getting the information in a timely manner, but also, are we getting the right information, is it put together in a format that’s readable that we can utilize and again make the strategic decisions that are important to the business?

Marco Morsella: Are those issues surfacing? Are there enough that are weighing and saying, “Look, we need more time to actually read the material and be effective on how we’re chiming back at it?”

Jessica Vaughn: I think we could do a whole another webinar on how to put the appropriate board materials. We’ll leave that for another time.

Marco Morsella: Lastly, one of the last themes that we just have up here in terms of just a North Star on how you would build your evaluations is governance policies. Here you really would ask questions such as, has the board created governance structures and practices that support the ability to govern effectively and objectively? Obviously these questions are designed to determine whether the board is practicing good corporate governance or not.

As I mentioned these are just some themes. Not every evaluation would fit each board. They all come in different shapes and sizes. These are just some of the themes and question that board members should be discussing and responding to and evaluating. The common thing Jessica that we are talking about is that evaluation should be used for a purpose, not just avoiding a checkbox exercise.

Jessica Vaughn: Actually we had a good objective.

Marco Morsella: Absolutely. There has to be an objective and an outcome. Probably a lot of participants on the call are already conducting their evaluations, again not only in terms of good practices but obviously producing a better effective board. Again, this is just high level. We’re not really diving deep into all of these themes. We could follow up in another webinar or in a follow-up call that we could discuss in further. But really, really what we want to get down to is why Diligent has built the solution in terms of building an evaluation tool that our customers can use to distribute, build and distribute evaluations.

Here at Diligent we always build features and products based on client needs. One of the reasons that we’re looking at a board evaluation tool is that we’ve talked to a large number of our clients. Obviously the paint points around evaluations is that a lot of our clients in the Americas are performing evaluations, and there’s really a lot of different methods of how they’re doing that. Some of them are still doing it via paper. They’re building them in Word, printing them out, going to the meeting, and passing them around. Obviously we know and what we’ve gathered back from our clients is that, look, it’s effective in that we force themselves the evaluation live in the meeting, but essentially it’s difficult to manage, it’s very difficult to analyze. Obviously all the results we get back, we then have to translate that to some digital format, be it back in Word, and obviously it’s difficult to archive. As we all know paper is a thing of the past, causes a lot of headaches.

Some of our clients actually still use PDF and Word and Excel reports. The challenge here is again email. You’re putting documents in an email and sending it out, revisions. I think that causes a lot of headaches and it’s insecure. Again, still a lot of labor on how you tally up all those results. We still have some users who use survey tools. There’s some free tools out there. I think they work at a very minimum level, but it’ll include major features that are focused on evaluations such as having the appendices, being able to tally average scores, signatures, and of course the support.

Jessica Vaughn: And that goes back to the security issue as well, right? I mean if you’re-

Marco Morsella: Absolutely-

Jessica Vaughn: … using another online tool, you’re putting very sensitive information about your board members out there.

Marco Morsella: Absolutely. Form of security is our number one concern, so any products you use, again, and we’ll touch upon that on the end, but it’s our data centers, it’s our service, your data is safe with us. We’re not farming it out where you have some of these third-party tools that have server farms and you don’t know where the sensitive information is being published to and stored.

Jessica Vaughn: Exactly, and they’re often known for marketing to their users, so you don’t necessarily want extra communications going out to your board members.

Marco Morsella: Exactly. Lastly some of the other challenges we heard is that, look, we want to perform effective evaluations. We’re up and running, but now we have these high-end consultants who are charging us a yearly fee to manage the entire process. Evaluations are usually done internally, and having a yearly cost to run, duplicate the same report can really add up quickly. Again, these are just some of the challenges that we heard from some of our clients. Feedback is what drives us to build better solutions and identify pain points.

Now why don’t we look at why Diligent built the solution and how you can leverage us to actually build and distribute better evaluations. For us there’s three key areas that we always focus on. One, it’s important for us to build an intuitive questionnaire. When you look at our foundation and our approach to problem-solving, we always think of our end users. Our evaluations module is on the same design principles as our board’s platform. We don’t want you to have to learn a new system. We model a lot of the experiences on easy-to-use, get in, get out methodology. You should be able to build, distribute, and track. Again, you have the same access to the team. The expert that built the board solution has built the evaluation solution.

One of the things that we’ve done is that we’ve allowed customization of the questionnaires. As I mentioned before it’s not a one-size-fits-all. Every board is slightly different. Every industry produces different types of evaluations on different themes. You actually can build a very customized questionnaire solution. We have very flexible questionnaire design. We have a library of question types. Most of them are the standard ones that you would get with a standard survey module. The yes or no radio buttons, rating scale questions, conditional questions, et cetera.

The one thing that we’re really excited about is that our questionnaire module is accessible from all devices anywhere in the world. We know that directors are on the go. Obviously if you want to distribute a questionnaire, unlike paper or a web link that’s in an email attachment, a director can actually log into Diligent boards, get access right to their questionnaire on the iPad. They can start filling it out there. They can then say finish it later and finish it on our web app or on the [inaudible 00:16:18] or in Windows 10 app. Again, it’s up to the directors based on if they’re using all those solutions, they have that mobility at their fingertips. [inaudible 00:16:28] for that email attachment of that Word file.

Jessica Vaughn: Sure, and I think that goes to how easy to use our system is. I have a quick anecdote from one of our large corporate clients here at Diligent. They were using some of our advanced survey technology in the use of a D&O survey. We heard that they published that survey and then within 24 hours over 50% of their respondents had submitted their survey. That’s unheard of. D&Os are complex. They’re difficult. The same as evaluations. There’s a lot of information that we’re looking for here. If we can get that many responses in a 24-hour period, that’s amazing. The administrators, the company, our corporate secretaries were thrilled to get those results and they’re able to follow up and sort of track what that percentage looks like.

Marco Morsella: Yeah, and a great point, again, we covered at the end in terms of what are the key value adds of our product, you can track. From the minute you publish the evaluation you know if the director has opened it, how far they’ve completed, or if they’ve submitted it. Great point.

We couldn’t do a demo but again we just want to show you the simplicity of our solution. Here is an actual screen grab of the iPad app. This would be the end user actually logging into boards, having access to their board material, and then clicking to their evaluation or questionnaire section. They would open up their evaluation. Again, on the iPad they could fill it out, quickly go through it, save and finish later, or submit once they’re done.

Another key area in terms of our approach to development is really leveraging technology for better evaluations. I think really when we looked at for the administrators, or those who are building the evaluations questionnaire, we really want to build something that can be built very easily, it can be used year-over-year. Again, if you build one for 2016, you can duplicate it and obviously edit it and then resubmit the 2017 and 2018 version. We built a really simple export wizard that allows you to export a variety of report types. We have pie, we have tabs, we have bar charts. We have a variety of how you can export these submissions that come back. We have a very complex averages report. Again, based on the themes that you build and the submissions, we give you the averages across all of those director submissions per question type and how they rate across all of the board submissions. Again, so when you talk about themes and metrics, these are great, great Excel reports to run to give you sort of key indicators around where the board needs to be more focused in terms of issues or sensitivities.

Jessica Vaughn: Marco, you just said complex, but I don’t think you meant complex in that it’s difficult to do.

Marco Morsella: Correct.

Jessica Vaughn: It’s taking a lot of the analysis that you would do that takes you hours, in fact if you are in Excel wizard it takes you hours to compile and put together in a format that is readable by your board, and those you need to report to. It takes a lot of that data and takes the complexity out of the output.

Marco Morsella: Exactly.

Jessica Vaughn: It takes a lot of information and puts it in a very easy output, sort of a one click kind of an option.

Marco Morsella: Exactly, and that’s the thing that we … When you use Diligent complexity should be out of the equation. That’s what we focus on. Complexity is the back end. We actually built an averages engine. That’s some of those, those free survey tools out there or some of the consultancies, there web tools don’t have that averages engine that we built for our clients.

Really again for us it was the output. You quickly build a solution, distribute it. You can track, see who submitted, who hasn’t. Everything is in one place. Then again, for us really the beauty of the report, this is actually a snapshot of what our report looks like. The ease of use, and one of the things that we really wanted to combine our report is not only the ability to export and upload directly to your next meeting book for presentation. You would actually write a summary. We have a summary page that you can write. But again it’s presentable and there’s no manual labor to go in and mix-and-match or manage an Excel spreadsheet that you have to run your own macros on to get the type of reports that you want. We give you that full flavor and robustness of reporting.

Obviously the last key point is really leveraging Diligent for better evaluations. One of the key benefits of the product is not only easy of use, accessibility, tracking, allowing directors to receive questionnaires easily, but we have key integration with our boards product. This means that, again, Jessica to your point about the 24 hour turnaround, directors log in to Boards. If you have an iPad with touch ID, you get in, it notifies them that in their questionnaires is a new evaluations waiting for them. They go in, they fill it out and submit, and they’re done. There’s no hunting for that email where the link or the attachment was. They log in once. They get all their board materials next meeting date and their evaluations and their questionnaire is all in one place. Again, that was critical for us and that we made life easier both for administrators and for directors.

For us the clients should be in control. We allow you to decide if every evaluation that you submit and receive can be archived or you can delete it. It’s up to each of the clients and administrators to do that. If you did want to keep it on the record year-over-year you can keep that record. We also can allow that, it’s by setting, if you want the director to keep an archive of all their evaluation year over year. Again, on the iPad or any of the devices, if a director wants to see some of the responses from the previous year or they want to go see some of the reporting, they can actually go and find that information right in Diligent boards. Again this is by choice.

Jessica Vaughn: Yeah, the other side of that, the flip side of that is it can also automatically be deleted. You can get rid of those responses as you need to.

Marco Morsella: We always we adhere to the needs of our clients, and we know there’s always two sides to the coin.

Jessica Vaughn: Exactly.

Marco Morsella: I know we’re running a little bit short on time so I’m just going to speed up. Let’s just recap around what are the benefits across administrators and directors. If you’re an administrator and you’re using boards our questionnaire is easy-to-use. You don’t have to relearn a system. There’s minimal training. We also work closely with you. We can help you build the evaluation. I think you know our experience, our support, and on boarding. I think the generation of the report is where the value added is. A quick export wizard allows you to tally up all those metrics and key points that are submitted by directors. It’ll give you a flavor of what the outcome is and how you want to actually run those reports and post them back to the book material. Again, it’s a simple questionnaire module but we have a library of question-and-answer types, the standard rating tables, multiple selection, tables, et cetera.

We’ve actually added some additional capability like having the appendix so you can post relative information or a reference material. We have linkable questions, so if there’s any questions that refer back to a previous question, we all have that capability again customizing our solution really to cater to your needs. We allow you to run anonymous questionnaires, to build anonymous evaluations, as we mentioned, peer assessments there is a sensitivity there. You can run anonymous peer assessments. We do allow for required questions so this way even though directors via the paper route they answer half and then give you back a half answered evaluation. So if you require all before they submit, it reminds them, “Hey, please go answer these missing questions.”

Again, the beauty is you get to monitor all in one place and track where and at what point the questionnaire is out there in the world, has the larger majority submitted or not. You can do follow-ups. Again, all in one place. There’s no email follow-ups or calling the director, asking them this closes tomorrow. If you need to extend the questionnaire we have an extend close date because we know this pain point, something that’s causing-

Jessica Vaughn: That’s an important thing.

Marco Morsella: Again, really quickly on the director side, again, ease-of-use, accessibility was some of the key features. We extended the board’s experience to include evaluations. There’s no new software workflows to download or learn. Again, if this gets enabled as you subscribe to the solution, once they log in, questionnaires will appear and their evaluations will be there waiting for them. We’ve added e-signature. Again, this is, it’s up to you to decide if they signed or not. It’s accessible on multiple platforms. Obviously we know directors have questions. They can always call us and reach out to support who can walk them through at any time of the day any questions they might have on their survey.

Lastly, we can’t speak highly enough about our security. Any of the evaluations that you build that are distributed and submitted are on the same secure service that Diligent hosts your secure board material. Again, they’re not farmed out like you would get with a third-party solution. Again, I can’t say enough about adding email attachments and where when you send it to a Gmail account and they’re responding and attaching back in a Gmail account and then that gets hacked, that sends an information about highlighting sensitivities of specific boards on large companies. I think you do want to avoid that.

Look, I think that we’ve covered a good part. We know time is of value here. We are the industry leader in the board solutions for a reason. We have a track record. We’ve been in this business 16 years. We’ve gotten into the evaluation space because of our clients. They asked us for this. We have a lot of trusted partners that we work closely with who are conducting evaluations and really want their boards to become more effective. Really we’ve built all our features and solutions on this principle.

I do see a lot of questions coming in. Jessica, why don’t we turn it over to our participants and see if we can answer some of the questions that are out there.

Jessica Vaughn: Sure. I think Marco this is probably a big one. Everybody’s probably curious about this. Is the self-evaluation feature available now? Evaluations module.

Marco Morsella: It is. Evaluations are done beginning of year, middle, end of year. Some do more than once a year. We rushed to get our first release for evaluations tool in December. I think it was December 22nd or right by the end of the year, so, yes, it is available now.

Jessica Vaughn: Fantastic. Had a couple of questions here about the anonymous functionality. Could you just recap the uses the surveys or the evaluations in an anonymous manner?

Marco Morsella: Sure. When you create a new questionnaire you have the ability to flag it as anonymous. What happens is when you build an evaluation you actually build your participants out, but what it does is it anonymously creates each participant. Essentially it’ll flag it as from director 1 to director 12. You submit it, everyone will receive their unique evaluation questionnaire. When they submit it essentially it submits as all anonymous responses.

Jessica Vaughn: We’ve had a couple of questions here. Is the evaluation tool separate from the questionnaire module?

Marco Morsella: Sorry, can you repeat that?

Jessica Vaughn: Is it separate? I think the answer to that is they are integrated. The evaluation portion will allow you to take your results to the next level, be able to create the analytics then.

Marco Morsella: Yeah, absolutely. Yeah, yeah, it’s one product. Absolutely.

Jessica Vaughn: Nothing new to learn there.

Marco Morsella: Nothing new.

Jessica Vaughn: Let’s see. We do have a couple questions here about cost. Everyone wants to know the cost. Because we have a diverse group of attendees on our call, to make sure that we are providing you with all the information or on the cost, we would ask that you get in touch with either your customer success manager if you are a current Diligent client. If you are a prospect, you can certainly get in touch with your sales representative that you’ve been working with. You don’t have one, we will be sending out an email after this session and you can respond to that with additional questions and we’ll have somebody back in touch with you about that.

Marco Morsella: Yeah, and on the survey, if this is a solution for you, please put that on our survey response and someone will get in touch with you right away.

Jessica Vaughn: What if our users don’t use an iPad?

Marco Morsella: That’s fine. Again, as I mentioned, we have multiple platforms that the user can access their evaluations. The PC, we have a web browser that they can access it, they can do it from one click, so from their desktop if they’re on Windows 7. Windows 10, you can actually access your questionnaires on Windows 10. Obviously we know that not every director is tech-savvy so we actually have simple printing capabilities. For that one, that one or two directors who basically still want or refuse to do a digital questionnaire, you can actually print it out. Again, nothing’s wasted. Everything is in one place. You can export it for that participant or participants via paper.

Jessica Vaughn: We have a couple of questions from some of our clients that are already using the D&O functionality as well. I think in terms of how does evaluations work into that I would suggest getting in touch with your customer success manager. They’ll be able to walk you through the different features and functionality on that piece. I think we had a couple of questions there. We are tracking all of these so we’ll make sure people get back in touch with you, but you can certainly reach out to your CSM immediately after this if you would like. I think that is about all of your questions. They’re coming in quickly and there’s a lot of duplicates. Apologies if we didn’t get to your exact question. We will follow up.

We again thank you for joining our call today. Again, if you would like any additional information for those of you that are current clients, please contact your customer success manager. For any of those prospective clients out there that are looking for more information on our evaluation, you can certainly be in touch with your Diligent sales contact or again reach out via the email. We would appreciate you completing our feedback survey at the close of the session. Again, we can respond back to you that way as well. Thank you again for joining. The replay will be available shortly, and we hope everyone has a wonderful day. Thanks very much.

Marco Morsella: Thanks everyone. Thanks for your time.