Governance Best Practices

Board of Directors Skills Assessment

Why directors should assess their skills

Board performance has become a priority, companies need boards with a combination of skill-sets to tackle the challenges companies face in these volatile economic conditions.

In Australia, there are very definite ideas about what makes a board effective. The quality that Australians find most effective in board members is “possessing the courage to do the right thing for the right reasons,” according to a survey of about Australian 330 directors by consultancy Russell Reynolds. Next comes “a  willingness to constructively challenge management when appropriate.” “Asking the right questions” comes next, and finally “possessing an independent perspective, and avoiding groupthink.”

“Do I possess these qualities?” These are among just the kinds of questions that board members should ask themselves in a skills assessment.

For example: Is a director comfortable in external communication, with shareholders and investors? In Australia, 31% of those surveyed said that this is a key skill for a board member to possess.

As the New Zealand Institute of Directors puts it: “Director need to be aware of what makes a good board and of how they can contribute as individuals.” By assessing skills, directors learn their strengths, weaknesses and how to contribute better to performance.

How boards should undertake skills assessment

As Ernst & Young point out in a recent article, many boards have traditionally followed a checklist approach to self-assessments. “But an emerging trend is to use assessments as a thought-provoking process — one that pushes boards to actively reflect on the current environment and consider new ways to optimise function and performance.”

This is why self-assessment can be more effective than having some executive, say the company secretary, drive the process. It’s easier for board members to be honest about their strengths and failings if they know that the entire board is doing the same, and that the exchange of information will be confidential and amiable. They won’t have the sense of someone looking down at them.

Of course, security becomes paramount in that case, and so an electronic assessment tool offers considerable advantages for safeguarding privacy.

A successful skills self-assessment should first and foremost consider exactly what aspects of performance are being measured, perhaps establishing a list of priorities like those indicated in the Russell Reynolds survey above.

Consider focusing on specific governance areas for a robust board assessment process. Along these lines, all board directors should be adept at aligning their objectives with those of the company’s mission. This will help them prioritise their strategy and goals. The board should have clarity on their decision-making process, and work to make it more rapid, while taking care to respect due diligence.

Directors should also assess their skills at understanding how the business operates, the market it operates in, and the dynamics of that market. If a director has doubts about his abilities in this regard, it’s easy enough to arrange training.

Every director today should have at least a basic understanding of cyber risk. This is a direct responsibility for the board as a whole. If technology and computers are a mystery to a director, self-assessment is the place to arrange ways to bone up on the subject.

And communication skills are absolutely essential to a board member. Communication with shareholders, regulators, even the general public is a major part of the role. Some managers who become board members have always worked within their siloes, and so may not be comfortable communicating on a wider range of issues. Self-assessment should bring this out, and board members should seek the necessary help to improve.

Self-assessment should also consider the team, and if its dynamics are in order. Conflict on board committees, or on the team as a group can shatter the best-laid plans directors make. Concerns should come out with self-assessment, and be addressed with great care. 

How Diligent’s Self-Assessment Software Promotes Quality Assessments

Diligent is an industry leader in governance software. After creating a highly secure board portal system, Diligent continued to assess the needs of boards of directors of all kinds. One of the tools that came out of their creative process was an integrated self-assessment tool. This was designed to streamline and enhance the process of board self-assessments. The self-assessment tool is part of a suite of solutions called Governance Cloud. Theses enable best practices for total enterprise governance management.

Diligent’s assessment tool virtually eliminates the risk of human error. The program is highly intuitive so that it doesn’t require any training to use it. Board administrators will appreciate how easy it is to import questions from previous years and add new questions to the mix, using a variety of responses with just a few clicks.

They’ll find the self-assessment tool saves them hours of time because it automatically tracks results and completions. The program automatically creates accurate charts and graphs boards can readily use for presentations.

Not only is the self-assessment tool valuable for board administrators, but board directors will highly value the convenience it provides. They can complete the assessment at their convenience using any electronic device that’s handy. If they’re not able to complete all at once, they can simply log out  and come back to it later. They can even log in conveniently, using their fingerprints.

Considering any type of software, security should be a top concern for all boards. That’s why the self-assessment program contains the same high-security standard. Diligent is ISO 27001 and IRAP certified.

Boards are more likely to make a strong commitment to completing and using a skills assessment when the process is easier, cost-effective and convenient, such as Diligent’s electronic self-assessment tool.

Diligent Governance Cloud: A reliable tool for achieving compliance

The Governance Cloud, the only integrated enterprise governance management solution that enables organisations to achieve best-in-class governance. It is an ecosystem of software tools that digitises the various activities and tasks for the board of directors. As organisations grow more complex and regulations more stringent, the scope of governance responsibilities evolves. The Governance Cloud allows boards of directors to meet the demands in the boardroom and beyond. Giving them the ability to select the products they need that help perform their best and work within budget.

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