Best practices for a board of directors’ self-assessment
Board self-assessments originated some years ago from concerns by shareholders over whether boards were being honest, transparent and accountable. The NYSE and the NASDAQ support shareholder concerns by requiring some shareholders to conduct annual board self-assessments and make their findings available to investors and others.
Regulatory requirements prove that boards hold themselves accountable. Board self-evaluation best practices ensure action and accountability. The true test of accountability lies with boards and their individual directors and their commitment to performing to their full potential.
Dave Anderson, the author of No-Nonsense Leadership, sums up the importance of accountability by saying, ‘Leaders must develop a lower threshold for alibis and become better communicators and enforcers of what they want done. If you are more interested in being liked and popular than holding people accountable for results, you have a serious leadership weakness. It is not your job to make people happy. Your job is to get them better. Holding people accountable to high standards and results is nothing to apologize for. Failing to stretch them to their potential is.’
In this article, we will cover:
- Best practices for board evaluations
- Whether your board would complete a board evaluation if they didn’t have to
- How technology can help
11 best practices for board evaluations
Board evaluations can be long and complex processes, but they’re also incredibly valuable, which is why they’re so imperative. Below are 11 board evaluation best practices that every organization should consider.
1. Define the objectives of your meetings
Before the self-assessment process begins, it’s important that the board understands the objective of the meetings. Yes, the overall goal of the self-assessment is to identify whether the board is fulfilling its duties, but there may be key points to address or specific areas that need to be a major focal point. The entire board must align so every member can focus on shared goals.
2. Agree on a well-planned process
The board must agree on a well-planned process. Many boards find that it's prudent to set up a board committee to make recommendations for decisions about whether the scope of the assessments will include the whole board, individual directors or both. The committee should also recommend whether the board will pursue individual or peer-to-peer assessments.
3. Allow for anonymous feedback
Board evaluations should encourage honest feedback by ensuring that results will remain anonymous. Manual processes and online surveys require using personal or company emails, which defeats the goal of remaining anonymous. Working with an outside facilitator can help with anonymity.
4. Alleviate concerns about security
Board directors seek assurances that their answers will remain confidential among their peers and the public and that they face no risk of retaliation. They prioritize confidentiality highly, so it is crucial to emphasize the actions you will take to address any security concerns and potential risks.
5. Acknowledge and value the effort that board directors put into the process
Unfortunately, self-assessments are known for taking a long time, which is often one of the main reasons why many directors are unhappy with the process. However, while they may take time and require input from every board member, they’re the most effective way to get the information needed to ensure the board is performing as it should. Get buy-in from the board to complete the process with fidelity and assure them that the results will be worth it and contribute to the overall success of the organization.
6. Create a process that is easy, streamlined and mobile-friendly
Create a process that is easy, streamlined, and mobile-friendly. Board directors will look more favorably on completing board assessments when they can use an electronic tool that integrates with existing board management and governance software. They'll also be more receptive to the ability to complete the evaluations on their mobile device.
7. Clearly outline the methodology
The methodology for the self-assessment should be consistent and standardized so the results can be fairly analyzed and all board members are happy with what is expected of their input and why.
8. Automate where possible
Because the self-assessment process can be long, it’s important to use automation where possible, as this will streamline internal processes. Use a program that enables you to replicate the previous year's results and add new ones so the board can more easily validate its progress.
9. Identify tools that will help with the evaluation process
Before the self-assessment begins, refer to the objectives that should have already been outlined to identify tools that will help with the evaluation process. There may be a number of tools that have similar functionality, but they should be carefully selected so they give you the most specific and candid response.
10. Ensure follow-ups are planned
Following the self-assessment, issues or challenges may be identified. Large issues will undoubtedly become a focus, but smaller problems should also be addressed quickly. To do this, follow-up meetings and clear and actionable plans with achievable, incremental goals should be scheduled.
11. Every board member should back annual evaluations
It’s important that your board commits to annual evaluations to ensure your organization is as productive, efficient, and successful as possible. Committing to yearly self-evaluations will prevent major issues from developing and keep processes quicker and more streamlined.
Would your board conduct self-assessments if they didn't have to?
The primary reason that board directors either dislike board evaluations or prefer to rush through them is that they simply take too much time. Many boards don't do them unless someone requires them to. Boards that commit to annual self-assessments may find that some board directors don't engage in the process effectively. Sadly, many view self-assessments as a rote task where they can check the boxes as quickly as possible without giving them much thought.
This problem begs the question, 'Would your board be more strongly committed to doing board assessments and giving them their due diligence if the process were easier and less time-consuming?' In most cases, the answer is a resounding 'yes.’
In their quest to find an electronic solution for board self-assessments, some boards have resorted to online survey solutions. Online surveys may work well in theory; however, they're often generic, which means they fail to meet the industry-specific needs of boards. Such programs still require board secretaries to develop and load questions, send them out, and manually analyze the results. They may not be able to save their questions and results to expand on them the following year. Board directors need to learn the system just to learn another new system every year. Manual processes for analyzing results are subject to human error. Most importantly, online survey solutions lack the level of security to assure board directors that their answers are anonymous, confidential, and secure.
How the Diligent evaluations module solves the hindrance to effective board evaluations
At Diligent, we looked at the problem areas related to board self-assessments to address common pain points. We designed a board-self-assessment solution that supports the board of directors' self-evaluation best practices and addresses issues of functionality, security, ease of use, and automation.
Here’s how Diligent’s board assessment tool makes the process easier and far less time-consuming.
Streamlined processes
Diligent's board assessment tool saves templates and results for successive years, which saves board secretaries a significant amount of time in preparing questionnaires. The secretary can track submissions and completions automatically and use the responses to create a variety of customized results in a few clicks. The tool virtually eliminates the risk of human error.
High levels of security
The module uses the same high-security standards of Diligent Boards. For example, Diligent is ISO 27001-certified for its Information Security Management System, with SSAE 16/ISAE 3402 (SOC 1, Type 2) controls audited for nine consecutive years. Biometric technology makes it ultra-easy for board directors to sign in on any device using their fingerprints.
Accessibility and ease of use
Board members who are familiar with the Diligent Boards portal can use the same credentials to sign in to the board assessment tool. If users get interrupted midstream, they can easily sign out and pick up where they left off at another time. Intuitive software means board directors can move through the process without needing training on the module.
Simple automation
The Diligent Board Assessment tool gives secretaries the option to import questions and responses from the prior year's evaluation. The software automatically reports averages and graphs that are presentation-ready.
Confidentiality and anonymity
The Diligent platform is safe and secure, ensuring data is encrypted and stored to maintain confidentiality and anonymity.
Actionable insights
The software allows you to generate comprehensive reports that provide clear and actionable insights, so you can take the steps towards continuous improvement.
Efficient communication and collaboration
Because Diligent software is a centralized platform, communication and collaboration are simplified, and discussions are structured around the evaluation and its results.
Conducting board evaluations with Diligent software
Diligent has committed to being an innovative leader in governance software products.
Board evaluations don't have to be so challenging. However, outdated approaches make evaluations difficult. Diligent knows that your board members will make a deeper commitment to the board evaluation process when the process is easy, intuitive and mobile-friendly. This resolves the biggest issue of them not taking it seriously or not doing it at all. Automation also solves many front and back-end processes for setting up the evaluations and analyzing the results. Combined with the Diligent Boards portal, Diligent Evaluations provides the most advanced solution for board evaluations for all types of organizations.
Simplify your directors’ self-assessments with diligent
Are you looking to streamline your directors’ self-assessments and get actionable insights in less time? Request a demo of Diligent One today.
