Board assessments

What are board evaluations?

The board assessment (also called a board evaluation) is simply an assessment of board performance, composition and structure. It’s typically measured using written questionnaires, in-person interviews or a combination of the two.

Boards may choose to bring in an outside facilitator or conduct the assessment on their own (often proctored by the general counsel or board chair); best practice recommends bringing in a third-party facilitator at least every third year and leveraging secure technology to protect the data collected during the board assessment process.

What is the purpose of board assessments?

Board directors should conduct board evaluations because they are valuable for receiving feedback and improving performance across all levels: board, committee, and individual. Ideally, board assessments underpin important refreshment, succession planning and strategy decisions. They also help:

• Identify the board of directors’ strengths and weaknesses
• Measure how well board members meet the needs of their role
• Shed light on where board members could improve their performance
• Evaluate how effectively the board guides the organization’s strategy and goals
• Assess board composition
• Hold board members accountable
• Optimize board procedures and practices to strengthen governance
• Determine whether the board is well-positioned to navigate emerging challenges

Key components of a board assessment

A comprehensive board assessment evaluates multiple aspects of board effectiveness, structure and governance. Common areas of evaluation include:

• Effectiveness and strategic oversight: Assessments determine how well the board fulfills its strategic and oversight responsibilities in a way that helps the organization meet its mission and goals. They should also identify whether the board can provide forward-thinking leadership and adapt to challenges.
• Board performance and engagement: Evaluations also measure the effectiveness of individual board members and the board, including participation levels, preparedness for meetings, quality of discussions, decision-making processes and collaboration.
• Diversity, composition and skills: Review the board’s mix of expertise, backgrounds, demographics and lived experiences to assemble a well-rounded team that reflects the organization’s needs. An effective assessment should also consider whether the board has the right skill sets to address future opportunities.
• Governance and compliance: An assessment should also uncover how well the board adheres to governance best practices, legal and ethical responsibilities and regulatory requirements. Doing so ensures the board follows proper policies, charters and bylaws while maintaining accountability and transparency.
• Board dynamics and culture: Interpersonal relationships matter. Boards should regularly evaluate how much they trust other board members and can communicate transparently. This component of the board assessment should also review whether the board fosters an inclusive environment that values diverse perspectives.

How to conduct a board assessment

Conducting a board assessment is fairly straightforward and can unlock powerful insights. Start by:

1. Defining the objective and scope: Determine the purpose of the assessment and its key focus areas. Decide at the start whether it will evaluate the full board, individual members, committees or governance practices.
2. Select assessment method: Choose between self-assessments, peer reviews, third-party evaluations or a combination of these methods. Decide if the assessment will be conducted via surveys, interviews or facilitated discussions; board portal software can streamline this process.
3. Develop assessment criteria and tools: Create questionnaires, rating scales or structured interview guides that align with best practices in governance and the organization’s unique needs.
4. Gather input from board members and stakeholders: Distribute assessment tools to members and relevant stakeholders — such as executives, committee chairs or key external partners — to gather insights.
5. Analyze responses and identify trends: Compile and review assessment data to identify strengths, areas for improvement and common themes related to board effectiveness, governance and engagement.
6. Facilitate discussion of findings: Present key insights to the board, fostering open discussions on areas of success and opportunities for growth. Ensure confidentiality in individual responses to encourage honest feedback.
7. Develop an action plan: Based on the findings, create a plan with clear recommendations, priorities and next steps for enhancing board performance, governance or composition.
8. Implement changes and track progress: Assign accountability for implementing improvements, such as board training, restructuring committees or adjusting governance practices. Set a timeline for follow-ups and reassessments.
9. Establish ongoing assessment practices: Integrate board assessments into regular governance processes, promoting continuous improvement through periodic evaluations, typically annually or biennially.

Using board assessments effectively

In the frenzy of today’s busy board agendas, the board assessment process is too often approached as a check-the-box exercise, which can impact the effectiveness of board assessments. A few best practices for boards to keep in mind:

1. Develop a roadmap: At the start, boards need to determine what they want to accomplish with their board assessment process: Are you trying to streamline board and committee processes? Align the board’s composition with a new strategic direction? Identify board education needs? The nominating and governance committee is typically responsible for identifying these goals at the outset, which are then used to determine the appropriate assessment format, facilitator and frequency over a multi-year time horizon. We find that boards may not need to bring in an outside facilitator or conduct in-depth committee evaluations every year, so we recommend outlining a board assessment plan three years at a time.
2. Take action on results: This is arguably the most important phase of the board assessment process. How is the board using the evaluation results to improve performance? Sometimes, the action can be as simple as tweaking a board process, devoting more time to strategy, or creating more opportunities for directors to build camaraderie outside the boardroom. Other times, board leadership must have difficult conversations with a board member who’s underperforming or whose skills and experience no longer align with the company’s direction.
3. Communicate goals and actions to shareholders: Institutional investors encourage today’s boards to be more purposeful in their board assessment process. Investors want to know how boards use evaluations as feedback to inform decisions in board composition and refreshment. Don’t miss the opportunity to tell this story.
4. Integrate assessments into board culture: Treat board assessments as an ongoing governance practice rather than a one-time exercise. This creates a culture of continuous learning and accountability, which lays the foundation for more transparent board assessments and keeps the board open to new ideas, perspectives and positive change.
5. Leverage a combination of assessment methods: Incorporating surveys, interviews, peer reviews and third-party evaluations can give you a well-rounded perspective. Surveys can yield essential quantitative data, while interviews can take a closer look at the areas of improvement different board members may see. Similarly, third-party evaluators are more objective and can uncover challenges and opportunities board members themselves may miss or be uncomfortable airing out.
6. Tap into AI-driven board evaluation tools: Board assessments may not change much over time, at least in the short term. Asking the same questions once or twice a year can help measure changes. That means that evaluators can spend a significant amount of time duplicating and updating questionnaires. Purpose-built AI eliminates many repetitive tasks, allowing more time to interpret and implement the results rather than create and distribute forms.

Key trends in board assessments

Board assessments don’t look like they used to. In addition to standard governance, culture, composition and other evaluations, assessments are adapting to keep pace with the rapidly evolving business landscape. Current and future board assessments should consider:

1. AI and data-driven insights: Boards increasingly use AI-powered tools to analyze performance trends, benchmark against industry standards, and identify governance risks. AI can also streamline assessments by automating surveys, analyzing qualitative feedback and providing predictive insights for board effectiveness.
2. Greater transparency and accountability: Boards are increasingly expected to disclose assessment results, governance improvements and areas for development. Organizations are publishing summary findings in annual reports or on websites to demonstrate their commitment to strong governance expectations.
3. Evolving governance standards: Regulatory bodies and governance frameworks continue to grow, requiring boards to adapt their assessment criteria. Best practices now emphasize board independence, diversity and proactive risk oversight, aligning assessments with modern governance expectations.
4. Rising stakeholder expectations: Investors, employees and the public demand more from boards regarding ethical leadership, sustainability and social responsibility. Board assessments increasingly evaluate how well boards address environmental, social and governance (ESG) concerns and respond to stakeholder interests.

Evaluate your board more effectively with board assessment tools

With a process as necessary as board assessments, boards must ensure they’re using the right tools to protect data and visualize the results in a way that allows boards to extract key insights and outline action items.

Manual processes have met this need for decades, but as the business landscape changes, so should assessing how the board responds to it. Diligent Boards, part of the Diligent One Platform, includes a board assessment tool that empowers today’s boards to conduct evaluations and analyze results entirely electronically. Not only is the process significantly more efficient than the traditional paper process, but it’s also more secure, more strategic and more supportive of a high-performing board.

FAQs

How often should a board assessment be conducted?

Best practices recommend conducting a board assessment annually or biannually to promote continuous improvement. Some organizations also perform in-depth external evaluations every two to three years for more objective reviews.

Are board assessments required for public companies?

Most companies must conduct annual board assessments under corporate governance regulations, such as NYSE and Nasdaq listing standards. However, specific requirements vary by jurisdiction and industry.

How can companies ensure an effective board assessment process?

To maximize effectiveness, companies should use a mix of self-assessments, peer reviews and third-party evaluations. Ensuring confidentiality, aligning assessments with strategic goals and developing clear action plans are key to meaningful improvements.