Benchmarking Your Board Evaluation

During a board evaluation there is often an elephant in the room that no one wants to acknowledge. It’s the question, “How does our Board compare to other boards? Are we really as good–or as bad as we think? If we wanted to make a comparison with others, how would we do it?” There are two ways to deal with the elephant.

The first is to ensure that your board has a regular injection of new members who have experience with other boards. That is the long and preferred way, but a topic for another day.

The shorter way is to treat board evaluation for what it is; a means of measuring year-over-year improvements in the capacity of your board to work effectively. Accepting that approach begs two questions:
1. How do we measure where are we now?
2. What actions should we take to make the greatest and most important year-over-year improvements?

To answer those questions, you need a starting point, a means of identifying what the greatest improvements should be, and an approach to measuring progress.

Typically a board evaluation questionnaire consists of a series of statements, (or questions.) Directors are asked to express their level of agreement with those statements on a multi point scale. There are two kinds of questions; those relating to board mechanisms that should be in place such as a code of conduct or a strategic planning process; and those relating to the accomplishments produced by those mechanisms. Examples of the latter would be, “Our CEO is clearly aware of what the board expects the organization to accomplish in the next year and has created a plan to do so.”

The questionnaire is completed, the results prepared, the board discusses them, and the whole exercise is put to bed ’till the next year. There is little to which to compare the report except last year’s, and only a vague suggestion of areas that could be improved.

A more directed way to manage the process is to start with a benchmark questionnaire. It uses the same statements, but for each of the statements two responses would be sought. Consider the following example. The statement on the questionnaire would read:

“The Board has established a mechanism for setting risk tolerance and monitoring risk exposure.”

The board would be asked to rate the importance of the activity to the effective functioning of the board using a five point scale.

1- Unable to assess (i.e. I don’t know enough to answer the question)
2 – Low
3 – Moderate
4 – Medium
5 – High

In the second part of the question, Directors are be asked to rate the boards capacity (skill) to accomplish this activity (i.e. Setting risk tolerance and monitoring risk exposure) again using a five point scale.

1- Unable to assess (i.e. I don’t know enough to respond)
2 – Low
3 – Moderate
4 – Medium
5 – High

Activities that require the Board’s attention show up in the results as being ranked High in importance and Low in skills. Contrary to expectations, the number of activities so highlighted by this exercise is usually relatively low.

The report provides several pieces of information.
-It identifies areas the board should examine for improvement projects in the next year and indicates a level of priority for the improvement.
-It identifies statements that are not necessary to include in future evaluation surveys.
-It identifies types of statements that should have higher representation in the survey.

A year from now, the modified survey can be run with relevant questions resulting in a true evaluation of progress in areas where improvement was identified.

Board evaluation should be about improving your board’s ability to function effectively. Employing this benchmarking approach makes that objective easier.