Quotes on Board Evaluation

RNCI themadag “Evalueren om te evolueren”

18 oktober 2011

“I can’t think of a single work group whose performance gets assessed less rigorously than corporate boards. This lack of feedback is self-destructive…people and organizations cannot learn without feedback.

No matter how good a board is, it's bound to get better if reviewed intelligently J. Sonnenfeld, Harvard Business Review, Sept 2002

Performance evaluation is becoming increasingly important for boards and directors and has benefits for individual directors, boards and the companies for which they work.

Geoffrey Kiel, Professor, University of Queensland

Great governance is a journey, not a destination. Past performance is, as the saying goes, no guarantee of future success. The board that becomes self its full potential ‐ and the organization’s needs.

satisfied is a board that may underperform Barry S. Bader

Evaluation of candidates should be based on their competencies as board members, as well as their fit to the team, their potential to help with the issues facing the company, and their contribution to the diversity of the board. Dr. Yılmaz Argüden

…Boards often neglect the process of engagement when undertaking evaluations. Unfortunately, boards that fail to engage their members are missing a major opportunity for developing a shared set of board norms and incalculating a positive Board and organisation culture. In short, the process is as important as the content.

Geoff Kiel and James Beck

 “We had no issues” in our board evaluation is a big red flag. It implies either that:  The Board evaluation is very poorly designed; or  The Board is “checked out” and doesn’t care  Good Boards are made up of accomplished business leaders who value continuous improvement  These people always surface good issues and try to make good Boards even better Beverly Behan

Good boards of directors continually strive for improvement Good boards of directors: are mentally aggressive; ask good questions; participate in education/training; value time; are good decision makers; And are leaders.

Bob Cropp Director, UW Center for Cooperatives

An effective and talented board

is needed to attract other strong directors with specific competencies and expertise required to support the strategic direction of the company. Experienced and talented directors, especially those with CEO experience, are in great demand as potential directors; but they have limited time to serve due to the demands of their own organization. • • • They are choosy and only want to be on a board that: makes it worth their time and energy, "feeds them " in terms of their own professional growth, and provides important links to their own business. Weak boards do not meet the first two of these criteria and, therefore, often have difficulty in recruiting the level of competencies they need, thus affecting the quality of the board and its correlated effect on shareholder value.

Richard M. Furr

A Framework for a board evaluation

1. What are our objectives?

2. Who will be evaluated?

3. What will be evaluated?

4. Who will be asked?

5. What techniques will be used?

6. Who will do the evaluation?

7. What will you do with the results?

Seven steps to effective board and director evaluations Geoffrey Kiel, Professor, University of Queensland

Governance vs. Value Add

The CEO’s Top Complaints – BOD is waste of time – BOD do not know the business and cannot add value – Too much power or too much involvement – Too much politics and personal agendas – Ineffective meetings and evaluation processes – Myopic or short-term view – Unfair CEO compensation – Disconnect with CEO compensation and performance goals Med Jones, IIM

Don't evaluate performance against criteria that have been established by someone who doesn't know your board and your organization.

Most off-the-shelf evaluations are based on the notion that all boards are alike -- or at least that they are similar enough that a generic evaluation will work. Boards are extremely diverse and many of the evaluation criteria will not apply to your board. When I encounter a lot of irrelevant questions, I quickly lose my sense of commitment to the process. I strongly suggest that you assess several evaluation tools and build your own questionnaire. Select questions that are relevant to your organization and adapt them to suit your structure and approach to governance.

Set the standards before you evaluate.

It is demoralizing and frustrating to be criticized for not doing something that you didn't know you were supposed to do. Don't assess performance against standards that have not been agreed upon in advance. Evaluation tools express the author's view of what a good board should do. Once you have adapted an off-the-shelf questionnaire, be sure that there is consistency between your evaluation standards and your board job descriptions. Follow up with some board training around the standards. Only when your directors know what is expected of them, should you begin to assess their performance.

Nathan Garber & Associates

Benefits of a CEO Performance Evaluation

When properly conducted, CEO performance evaluation can: * Facilitate board-CEO communication regarding company and CEO performance expectations, both in the short and long run.

* Improve communication between the board and the CEO regarding the evaluation of actual performance.

* Help the CEO identify personal strengths and weaknesses and ways to capitalize on or correct them.

* Provide early warning signals of potential problems to the CEO and the board.

* Provide clear guidelines for CEO compensation decisions.

* Help to foster a sense of teamwork between the board and the CEO.

* Increase the likelihood that the board will support the CEO in times of crisis.

* Provide a clear signal to shareholders and regulators that the board is monitoring and evaluating the actions of the CEO and senior management.

Conditions for an effective Assessment Process

• Enthusiastic support board leadership.

• Based on a set of standards or best practices that characterize effective board performance.

• Formal process conducted on a regular, agreed upon basis.

• Written assessment tool that all board directors complete is the centerpiece.

• Plan to use the results to set goals, implement and measure improvement.

Why Boards Fail

• Ineffective recruiting process.

• Members lack understanding of the organization and their roles.

• Micro-managing.

• No well-planned rotation of members.

• No way to eliminate non-productive members.

• Too small. • No well-planned orientation for new and old members.

• No strategic plan.

• No process for assessment.

• No functioning committee structure.

R. Chait, W. Ryan & B.Taylor

16

Board self-evaluation results can be instrumental in helping the Board to determine what resources are needed to facilitate improvements and what are practical steps to accomplish those improvements. In a realistic time frame.

National Association of Community Health Centers

GETTING THE MOST FROM BOARD EVALUATIONS (1)

Evaluations are not a magic bullet and may not even be of particular value when done in a disjointed fashion. Follow-up is critical to having the maximum impact.

That includes quickly presenting results to the board and engaging directors in discussion about the results. Once the evaluation is complete, directors should be encouraged to formally recognize the results and enable follow-up activities. Followthrough should include developing a plan of action for addressing points that arise from the discussion and assigning follow up responsibilities to the governance committee or the board chair. In order to be truly effective, board evaluations should be done on a consistent annual basis.

Spencer Stuart

GETTING THE MOST FROM BOARD EVALUATIONS (2)

Board evaluations will and should change somewhat from year to year; priorities may shift depending on the critical issues facing the board. Questions should be relevant to the board’s current tasks and should be based on the needs of the board at the particular time when the evaluation is planned. Moreover, questions should be targeted to focus on areas of board performance, not CEO and staff performance, which also are essential exercises, but discrete ones from evaluating the board.

Spencer Stuart

PERSONAL VIEW ON BOARD EVALUATION

(extr.) A STRUCTURED, SYSTEMATIC, ANNUAL BOARD EVALUATION IS VERY MUCH ADVISABLE (TODAY MUCH EASIER TO COMPLY THAN TO EXPLAIN) IMPROVES THE PERFORMANCE OF THE BOARD YEAR AFTER YEAR AND HELPS ALSO NEW MEMBERS TO CATCH ON BOARD MEMBERS MUST BE MOTIVATED TO SPEND TIME AND EFFORT NO MATTER HOW THE EVALUATION IS EXECUTED – THE FINAL DISCUSSION IS MOST VALUABLE ROLE AND CONTRIBUTION OF THE CHAIR ABSOLUTELY ESSENTIAL ADVISABLE TO CHANGE THE SYSTEM FROM TIME TO TIME CHAIR AND BOARD MEMBERS MUST BE COMMITTED TO IMPROVEMENTS Arto Honkaniemi Ownership Steering Department (Finland )

ICSA Board Evaluation Review of the UK top 200 companies 2010

…/… We are not contending that internally managed evaluations are per se ‘bad’ or that externally facilitated evaluations are per se ‘good’. We are aware of some excellent internal processes just as we are aware of some less rigorous external evaluations. Nevertheless, internally driven exercises do not necessarily permit individual directors to unburden themselves of genuinely held concerns without fear of recrimination or even, in an extreme case, retribution. We hope that boards will start to ring the changes in order to derive greater benefit from board evaluation. To that end, alternating between internal and external processes should assist them in becoming better performing boards.