Business and finance expert Jo Haigh describes how to approach the annual board evaluation.
If you are a listed company per the UK corporate governance code, an annual board evaluation is mandatory, unless you can explain why you do not think this is needed. (You had better have a good reason!) Mandatory or not, the value attached to such an exercise if done correctly, is substantial.
Appraising the performance of your management team, is commonplace, setting targets, objectives and looking at skill gaps is expected and valued by most aspirational staff, and without a doubt (if done properly) will improve their, and so the business’s, performance.
You may well consider, then, why the evaluation of what is effectively the driving force in the company is often so neglected.
Partly, this may be due to uncertainty as to what it is you are evaluating. As experience tells me, many directors particularly in the SME sector, just don’t know what they don’t know.
This can be a homespun process, and the web has some question and answer downloads. Check out the UK corporate governance code board evaluation check list. However, independent evaluation undoubtedly has more impact. Both in terms of the process itself and in the perceived and actual added value.
When looking at what it is you are evaluating, you need to consider at the very least, some of the following:
Confidentiality – any potential that dilutes this will tarnish the process and prevent the participants being truly honest.
Smart – any evaluation needs to be;
- Specific
- Measurable
- Attainable
- Realistic
- Timely
Commit to actions – There could be a number of things from personal development programmes to board room culling’s and new appointments. Whatever the action plan that evolves, if you do not commit and indeed carry through, not only won’t this work but any future evaluations will be poorly regarded.
In a board evaluation process, you are looking at numerous things, but the following are key headings;
- Legal knowledge
- Governance knowledge
- Board dynamics
- Governance practices
- Board member relationships with the chair
Within each of these sections, there may be multiple questions, but these are the major areas that need prioritising.
Jo Haigh is an expert on business and finance… check out her books here!