Here are six common lessons from Board evaluations conducted with public, private and not-for-profit organizations in North America.
- The majority of Boards over-rate their governance competency. They do this because:
- Directors want to be supportive of their Board – and each other. They are frequently reluctant to be fully objective about issues they see regarding the performance of the Board.
- Many Board written evaluations are too long. This results in box-ticking and lack of serious reflection by Directors.
- Many Board evaluation rating scales are too broad. This results in limited differentiation between the choices and too much concentration at the high end of the scale.
- And finally (and very frankly) – many Directors lack the knowledge and competency to evaluate their Board effectively. Governance expertise is not the reason most Directors are invited onto a Board.
- Unfortunately, the most common outcome of a Board evaluation is nothing. One key reason for this is that the over-rating that occurs provides little incentive to fix anything. When everything is well-rated, it’s not really clear what the Board should focus on to improve.
- Lack of clarity about the Board’s oversight role is a fundamental problem that almost all Boards face. When surveyed, very few Directors on the same Board provide a consistent definition of their governance role. This is a key reason that governance fails so often. Too often, Boards are focused on the wrong issues.
- Straying too far into operations is the fear that all Boards face. Somehow ‘nose in, fingers out’ has become a Board mantra. Unfortunately, it’s a mantra with few helpful clues on how to actually execute.
- The primary risk most Boards focus on is financial. However, financial risk tends to increase AFTER legal, market and operating risks are already impacting the organization.
- The composition of most Boards is poorly aligned with the risks and strategies their organizations are now facing. Common Board composition deficiencies include technology, cyber-risk, marketing and HR. Finance, legal and operations tend to be over-represented.
A Board Evaluation Should Start with Understanding of Board Role
Since governance failure is common – much more common than most Directors realize – it’s important that Board evaluations accurately reflect the Board’s governance competency. Doing this is simple: start by evaluating how well the Board understands its role by asking Directors to define two things:
- What the roles of the Board is
- What their role as a Director is
We’ve seen Board evaluations where Directors who rated themselves 4 out of 5 in understanding their role all provided different definitions of what that role is.
A common understanding of the Board’s role is vital.
Without a consistent understanding of the Board’s role it is very difficult for any Board to be highly effective.
Leave A Comment