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Are You Ready for a Director Evaluation?

June 17, 2018

Posted in: WATSON Views

Part 1 of WATSON’s 3-part Year of the Peer series

This may not be your year, no matter how much talk there is about peer evaluations. Although over 90% of the largest boards in Canada have adopted director peer evaluations1, the timing may not be ideal for your board. But it just may be the right time to start the conversation. Like all aspects of intentional governance, the conversation begins with understanding your board’s purpose in pursuing an evaluation. It also comes down to readiness. Without both, there is a risk of the process causing more harm than good, particularly when it comes to relationships and board dynamics.

The true purpose of a director peer evaluation exercise is not to create a report card for directors but to provide each director with a sense of how their performance is viewed by others, where they are seen to perform well and where fellow directors believe there are opportunities to contribute further to the board’s performance. Directors tend to take feedback from their fellow directors very seriously. Though a collective openness to an evaluation is critical, it isn’t always enough.

Your board may not begin with a unified point of view. That’s OK. The depth of dialogue and willingness to share and hear each other’s perspectives is a sign of a healthy board. If it feels like directors are close, keep the conversation going until there is a unified point of view. If there are too many divergent opinions, you may consider parking the issue for now and revisiting at a later date.

Evaluating the performance of the people as well as the board as a whole is best practice, but it may not always be the right practice for your board. Boards should consider four factors when deciding whether or not to formally evaluate individual directors:

  1. Evolutionary state of the board
  2. The length of time directors have served together
  3. Organizational history
  4. Strength of board culture and dynamics

Most boards do not pursue a peer evaluation until they are confident in the quality and effectiveness of their underpinning governance practices and policies, from a solid board manual to a sound code of conduct. They also take continual improvement seriously. Too often boards invest considerable time, money and resources in evaluating board and director performance and then fall short on implementing recommendations and sustaining change. Peer evaluation-ready boards have experience in both evaluation and implementation.

Take the Readiness Test

Before you assess your readiness, ask yourselves one BIG question: Why are we doing a peer evaluation? If directors are not 100% in agreement on the WHY, then all the readiness in the boardroom will not guarantee a successful outcome.

Once you know the WHY, consider the following questions to determine whether or not your board is ready for a peer evaluation:

  1. Do we regularly evaluate the full board?
  2. Do we have position descriptions for individual directors?
  3. Do we have director performance expectations?
  4. Will the full board own the process?
  5. Would our board dynamics be characterized as respectful and open?
  6. Are we confident that this process will not cause harm to any directors?

If you answer NO to any of these questions, your board may not be ready at this time. Recognizing this can help you get there in the future. Think about why you answered no to the question and what specifically needs to shift to turn that answer to a yes.

If you answered YES to all six questions, you may be ready. But what are you ready for? As with board evaluations, there is no “one size fits all” approach to peer evaluations. The specifics of the process are typically developed by the governance committee based on the evolutionary state of the board, the expectations of directors and the previous experience of directors with peer evaluations. When designing a peer evaluation process, consider and ensure there is agreement on the following questions:

  • What is the objective?
  • Who will lead the process?
  • Who will be evaluated?
  • Who will participate in the evaluation?
  • What will be evaluated?
  • How will the feedback be collected and managed?
  • What will be done to ensure confidentiality?
  • How will the data be compiled, analyzed, interpreted and presented?
  • What will we do with the results?

The difference between a mediocre evaluation and a game-changing peer evaluation lies in a deliberate, thoughtful approach. Understanding your purpose and assessing your board’s readiness ensures your board starts off on the right foot. When you have both purpose and readiness, it may just be the perfect time to build the right peer evaluation for your board.

Check out Part 2 of the Year of the Peer series: Customize Your Approach to Peer Evaluation

 

1 https://www.spencerstuart.com/-/media/pdf%20files/research%20and%20insight%20pdfs/canadianboardindex2017.pdf?la=en&hash=B7C240140DC2277B98B3ABD0ECFCCDAB03D026A2