The concept of ‘board evaluation’ covers everything from a director having a quiet chat with the chair to detailed questionnaires and interviews with an external facilitator. Some boards and directors shy away from it, or only undertake it at a surface level. But when handled in the right way, board evaluation is an important piece of ‘kit’ in an organisation’s strategic tool bag.
Why conduct a board evaluation?
Support the organisation’s strategy
Any organisation can accept its current operations and strategy as ‘what we’ve always done’ without questioning whether that will lead to success and growth. As an organisation evolves, its governing body needs to revisit the question of whether its structure and governance are supporting the organisation’s development. The following points should be considered.
- A growing company engaging with external investors for the first time will need to grapple with the difference between executive and non-executive directors, and accept more formal governance structures, such as board committees, required by a venture capital or private equity investor.
- Boards of recently listed companies need to adjust to a much broader range of stakeholders, additional requirements for shareholder approval and the need to engage regularly with the market through continuous disclosure.
- Recently listed companies may also need to work through legacy issues where the founder maintains a board position and significant shareholding. This may be a strength (there is a committed substantial shareholder with ‘skin in the game’ who is highly motivated to ensure the company succeeds in the long term) or a weakness (the founder cannot adjust to being outside the core of the executive team, and undermines the new CEO).