It’s Monday morning, and you are surveying your diary for the week. As a busy non-executive director (NED) on the board of three different organisations, you have a number of meetings lined up which are about fulfilling your governance responsibilities including on board committees. An email pops into your inbox from the Head of Governance of one of the housing associations where you are a NED asking you to complete a questionnaire whose stated purpose is to evaluate the performance of the board.
If like me you have received such an email as a NED, you may have experienced a sinking feeling as you start reading the survey questions. And as you resolve to complete the questionnaire by the deadline requested, you move it to the electronic “to be done later” pile for when you have some spare time.
The problem with board evaluation surveys, which are usually produced by consultants, is not only that they are lengthy, but they are also very generic. The questions that are asked are the same for every board whether relevant or not, which in theory means the results could be benchmarked, but in practice they end up being treated as no more than tick-box exercises. The results, such as they are, are not focused on outcomes so they are of little practical use to the board to prompt questions or provide answers about where the board’s gaps are or how performance can be improved. The report gets filed and the topic is not considered again until three years later when the next milestone for an externally validated review comes around. 1
In an article in the May newsletter I suggested that a useful starting point for measuring the board’s effectiveness is to consider what is the board accountable for and to whom is it accountable. In terms of the What question, in the July newsletter I outlined that the four primary duties of a board are THIS:
• Take decisions
• Hold management to account
• Engage In the strategy
• Seek assurance
These principles are fine as a foundation, but they lead directly to a key question, namely how to measure the effectiveness of the board. What process enables the board to do this in an efficient, valuable and values driven way? And why do board evaluations not deliver this at present?
The problem with board evaluation reviews
Not only are most board evaluation reviews based upon lengthy surveys with generic questions, which may or may not be relevant to the organisation and board’s context, academic research confirms that board evaluations invariably do not produce useful data and outcomes for boards. Consequently, the results are never discussed in any depth, because they do not lend themselves to considered analysis and reflection by the board.
Furthermore, board evaluations are rarely related to the skills, knowledge and experience of the board members. This makes them imperfect guides for identifying where the board’s gaps are, what training might be needed and how they contribute to the board’s succession strategy and planning.
By not applying a rigorous approach to exploring their gaps, there is a risk that boards will carry on functioning as they always have, perhaps ignoring their own recognised shortcomings. Furthermore the lack of rigour may reinforce behaviours which are discriminatory, resulting in the appointment or reappointment of board members who will “fit in”, i.e. “People like us“.
And finally, externally facilitated board evaluation reviews are costly, both in money and resource terms for board members and executives who undertake and support them.
The solution – Board Measures, an outcomes-focused approach to measuring board effectiveness Board Measures is a uniquely efficient method for measuring board effectiveness, which is particularly suited to boards and committees of registered housing providers.To make sense of board effectiveness requires an understanding of the underlying skills, knowledge and experience (competences) that are available to the board. Board members are used to the idea of evaluating their own competences as part of their personal appraisals or by having participated in a skills audit.
If board members can measure with reasonable accuracy and objectivity their own competences, they should be able to apply the same level of judgement to the board’s collective effectiveness, though there will inevitably be an element of subjectivity. What they bring to the exercise is their accumulated knowledge and observations about what happens in the boardroom; i.e.
• how decisions are made
• the quality of debate in making the decisions
• the boards’ and committees’ capabilities to exercise oversight and obtain assurance
• the behaviours of board colleagues towards each other and the reporting staff
• the role played by the Chairs in ensuring the boards/committees are working effectively.
Measuring a board’s collective effectiveness isn’t a simple aggregation of the competences of the individual board members. For example, having one or two CFOs as non-executive directors on a board, by itself doesn’t provide sufficient evidence that the board collectively is financially competent.
How Board Measures works is that it enables board members to self-evaluate their own skills and competences and at the same time rate the collective effectiveness of boards and committees, using the same criteria. Correlating the individual and collective ratings gives the board a reality check on the members’ own ratings as well as providing data about the board’s effectiveness which will enable the board to conduct considered analysis and deep reflection about where their gaps might be and how they can be addressed by various interventions, including training, onboarding, succession planning and recruitment strategies.
The key to measuring board effectiveness is to select the right criteria for the board to measure in the first instance. How the board selects the criteria is beyond the scope of this article but anyone wishing to learn more is welcome to get in touch with me.
In future, including as part of the Regulator’s in-depth assessments (IDA), boards will be required to provide evidence that their organisation complies with its Code of Governance. Housing providers will have to demonstrate that they are well led by their board which means board effectiveness reviews will need to be taken more seriously and, by adopting the Board Measures approach, become more outcomes focused.
David Levenson is a housing non-executive director, boardroom coach and advisor, and governance trainer. David is the creator of Board MeasuresTM an outcomes focused system for Measuring Board Effectiveness. He
has devised a framework for great governance called Ten Steps to Become a High Performing Board©.
For more information, contact David by email or on LinkedIn: here David Levenson©
1. According to the NHF Code of Governance, boards should conduct an annual review of the board’s and committee’s effectiveness. At least every three years, a formal structured review should take place and the Code recommends that the board is supported by outside party to demonstrate transparency and invite challenge to its governance organisation. Small HAs (less than 1000 units managed) are exempt from the requirement to conduct a full effectiveness review every year but are still expected to comply with the requirement for a triennial review of its governance arrangements.