EXCELLENCE IN BOARD EXCELLENCE IN BOARD & DIRECTOR & DIRECTOR ASSESSMENTASSESSMENT

Session ObjectiveSession Objective

• provide perspectives and

review process steps for Board

and Individual Director

Evaluations

Motivation for Motivation for EvaluationsEvaluations

• Improved Performance: we can do better

• Best practice: we can’t not do it

• Compliance: we have to

• Comparison: we’re better than…

• Compromise: we have to, so let’s get some benefit

Drilling down…Drilling down…• …make explicit what everyone knows

• …impetus for needed change

• …put spotlight on performance issues

• …identify priorities for good governance

• …what get’s measured, gets done

What Should Be What Should Be AssessedAssessed

• all key components of the board:

oBoard chair

oFull Board of Directors

o Individual directors

oCommittees

oCommittee chairs

Good GovernanceGood Governance

Structure+

Process+

Relationship=

Board Effectiveness

Competence+

Contribution+

Character=

Director Effectiveness

Required conditionsRequired conditions• agreement on how results will be used

o clear outcomes defined

• appetite to engage in the processo value and relevance recognized

o Board ownership of process and results

• trust and confidence in process & peopleo perceived risks

• good use of time and resourceso stewardship

BOARD BOARD EVALUATIONEVALUATION

Overriding Overriding ObjectivesObjectives

• Board Assessment

oto foster proactive board development

oraise the performance bar relative to governance best practices

Key Success Key Success FactorsFactors

• director engagement and participationo platform for constructive discussion on

performance

• in-depth, customized review

• timely, relevant feedback

• director commitmento time and thought o support objectives / contribute to success o act on results

Key BenefitsKey Benefits

• accurately check board pulse

• identify and act on issues

proactively

• encourages shared commitment to

governance success

• promotes effective use of time &

resources

Practical Practical PerspectivesPerspectives

• board effectiveness not easily

measurable

• focus traditionally on structure

• effectiveness linked to what can’t

readily be seen or measured:

o relational dynamics

o value and contribution the Board makes

Measuring the Wrong Measuring the Wrong ThingThing

• no link between effectiveness and…

odirector independence (structural)

odirector terms and tenure

odirector age

oboard size

oother “structural” metrics

Using the Wrong Using the Wrong ProcessProcess

• assessments tend to be insular

o rely on internal views

o focus on best practice theory

• Boards do little benchmarking

o should ask: how are we doing relative to best hospital or other healthcare boards

o difficult to access valid, relevant benchmarking information

Ensuring RelevanceEnsuring Relevance• impacting board performance is…

o Director personality (behaviour) and competency

o Board chemistry (trust, candor, quality of

discussion)

o Board and Committee leadership

o Board / Management relationships

o meeting effectiveness

o information and reporting

o decision-making (scope and timeliness)

How to assessHow to assess• Board assessments should be:

o Comparative: benchmarking against objective criteria

o Convenient: directors are busy

o Constructive: affirming strengths; identifying opportunities for improvement

o Comprehensive: assess all relevant criteria

o Confidential: ensure candour and commitment

Effective Effective assessmentsassessments

• establish benchmarks:o avoid personal opinion/biases

o need objective criteria

o use behavioural descriptors

o focus on key board accountabilities, deliverables and success factors

Process StepsProcess Steps• training / education

• collect data through a multi-phased approach ensures rigour and objectivity:

osurveys

o interviews

oobservation

Who Should Manage Who Should Manage Process?Process?

• several optionsoBoard Chair

oCorporate Secretary

o External Consultant

• all valid for different reasons

• circumstances / culture the determining factors

Other Process Other Process ConsiderationsConsiderations

• who owns the process?

• confidentiality expectations / assurances

• how will reporting of results be handled?

• accountability for acting on results?

• management participation (if any)

• identification of benchmarks / comparables

Board Evaluation Board Evaluation ProcessProcess

• Diagnosis

1. written survey/questionnaire

2. interviews

3. observation

• Reporting• Action Planning• Measure results

ConsultantConsultant’’s Roles Role

• ensure a successful outcome

o technical skills and experienceo project managemento understand and accommodate broader

issueso identify relevant outcomeso ensure confidentiality, trust and confidenceo effective analysis of raw data o propose recommended next steps

Board Structure Board Structure

• How the Board is organized o director and chair independenceo sizeo committee structureso roles, responsibilities, mandates, key

tasksomembership (skills / experience mix)omeeting frequency

Board processesBoard processes

• How the Board does its work:o meeting effectiveness o Information delivery and managemento director recruitment / appointment processo director orientation and ongoing educationo director successiono board and director evaluation

Board behavioursBoard behaviours

• group dynamics & interpersonal

relations

oBetween Directors

oBetween Board and Management

oBetween Chair / Board

Key QuestionsKey QuestionsFocus on the Board’s impact…

•What was the most significant achievement during the last year?

•What would the organization lose if the Board ceased to meet?

•What is the Board’s primary contribution?

•What tangible value does this contribution deliver?

INDIVIDUAL INDIVIDUAL DIRECTOR DIRECTOR

EVALUATIONEVALUATION

Director Director characteristicscharacteristics

“There are 3 characteristics a

director needs: curiosity,

competence and the courage to

speak your mind and stand for

what you believe in.”

• Stephen A. JarislowskyO.C., ICD Fellow

FOCUS

BEHAVIOUR

BEHAVIOUR

Performance Performance IngredientsIngredients

• “The single most important corporate governance requirement is the quality of directors.”

o integrityo competencies & capabilities o motivation

• Canadian Coalition for Good Governance

BEHAVIOUR

BEHAVIOUR

Recommended Recommended ObjectivesObjectives

Board member performance and

success

•clarify performance expectations

•affirmation of strengths and contribution

•identify improvement opportunities

•communicate key messages

•personal accountability

Key BenefitsKey Benefits

• help directors maximize their contribution to the board team

o Increase the board’s bench strength

o assess education needs

o facilitates succession planning

• e.g., Board and Committee chairs

Director evaluation Director evaluation modelsmodels

• self-evaluation

• peer-to-peer

• combinations of the above

oalign with appetite/culture

oadd rigor over time

BEST PRACTICE

Process Process ConsiderationsConsiderations

• who owns the process?

• who will manage the process?

• what are confidentiality expectations and how will they be met

• how will reporting of results be handled?

• what accountability for acting on results?

Issues and Issues and challengeschallenges

• how results will be used

• discoverable for use in litigation

• used to settle scores between board adversaries

• directors opting out

• how to address non-performing directors

Issues and Issues and challengeschallenges

• different levels of director competence and

experience

• individual director accountability for acting

on results

• reducing perceived risk

• comfort assessing peer directors

Evaluation criteriaEvaluation criteria• based on three key dimensions:

o competency• possesses relevant skills &

experience

o contribution• use of skills and experience

o characteristics• behavioural: models organizational

values, team member, etc.

Evaluation ProcessEvaluation Process• Diagnostic phase:

• peer survey input

o ranking against criteria

o commentary

Evaluation ProcessEvaluation Process• Feedback and follow-up:

osummary of survey results

o key themes

o identify key issues and priorities

o individual feedback sessionsocoaching on potential action steps

QUESTIONS AND

COMMENTS?

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Tel: 519-744-5909

www.boardgovernance.ca

E-mail: john@boardgovernance.ca