Few governance issues are as complex as assessing board performance. The evaluation of board performance is more an art than science because there is a synergistic link between the management, company and board outcomes. It’s also not always clear cut. The board might be doing a great job in governing a business however shareholders are dissatisfied over the poor return on their investment. The board may have inherited firm, management and governance issues and be working to make things better. It may also have invested in new strategic initiatives and shaped an overhaul strategy.
In other situations, the board might become too involved in the operational details and making choices that are best left to the management team. These situations are made even more challenging when the board does not use an ideal process for the evaluation of its members. It is easy for small additional resources problems to become serious issues, which could affect the effectiveness of a board.
The board might have developed an environment that doesn’t take performance assessment seriously. This could be because it lacks the systems in place to collect information on performance, or it’s unable to gather the necessary skills required for a boardroom to effectively carry out its evaluation responsibilities.
Boards shouldn’t just have the right skills, but also be open to the results of the assessment. The board should prioritise areas that need improvement and collaborate with the management team to create an action plan. This could include arranging regular board training on relevant subjects to increase knowledge levels across the board and address information asymmetries.