Holding a mirror up to the board

With organisations increasingly dependent on the effectiveness of their boards for success and growth, regular board evaluations are becoming critically important. “The board is a strategic asset, and organisations should seek to maximise its value,” says Carol Bolger, who has been a Board Assessor with the Institute of Directors (IoD) Ireland board evaluation team for nearly a decade. She is also a highly experienced independent director having served as chair of An Post and on the boards of the Coombe Hospital, the Health & Safety Authority, and a number of private sector companies.

“Boards are there to ask the right questions, use their outside-in thinking to broaden the debate, challenge management and add value from their external experience,” she adds. “A good board used effectively can be like a team of high performing consultants.”

Explaining the value of the evaluation process, she describes it as being akin to holding a mirror up to the board. “We ask board members to reflect on how they are performing against best practice standards. It’s not about finding fault. It’s about shining a light on the things the board is doing well and areas which might need improvement. The result is an objective, candid, confidential and actionable report delivered in a timely way that supports the board to improve its effectiveness.”

The nature of the evaluation process is critically important, Bolger explains. “It must be independent, confidential, and carried out by an expert assessor with in-depth knowledge of best practice governance standards and first-hand experience of how a board actually works. In addition, it must be carried out with due consideration for the particular nature of the organisation and the context in which it operates”.

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For these reasons, among others, many organisations are choosing to undertake an IoD Ireland board evaluation. Indeed, many organisations including listed companies, regulated entities and State bodies are required by their relevant corporate governance codes to conduct regular board evaluations which incorporate an annual self-assessment and an evaluation by an external assessor every three years.

“An independent evaluation helps to leverage the insights and experience of the directors to optimise the effectiveness of the board,” Bolger adds. “It unlocks value for the organisation and stakeholders, helps it to meet its statutory and regulatory responsibilities, and facilitates reflection by each director on their individual contribution to the success of the organisation.”

IoD Ireland has been supporting Irish organisations with board evaluations since 2009. During that time the organisation has developed significant capability and expertise in assessing the effectiveness of boards across a range of entities including small private companies, large corporates, PLCs, regulated entities, not for profits and State bodies.

Firmly rooted in its approach to board evaluations is IoD Ireland’s vision for Ireland to be an exemplar of corporate governance. The organisation’s purpose is to instil stakeholder trust and confidence in organisations by educating, informing, and supporting directors and business leaders to lead successfully and sustainably. In addition, the IoD leverages the international expertise of its fellow Global Network of Director Institutes (GNDI) members to bring the latest thinking to board performance and effectiveness in Ireland.

According to Bolger, to be effective, a board must be capable of leveraging its collective strength, sharing and critically assessing the information before it, engaging across a broad range of topics, be conscious of both internal and external stakeholders and their needs, and lead a governance framework that suits the organisation’s specific context. These are among the key areas assessed in a board evaluation.

Trust is essential. “It really is a partnership between the evaluator and the chair and the board,” Bolger points out. “Without trust you won’t get out of the starting blocks. It allows you to create an environment where individual board members can give honest feedback in a constructive context. I’ve worked with several boards on their first evaluation. Boards can be cautious in these circumstances as they are unsure of the process and the outcome. I have seen first-hand the importance of engaging with the chair, developing trust and confidence, and supporting them to put the board at ease and embrace the process in the knowledge that IoD Ireland’s objective is to support them to enhance their performance. We bring a richness of experience against a framework of best practice.”

There is no standard template for a board evaluation. Each one must be tailored to the nature of the organisation involved and its particular circumstances. Each evaluation begins with an experienced IoD Ireland assessor working with the organisation to understand the business context, the board and wider governance structure, and the strategic objectives of the organisation.

“We agree in advance on the scope and objectives of the evaluation and how it will be conducted,” says Bolger. “We prepare a questionnaire for board members based on the best practice framework and tailored to the nature of the organisation and the context in which it operates. We engage with the chair to ensure the questions are relevant to the organisation. We usually also conduct one to one conversations with individual board members and there is a growing practice of including members of the executive team. It can be extremely beneficial to engage with members of the executive team as it gives a broader perspective of board performance and indeed culture in the organisation”.

The outputs from the questionnaire and interviews are then analysed and an initial report drafted which is discussed with the chair in advance of the final report and recommendations being presented to the board.

“We look at nine key areas of focus and score them, such as strategy and culture,” she explains. “We highlight the areas where the board is performing well and those that could be improved and make recommendations for action. It could be that risk management processes need improvement or that more attention needs to be paid to areas such as succession planning. Undertaking a board evaluation can be a catalyst for taking action and IoD Ireland can help boards and nominations committees start that conversation. As part of our evaluation process, we also look at board composition and additional skills that might be required in some areas.”

In that context, Bolger notes that boards are increasingly expected to possess expertise across a range of areas outside of traditional governance. These include new technologies such as AI, cybersecurity, climate change, social impacts, economics, and the impact of new regulations in those areas.

She believes every organisation can benefit from regular board evaluations. “It is one of the most powerful things a board can do to improve its effectiveness, both as a collective and as individual directors. As an independent director and chair, I’ve seen the evaluation process from the other side of the table, and I know how valuable it is. Every board needs to continuously seek to optimise its performance and effectiveness in today’s increasingly disrupted business and economic environment. The best place to start that process is with an IoD Ireland board evaluation.”

For more information, visit the IoD Ireland website.

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