A Standard Board Assessment Process Is No Longer Enough

Today’s board faces more challenges—in scope and quantity—than the boards of five years ago. Then, boards were already mired in new responsibilities that divided their attention and expanded demands for their time and skill sets.

In addition, consider how the following recent factors now impact daily operations and strategic choices:

• The pandemic created a significant gulf between employers and employees, union challenges, novel return-to-office dynamics, and more.
• Significant social movements have become more politically charged, including as they relate to recent US Supreme Court decisions in Students for Fair Admissions Inc. v. President & Fellows of Harvard College and Students for Fair Admissions Inc. v. University of North Carolina that affect diversity and equity efforts.
• Geopolitical issues are multiplying.
• Artificial intelligence (AI) is the latest unknown risk and opportunity.
• The US Securities and Exchange Commission recently finalized new climate disclosure mandates.

The list doesn’t stop there. Directors need to understand these issues in the context of their organization’s business strategy in addition to having the “standard” knowledge and experience that is already expected. An annual board assessment is required and serves to uncover any concerns about governance, levels of strategic insight, operational issues, and underperforming or disruptive directors. But it is no longer enough to evaluate the board’s effectiveness as a whole or provide a roadmap for optimal performance of the entity versus individuals.

This current environment of complexity should drive a revamped, more in-depth, and customized board evaluation process—one that can clearly outline where deeper issues may lie and where opportunities to improve exist. Without a significant level of detail in the process, the board is left with a “good,” “okay,” or “poor” rating that cannot help directors grow either collectively or individually. The below questions offer a few areas for expanded exploration:

• How is the board led, officially or unofficially?
• How is the agenda determined, and what topics are included?
• Does the board spend enough time discussing strategy and external influences on the business?
• Are directors sufficiently educated on topical areas including AI, cybersecurity, and geopolitical impacts on the business?
• How much time is spent on formal report-out presentations versus interactive discussion?
• How are the relationships between the board and management, as well as individuals in both camps?
• Is there planful turnover and refreshment with emerging needed skills considered in the process?
• Is the board agile with the ability to vary its level of involvement based on circumstance?

In many cases where this expanded level of evaluation has been embraced and successful, there is a visionary board chair who is focused on culture, is receptive to innovation, and solicits multiple inputs and viewpoints.

Boards that are open to a collaborative, developmentally focused mind-set can take this additional knowledge and better identify where they currently stand and what plans might need to be put in place to move closer to the ideal state. Cyclical reevaluation and ongoing feedback will ensure that the benefits are not “one and done.” The boards that can travel this road together will be in a far better position to remain relevant and effective well into the future and guide their organizations toward long-term success.

Pearl Meyer is an NACD strategic content partner, providing directors with critical and timely information, and perspectives. Pearl Meyer is a financial supporter of the NACD. 

Susan Sandlund is a managing director and the leadership practice lead at Pearl Meyer.