The Appraisal Process

The Appraisal Process

Most codes of governance allude to the need for regular appraisal of the board; it’s committees and members. However, it can sometimes be a challenge for organisations to keep on top of their appraisal cycle, let alone engage board members, some of whom are volunteers and many of whom work at the top of their field in the processes!

Compliance with a code of governance no matter which sector you are in, is crucial to the long-term success of the company. Therefore, we recommend that in order to ensure organisations are able to comply, there are certain activities that take place as part of your Board Effectiveness Review (BER) on an annual to biennial basis as outlined in your specific code.

As a minimum, the following should take place as part of your BER:

Basic skills audit
In order to assess the range of skills and experience of your board members, the basic skills audit ensures that you have a picture of whether or not the core skills needed in your sector are represented on your board, helps to identify strengths, gaps and weaknesses which can inform your board recruitment process and succession planning.

Questions in a basic skills audit would ask members to identify if they have no, low, medium, high or very high skills in 10 – 15 key areas and also gather data on the diversity of the board.

The results are summarised and presented to the relevant committee and board.

Whole board appraisal
The whole board appraisal involves participation from all board members and is designed to solicit their views on various aspects of board performance. Questions can include:

1. Is the board agenda sufficiently planned to get the right balance between strategic and compliance matters?
2. Does each board member contribute to discussions, voice their opinions and use their expertise to the benefit of the organisation?
3. Are board meetings chaired well, decisions arrived at by consensus demonstrating that they are in the organisations best interests and debated well?

The results of the questionnaire should then be summarised in a report with recommendations where development needs have been identified.

Committee appraisal
How the committees operate will impact the governance of the organisation. Committees have a responsibility to present information to the board, helping them to make effective decisions. If the committee does not operate in a way that is conducive to being able to discuss the items on their agenda in line with their terms of reference, this will impact the board and ultimately the organisation.

The committee appraisal offers members the opportunity to evaluate its performance and includes questions such as:

1. Do you feel that the terms of reference reflect all the activities that you carry out during the year or are there any other amendments which could maximise the assurance value to the board?

2. Do you feel that the frequency of meetings enables the committee to consider the agenda with sufficient due diligence and care?

3. Is there sufficient challenge, discussion and debate in committee meetings?

Individual board member appraisals
Measuring the performance of board members helps the organisation to ensure they have the right people in place and that these individuals are meeting set performance criteria. Board member appraisals should be conducted by the chair and formally recorded. Where appropriate, we also encourage mid-term reviews to help monitor the progress against each action at regularly (six-monthly) intervals.

The process includes setting objectives and actions that will be taken to achieve those objectives and also gives the board member the opportunity to identify any training and development needs.

Chair appraisal (in camera)
An in camera appraisal of the chair is a good way of identifying any concerns board members may have about the chair that cannot be expressed outside of this setting. In addition, this process is in place to maximise the performance of the chair and appraise some of their key strengths.

Questions to appraise the chair include:

a. Are there any areas of concern that any board member has related to the chair’s independence, conduct or behavior?
b. Are the board members easily able to raise issues and concerns freely?
c. Does the chairman demonstrate effective leadership of the board?

A more comprehensive review will include the above but with more robust questioning addition items would be:

Board observation
There are a number of objectives to be achieved by undertaking a board observation. These include:

a. Providing external stakeholders with an independent opinion on the workings of the board;
b. The opportunity to review the paperwork and the meeting;
c. Providing feedback on best practice and areas for improvement;
d. An opportunity to see the board in action and gain an external view of the discussion, challenge and decision-making.

Review against governance code compliance
At the governance forum, we use the Governance Assessment Process (GAP) which is a cross-sector standard for assessment the governance. The process begins with a review and comprehensive diagnostic assessment of the organisations governance arrangements.

A number of codes of governance have been integrated into the assessment to ensure there is compliance with general good practice.

Desktop review of documentation
A quantitative check of the governance related documents an organisation has helps to highlight whether there is anything that is out of date or missing. This should always be followed by a qualitative check to ensure the content of such documents is robust, relevant and has been benchmarked against good practice.

Documents that should be checked include but are not limited to:

1. Terms of reference;
2. Policies;
3. Risk register;
4. Business/corporate/strategic plan;
5. Board pack (including minutes and agendas);
6. Governing document.

More sophisticated reviews will also look at relationships between the executive team and the NEDs, examining how they work together, how they view each other in the boardroom and how both of these can be made more coherent to positively impact board behavior and decision-making. There is also the assessment of the high performing board where forward planning of agendas and the use of systems scorecards and the integration of the values of the organisation are scrutinised.

The appraisal process in all of its different facets is a key to unlocking the potential and performance of any organisation. It’s important that you take into account how not appraising the board could impact it’s performance and ultimately the long-term success of the organisation – which is the one of the main reasons that the board is in place. Take the time to reflect on your process and what you need to do to ensure it is rigorous and robust leading to the openness and transparency needed to be effective.

As I conclude, I would like to publicly acknowledge this years Effective Board Member Programme for young leaders’ Outstanding Performance Award winner Kate Bailey who scored the highest mark of her class on the exam. The award, which recognises exceptional performance demonstrates our endorsement for her as a competent candidate for board appointment. Well done Kate!

Until next time…