Note: This article is part of an ongoing series on Board Directors. To learn more about their roles and responsibilities, download this free eBook today Director's Guidebook: How to be an Effective Board Director in Early Stage Companies or purchase our books at Amazon.com.
As a director on an early stage company board, how do you evaluate the performance of the board? And, how do you evaluate your individual contribution to the board? Those are very important questions that very few early stage company boards take the time and effort to ask. Well established corporate governance guidelines do require that company boards perform an annual self assessment of their performance. These assessments are rarely performed by early stage companies. However, if you are reading this, perhaps you might decide to bring a new best practice in board governance to one of the boards you are sitting on today.
What topics are covered in a board assessment?
First off, a board assessment is typically a self assessment. It’s generally viewed that directors are in the best position to evaluate their board’s performance. A thorough assessment covers 6 different topics:
Structure and Culture of the Board
Board Meeting Mechanics
Evaluating, Compensating and Working with Management
Oversight of the Company’s Financial Position
Board Committee Assessment
Director Self Evaluation
Each of these topics has a series of statements or questions on which each director should rate the board’s performance and provide additional commentary if they have recommendations to improve performance.
Who should oversee the assessment of the board?
In more established companies, the Governance Committee runs this process. But, for early stage companies that don’t have a Governance Committee, one of the independent directors (such as the Lead Director), will take on this task.
How do you go about performing an assessment of the board?
Start the process by having each director complete the assessment form. It’s important to encourage all directors to be honest in their critique of the board. Some directors might not be comfortable rating their colleagues and their own performance, but the results will be worthless if all directors aren’t honest and fair. After the assessments are complete, gather the results and pull together a brief summary report that you share with all the directors. At the next regular board meeting, allocate time to review the results and discuss areas where the board can improve its overall performance. Needless to say, whoever delivers the results may need to have a fair amount of diplomatic skills to not ruffle too many feathers!
Why is it worth the effort to assess your board?
For a small group of individuals who get together a few times a year, it’s helpful to know how you are doing. Are you helping the company succeed, or are you just a hindrance? Are there things you can do to improve your performance and thereby improve the performance of the company? Without assessing your performance, how do you know the answers to these questions? With a well run assessment, you have the answers to these questions, and you have a series of recommendations to improve your performance.
For a more in-depth discussion on early stage company board issues, download Seraf's free companion eBook Director's Guidebook: How to be an Effective Board Director in Early Stage Companies or purchase our books at Amazon.com.