Corporate governance has become a critical issue in the modern business world. The role of boards of directors has grown significantly in recent years, and they are now expected to play much more of a leadership role in the strategic direction, risk management, and overall success of organisations. As a result, it is crucial for boards to regularly assess their effectiveness to ensure they are operating at the highest level and meeting the needs of stakeholders. This is where board effectiveness surveys come into play.
What are Board Effectiveness Surveys?
Board effectiveness surveys are assessments that are conducted to evaluate the performance of a board of directors. These surveys typically gather information from board members, senior executives, and occasionally from other stakeholders to gain a comprehensive understanding of the board’s strengths and weaknesses. The results of the surveys are then used to make improvements and ensure that the board is fulfilling its responsibilities in the best possible way.
The aim of board effectiveness surveys is to provide organisations with valuable insights into their governance processes, identify areas for improvement, and promote best practices in corporate governance. These surveys can be conducted on an annual basis with most doing a deeper dive review every two or three years and a lighter touch in the years between. The survey typically include a range of questions that assess the board’s governance structure, composition and renewal, processes, and how well it undertakes its key tasks including strategy and risk management.
Why are Board Effectiveness Surveys Important?
1. Improving Board Performance
Board effectiveness surveys provide an opportunity for boards to identify areas where they can improve their performance. By conducting these surveys, boards can gain a better understanding of their strengths and weaknesses, as well as the areas where they need to focus their efforts to achieve better results. This information can be used to set clear goals and priorities, implement changes to the board’s governance processes, improve board composition and decision-making.
2. Enhancing Stakeholder Trust
By regularly assessing the performance of their boards, organisations can demonstrate their commitment to good governance and transparency. This can help to build trust with stakeholders and improve the reputation of the organisation. Regular assessments also provide stakeholders with an opportunity to provide feedback on the performance of the board, which can help to build stronger relationships and increase trust.
3. Identifying Best Practices
Board effectiveness surveys can also provide organisations with valuable insights into best practices in corporate governance. By benchmarking the results against comparable organisations, boards can identify areas where they are leading the way, as well as areas where they need to improve. This information can be used to implement changes that will help to improve the overall performance of the board and ensure that it is operating at the highest level.
4. Ensuring Compliance with Regulations
Many countries have regulations in place that require organisations to assess the performance of their boards on a regular basis. Board effectiveness surveys provide organisations with a tool to ensure that they are meeting these requirements and operating in compliance with regulations. This can help to minimise the risk of legal and financial consequences and ensure that organisations are operating in the best possible manner.
How to Conduct Board Effectiveness Surveys
Conducting board effectiveness surveys can be a complex process, but there are a number of steps that organisations can follow to ensure that they are conducted effectively. These steps include:
1. Defining the Objectives
Before conducting a board effectiveness survey, organisations need to define the objectives of the survey and review process – including whether the forthcoming survey is for the purpose of a deeper dive or a lighter touch review.. Good planning and engagement with directors prior to the review will help ensure that there is buy-in to the results are that they are appropriately actioned.
2. Selecting a Survey Provider and the right survey
Organisations will also need to select a survey provider that has experience in conducting board effectiveness surveys. This provider should have a deep understanding of corporate governance and ideally be able to benchmark your survey results against those or similar organisations. The better survey providers will be able to offer a survey that is suitable for a deeper dive review and another that will suit a lighter touch review. Providers should be able to provide comparable figures for those that carry out the survey in the second and subsequent years.
Many board in the past have decided to do their own internal board survey but technology has enabled survey providers to make available a well tested survey and provide a benchmarked report for a much lower cost that previously.
3. Conducting the Survey
It is important to ensure that the survey is conducted in a manner that protects the anonymity of respondents in order to encourage candid responses from participants. Conducting surveys in-house rarely passes this test as participants can rightly be concerned that one or more internal staff will see their individual responses.
4. Analysing the Results and Seeking Expert Advice if Needed
After the survey has been completed, the results will need to be analysed. If the results are benchmarked this process will be much easier. If they are not benchmarked care needs to be taken not to misinterpret the results. The report should be used to identify areas where the board is performing well and areas where improvements can be made. Some survey providers offer expert advice to interpret and act on the results. This can often be useful especially if it is the first time that a board has used the relevant survey and seen the resulting report.
5. Implementing Changes
The final step in conducting a board effectiveness survey is to implement changes based on the results of the survey. This will involve working with the board and other stakeholders to identify areas for improvement and developing a plan to address these areas. The plan should be actionable and include specific steps that can be taken to improve the performance of the board.
Board effectiveness surveys are an important tool for organisations to assess the performance of their boards of directors. These surveys provide valuable insights into the governance processes of the organisation, identify areas for improvement, and promote best practices in corporate governance. By regularly conducting board effectiveness surveys, organisations can improve the performance of their boards, enhance stakeholder trust, and ensure compliance with regulations.