I have had the opportunity to see the good, the bad and the ugly, when it comes to NFP Board Performance Assessments. This process at many organizations is often missing or is at best incomplete. Those assessments that are completed often provide little useful feedback and do not encourage any development or improvement. Board assessment must be more than a checklist of duties reviewed once a year.
While a checklist approach is simple and quantitative measures are easy, it is the value that a Board brings that is important. Board assessment needs to include not only what was done, but how it was accomplished and how the Board is leading the organization into the future. This article will focus on six topics that can transform your Board Assessment. Don’t give up your checklists, but consider adding some of these suggestion to improve the scope and value of your assessment process.
For a good example of the potential impact of ineffective Board Assessment, see Could Wells Fargo’s Issues Happen to Your Not for Profit
1 – Institute All-Level Assessments
Board assessments rarely go deeper than Board or Committee level, but that does not provide insight on Board Member performance. Assessments should be completed at all levels and should focus on the following;
Individuals – performance is measured on the value derived from their engagement, expertise, influence and leadership
Committees – in addition to success in completing tasks assigned, performance is measured on collaboration, effectiveness and efficiency
Board – as a whole, the Board’s performance is assessed on the value provided in helping the organization meet its mission and the vision that the Board provides in assessing and preparing the organization for the future
2 – Ensure Assessment Covers the Basics
Members, committees and the Board must adhere to the fiduciary responsibilities and the organization’s Bylaws / policies. Members must also hold their colleagues, committees and the Board accountable and responsible for acting in line with these requirements. The entire Board should be educated and refreshed periodically on their responsibilities and assessed on how well they conform to those requirements.
Assess members on their engagement in meetings. Do they show up? Are they on time and participate in meetings in their entirety? Have they read and understood any meeting materials? Are they familiar with significant issues, trends or events in the sector or industry?
Member should interact with the organization, funder and clients, at events or whenever possible. Do your board members come to the meeting and sit in the Board room without engaging with any staff members, except for the administrative person that arranged their car to the airport? Do your board members meet funders or clients? How can a Board member genuinely represent these stakeholders if they don’t meet them?
Board members, committees and the Board must respect the boundary between oversight and management. Members should be concerned with understanding the thought process used by management and assessing the quality of the process. Oversight is broadening, not focusing. Boards must assess themselves on how well they maintain their oversight role.
3 – Assessing Value Add (because if there is no value add, why be there?)
Board meetings should be active with conversations, not just presentations. There should be disagreements over strategy and initiatives as the Board seeks to lead the organization. Members should advocate based on their experience and should work together to raise and resolve issues. Are your Board members asking good questions and challenging the answers?
Members need to engage in the sector. This allows them to stay current on trends and events in the sector and to consider strategies and practices from other organizations. Members can engage by joining associations, attending tradeshows and pursuing courses of study aligned to the current and future needs of the organization.
Members can also add value through thought leadership. They can achieve this by writing or speaking on topics associated with the sector or the organization’s segment. This provides a double value to the organization. Not only is the member building knowledge on topics important to the organization, but the member is also raising the level of awareness for the organization.
The Board, committees and individuals need to effectively challenge management on areas of concern. There are far too many stories of Boards not addressing red flags in their organization. This hold for not for profit and for profit organizations. If management actions threaten the organization, the Board must act. This doesn’t mean that the Board should swoop in and take control of management processes, but they must gain comfort in how those processes function and how any associated risks are mitigated.
4 – Determine if the Board Leads and Provides Vision
Individual members add value by bringing their knowledge, expertise, and perspectives to the organization. Committees and the Board add value by channeling those assets into building a strategic direction for the organization and by pushing the organization to stretch out of its comfort zone. In addition to fostering these traits, the Board is responsible for identifying members who do not have the capabilities and acting accordingly.
Any organization, especially those performing well, can get stuck in doing things a certain way. The idea that a method has always worked before is a risky one. Change in the sector is a constant, so Boards must challenge the status quo and encourage management to look for new and innovative ways. The Board also must do this themselves. Boards need to look forward, to be proactive and to help the organization maintain momentum.
There is distressing news on the lack of diversity on Boards. How is your Board championing diversity in your organization and on the Board? What steps are you actively taking to broaden the perspectives that are part of your Board? Is your Board recruiting process limited to bringing on people that current Board members know? These are serious questions and Boards need to understand that a lack of diversity on the Board may translate to a lack of diversity in the organization. Boards add value when they contain many different voices.
5 – How Does the Board Contribute to Fiscal Sustainability
Board members need to demonstrate how their experience and expertise contributes to the fiscal sustainability of the organization. They need to embrace continual learning in order to address new topics and be well versed on emerging issues facing the organization. It is impossible for each member to know everything about all topics, but they do need to gain a general understanding a have a curiosity about trends, issues and events that can impact the organization. Member assessments topics should include;
- Gaining and retaining an understanding of the operational environment of the sector and the organization’s segment
- Staying current on skills and knowledge, for example, if you have a finance person on the Board and there are new accounting rules or regulations, that person should engage in discussions between management and the Board on those changes. That Board member should understand the potential impacts and should help other members understand.
- Risk management – all Board members should understand the basics of risk management. While management, in partnership with the Board, should be building and maintaining the risk assessment and mitigation process, Board members should have enough of an understanding of risk to ask the tough questions on management’s assumptions and processes
- Understanding reserves – the organization must maintain reserve funds to protect it against a short-term funding issues and provide funds for investments aimed at keeping the organization relevant. Board members need to understand the concept of reserves and how to assess management’s assumptions and determination of adequate reserve levels.
- Knowing the numbers – it is important for all members to have a general working knowledge of the financial aspects of the organization. Members should be able to read financial statements, the Form 990 and generally understand the impacts of budgets, reserves and proposals. There are simply too many decisions at the Board level for members to not understand the numbers.
6 – Overcoming the Inherent Weakness of Self-assessments
It is tough to be completely honest when assessing yourself, either as an individual or as a group. However, for the most part, Boards and committees need to do just that. Since there are no others that can see the inner workings of the Board, it is impractical to get an outside unbiased opinion. That means holding yourselves to a higher standard by including items such as those listed above in your assessment. In addition to identifying the behaviors that you want the board or committee to exhibit, you need identify some outcomes. Perhaps the Board has a commitment to adding diversity, so set some targets that are outcomes not steps along the process.
- Peer to Peer – for individual or committee assessments. Have members assess each other and have committees review assessments of other committees. Spread the wealth of the assessment effort. Encourage members and committees to interact in an unusual (and probably uncomfortable) way.
- Assessment Committee – identify a group of members responsible for assessing committee or individual performance. This group also maintains a record of Board-level accomplishments versus targets.
- Live Assessments – this is really hardcore, but consider having a live assessment feedback session at your Board offsite meeting. Similar to the peer to peer review, only this is an interactive session where members assess each other, the committees and the Board. Bring in a qualified facilitator to keep this focused and constructive.
- Board KPI – establish a set of assessment criteria and have a few members perform a quick instant assessment at the end of each Board meeting based solely on their observation. This is a good tool if you have identified some issues you would like to address. The standard assessment criteria can help you track progress toward a goal. Responsibility for the assessment can rotate between members.
This article is really about feedback. Is your Board performing well? Are its members participating and adding value? Is there support for members to develop or improve? If not, the organization can suffer.
This article provides suggestions that a Board can embrace and some innovative ways to support and improve Board development. Implementing a robust assessment process is not difficult. The process can be as formal or as informal as the Board wishes, but should be consistent, transparent and well-documented. This is not a comprehensive list of best practices. It is a list of ideas that can challenge the Board and its members to think differently about assessments and performance.
Once your Board has thought through some of these suggestions, take some time to get creative about consequences. What happens if an assessment shows the Board’s performance to be lacking? How does the Board work to improve itself and what happens if it is unable to meet its own expectations? Hopefully the answer is not to lower expectations.
Please share your thoughts on this topic in the comments section.
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