Few governance-related issues are more difficult than assessing board performance. Evaluation of board performance is more art than science due to an underlying link between the management, the firm and board performance. It’s also rarely simple to define. For example the board may be in charge of the company effectively, however shareholders are unhappy about a low return on investment. The board might have inherited governance and management issues and is working hard to turn the situation around. It may have also invested in new strategic initiatives and developed the turnaround plan.
In other situations the board can get too involved http://www.boardroompro.net/directors-desk-board-portal-tutorial/ in the details of operations and make decisions that should be left to the management. This is especially true when the board isn’t employing the right method to assess its members. In the absence of a formalized process for evaluation in place, it’s easy for minor problems to become major issues which can compromise the efficiency of the board.
The board may have developed an informal culture, which doesn’t take its performance assessment obligations seriously. It could be because the board lacks the systems to collect data on performance or the boardroom skills required to fulfill its responsibilities in evaluating.
Boards need to not only possess the right skills, but also open to the findings of the evaluation. The board should identify areas for improvement and work with the management team in developing a plan of action. This could include regular training sessions for the board to improve knowledge across the board.
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