Reviewing your board’s effectiveness

Internal board reviews provide a means for a board to evaluate its own performance and identify areas for improvement. They’re also a flexible and cost-effective way for a board to assess its own governance practices and processes.

Which all sounds great, but internal board reviews don’t come without their challenges. That’s what makes external board effectiveness reviews so important for mutuals and friendly societies.

External Board effectiveness reviews (BERs) provide a fresh, objective, independent assessment of the board's performance, areas for improvement and the board's commitment to accountability, transparency and best practices in corporate governance. An external assessment asks challenging questions and delivers demanding recommendations. It also allows the board an opportunity for self-reflection and can bring in best practice and external benchmarking to help improve performance. The UK Corporate Governance Code recommends external board reviews take place every three years.

In this article, I take a look at the common challenges of BERs we’ve uncovered through our BER work and offer some tangible tips for success.

4 common challenges of board effectiveness reviews

At Hanover, over the course of the last two years, we’ve worked closely with our mutuals and friendly society clients to help them better understand their board’s effectiveness. Our work has provided some interesting observations about the challenges they face.

These challenges are not solely those of mutuals and friendlies, and they highlight areas in which all firms could grasp opportunities to improve the way in which their boards typically operate.

1. Communication and board dynamics - we’ve found that there’s a need to strengthen relationships and communication between different groups within a board. For example, this could be between NEDs and executives or between new and existing members, especially if those existing members have served on the board for a long time. Tensions are commonly created simply through a lack of communication.

2. Strategic future focus - boards can often drop too far into the operational detail and make decisions that senior executives should be making. This is easy to do, but boards should have a stronger focus on the future, overall vision and strategy.

3. More focused and efficient board meetings - meetings are often too long, and/or not always focused on the most critical issues. Board members need clear, concise information in their board packs to reduce the need for information exchange during the meeting. This will help the board to focus on what needs to happen with the information they have.

4. Board packs - are often too long and sent too close to the meeting, not giving board members enough time to review. Board packs need to include clear instructions and expectations with enough time built in. Seven days is commonly recommended, to allow members to ask clarifying questions, research more detail and form opinions on the topics under consideration.

Tips for successful board effectiveness reviews

A board review offers the opportunity to really move the needle for your business. It’s crucial for every board member to be present and be prepared.

Before any BER, whether it’s internal or external, these tips will help you reach a successful outcome:

• Be aware of and incorporate a diversity of perspectives. It’s important to actively reduce bias at board level, whether that’s group think or authority bias, as examples.
• Ensure you create a psychological safety net so that all board members feel comfortable to step up and challenge each other. There’s no point in simply sticking with the status quo, and it’s important that everyone’s voice is heard.
• Meet at the right level. Ensure your BERs are on a strategic rather than an operational level. Looking outwards and towards the future makes meetings and reviews more efficient and focused.

Hanover’s approach to external board effectiveness reviews

Hanover can support your board and help you get the most from your members with external board effectiveness reviews.

We offer three levels of BERs, from the short and sharp with a list of practical outcomes to more in-depth reviews. Our simplest approach comprises:

• A short online survey
• 1:1 sessions with each board member
• Observation of a board meeting
• Desk research to understand the organisation and current market it operates in
• A final report of our analysis and recommendations which we present to the Chair and CEO

Our more complex levels include additional board observations, individual leadership profiling and development reports and a skills audit. We can also tailor our approach to meet your specific requirements and bolt on leadership training, 360s and more, depending on your board and individual board members’ needs.

If you’d like to talk through how we can support your firm with an external board effectiveness review, contact me directly and let’s set up time for a call.