"Assessing the value boards bring to their organisations is a key corporate governance requirement. Taking a different approach to the process can have a transformational impact on the business and its leaders," says Judith Nicol.
All boards need to develop the value they add to the organisation they serve. But how do they measure their contribution and assess their effectiveness? Traditionally this has taken the form of self-assessment, perhaps via a structured questionnaire or tick-box form. While this is certainly a reasonable approach, it has its limitations. Both the data generated, and the value that can be extracted from it, may be quite narrow. At the end of the day, it is a self report from 'inside' the board and does not have significant external insight.
I would argue that it is more valuable for boards to pay attention to the systemic context in which they operate. This includes a complex combination of stakeholders and influencers both inside, but crucially also outside, the organisation. Typically, these could include key professional advisers, investors, shareholders, customers, suppliers, key strategic partners and regulators. The views of the senior management team and how they connect with the board can also offer important insight on the wider context in which the board is operating.
The world is fast changing, driven by shifts in consumer behaviour, changing regulatory requirements and the growth of new markets and technologies. It is vital that the board’s radar takes in all the elements within its systemic context in order to step up to what the future demands of it.
In addition, change in the political and social climate around executive performance and pay, stricter regulation and oversight and more vociferous activity by shareholders, pressure groups and the media means that boards are under ever greater scrutiny.
Systemic Board Review™ challenges boards to go beyond a box ticking approach or a one-off health check and to turn a corporate governance requirement into a transformational process. It captures inputs from board members and crucially also invites views from key stakeholders outside the board who are pivotal to the success and future direction of the business. Working in partnership with the board, the review utilises both qualitative and quantitative data to examine current performance.
The crucial next step is for the board to engage with the review output to arrive at a clear framework for their future work together. This takes the process beyond a static, once a year snapshot of performance and contribution. It forms a blueprint for planned board development, and may well highlight areas the team can work on together to deliver change and improve effectiveness.
This collaborative approach is vital if boards and their businesses are to get value from reviewing their performance. Simply receiving a list of recommendations from an external consultancy asked to carry out a survey of board members is unlikely to generate consensus or commitment around the action needed. The Systemic Board Review™ approach includes an interactive board workshop at which the review findings can be worked with collectively, priorities identified and an action plan mapped out.
The breadth and depth of feedback and data captured is extensive and one of our challenges is how to present the richness of it in a way that doesn't feel overwhelming. So when we are working with boards as they engage with the data, we try to focus on key questions to help channel the discussions and the subsequent choices and courses of action they choose. At the end of the day the critical questions are ones like: "what is it the future requires this board to step up to?" and "what is it that internal and external stakeholders require of this board in order that the organisation is successful in the future?" A board cannot truly answer these questions if it only listens to itself, and so bringing stakeholder voices into the room is really important. The traditional board review method doesn't encourage this.
External stakeholders can be a very valuable source of feedback, not just on what is effective now but also how the board might want to adjust their focus in the future as things change. This also has the potential to be quite a challenging step – Boards may have apprehensions about what they will hear from external stakeholders. It might require a leap of faith, and boards may decide to begin the Systemic Board Review™ process with internal stakeholders first.
In my experience, moving to a systemic approach to board evaluation can pay dividends. It is a way of building a cohesive corporate culture by aligning the internal and external worlds in which the company operates. It also supports board members in identifying and adjusting priorities, ensuring they work cohesively and successfully in the current climate and are also fit for the future.
Warren Partners has launched a new Systemic Board Review™ service led by Judith Nicol. It stems from a proven and rigorous methodology developed by Peter Hawkins, Professor of Leadership at Henley Business School. Systemic Board Review™ supports compliance with the UK Corporate Governance Code as recommended by the Financial Reporting Council.
For more information please contact Board Service team members Judith Nicol at firstname.lastname@example.org, Joëlle Warren at email@example.com, Vicky Lawton at firstname.lastname@example.org or Sally Johnson at email@example.com.