Looking Under The Rock: Outcomes from your Board Performance Review

What you might find when you “pick up the rock” and what to do with it!

Here are some of the outcomes you might find from your Board Performance Review and issues to consider before deciding what action to take.

The Review rates the Board highly and recommends no changes to existing practices

This is a welcome outcome but before you start congratulating each other, consider:

• Was the process you used robust and focused on the key drivers of a Board’s success?
• Were the participants in the process ‘honest’ in their feedback?
• Was the facilitator sufficiently skilled to distill the right information from the group?
• Were there factors at play that prevented an objective review of the Board’s performance?

The review shows that the organisation has lagged behind governance best practice

Today we have good access to contemporary governance standards and commentators on their implementation.

Reference to publications of the Australian Institute of Company Directors, the ASX Principles of Good Corporate Governance and the Institute of Chartered Secretaries are available and provide good guidance as to contemporary practice.

A good facilitator will be able to recommend practical solutions to the governance practices that require updating.

The review shows that the Board is too operational in its focus

This is a common finding and leads to the Board having to ask some very challenging questions of itself.

• Does the Board have the skills to operate strategically?
• Does the Board remain operational because it is their comfort zone – it is what they know?
• Is the Board overly operational because it does not have faith in the management team to deliver the day to day results?
• Is the Board meeting agenda structured to keep the focus operational?
• Is the operational focus historical?

Action should be geared around amending the governance practices to create room for the ‘strategic’ Board and review the composition of the Board for appropriateness to make the transition from the operational to the fully functioning Board.

The review shows that there is inconsistency between the behaviour of the Board and the company’s policies and values

This is one of the most damaging findings from a Board review. Boards can no longer get away with a “do as I say but not as I do” approach to behavioural leadership. People internal to the organisation, on seeing the inconsistency of behaviour by the Board, will take the view that compliance to those policies and values also do not apply to them if they don’t apply to the Board.

The Board must make a commitment for its behaviour to model the behaviour it expects of the rest of the organisation or be prepared for the consequence of non-compliance across the organisation.

The review shows that there is confusion between some Board members as to the ‘hat’ they are wearing in the Boardroom.

Sometimes directors of a company can also be shareholders and/or employees. In these circumstances people are wearing ‘multiple hats’.

It is not uncommon for people to become confused as to what hat they are wearing in the Boardroom which can lead them to make comments or decisions that are inconsistent with their role as a director in protecting the interests of all shareholders.

While not uncommon, this can be extremely destabilising to a Board and needs to be addressed head on. A good chairman will challenge a Board member to be clear about the hat they are wearing (or another similar analogy) if they feel their different roles are creating a conflict of interest for that individual.