GovernWith Blog

The imperative is clear – the question is no longer WILL your board evaluate, but HOW will you evaluate. 

Recent Royal Commissions in banking, education and other institutions have led ASX to revise their Corporate Governance Principles to recommend board and director evaluation and development take place annually across all sectors to support good governance. 

But which evaluation method is best suited to your needs? 

A quick google search will return a multitude of methods by which an organisation may evaluate its board and director performance. Governance Evaluator takes a look at the pros and cons of the most popular evaluation options to help you make an informed decision for your organisation. 

1. Free surveys & tools 

Many organisations with very early governance maturity, or with very limited resources, may choose to ‘dip their toe’ into evaluation via an internally sourced and managed survey. Resource hubs such as VCOSS and  ourcommunity.com.au offer free of charge quizzes and fact sheets that give boards a good initial overview of their level of functioning. 

Pros: Suits the smallest budget. Provides a general overview of collective governance performance. Fact sheets may provide information about areas for development. Tackles the initial issue of ‘not knowing what you don’t know’. 

Cons: Content of questions and resources generic and basic, not tailored for specific industries or addressing specific issues. Can be cumbersome to complete and report upon. Lacks an external perspective. Can be time consuming to compile responses and turn into useful data for decisions about future actions. Provides no ongoing trending or benchmarking. 

2. Internal forums 

Similarly, boards at an early level of governance maturity may decide to hold a board discussion where a group consensus is sought in relation to the board’s performance on key governance requirements. At this or a subsequent session, the board would agree on actions to address issues raised. 

Pros: Can be completed in a short period of time. Does not require additional investment other than time. Helps the board go from not knowing what they don’t know, to identifying as a team what the issues are; ie ‘knowing what they don’t know’. 

Cons: Discussion & actions can be skewed by more influential participants. Lacks an external perspective. Focuses on collective board performance and does not address individual director skills and experience. 

3. External consultants 

Some more mature boards may engage an external consultant to manage the evaluation and development process from end to end, or facilitate specific milestones throughout the process. Consultants may be governance experts or industry experts, but ideally would be both. Consultants provide a guiding hand for boards who know they need to evaluate, but are limited by experience or time to manage the process themselves. Peak bodies are a good source for recommending consultants who have experience in the industry. Governance Evaluator is proud to offer independent consultants as a supplement to our board and director evaluation processes. 

Pros: An external perspective of governance performance against relevant legislation and frameworks. Adds rigour and reduces subjectivity of the process. Expert guidance to enable the board to move beyond evaluation and into targeted capability building & development. Can assist the board to go from ‘not knowing what they don’t know’, to ‘knowing what they don’t know’, to developing strategies to address the identified issues. 

Cons: Can be expensive. Can be labour intensive. In some instances, the board may be left to write an action plan themselves, or are left with a generic action plan that is relegated to the bottom drawer until next year. 

4. Self-assessment 

Self-assessment is recognised by Aon, ASX, DHHS and AICD as well as peak bodies in health & age services (LASA, VHA, ACHG, AHHA), community (ACNC) and education (NESA) as a sound method for understanding and improving a board’s performance, as well as the skills and experience of individual directors. 

Some online tools available offer flexibility and ease of data collation and analysis. In addition, some tools can tailor their content to the specific requirements of board’s sector, and provide data and insights for boards to trend and benchmark their performance historically, as well as against others in their sector and across industries. 

Care must be taken to ensure that the self-assessment tool avoids the influence of subjectivity. This can be achieved through careful questionnaire design and analysis. To find out more about how leading self-assessment techniques achieve this, click here. 

Outputs of the self-assessment inform actions to build board capabilities where they are needed most. Governance Evaluator is founded on effective online self-assessment of board and individual director performance. 

Pros: Affordable. Can be managed internally if desired. Outputs enable the board to move beyond evaluation and into targeted capability building & development for the collective board as well as individual directors. 

Cons: Requires engagement in the process by board members. Can be subjective, unless it is part of a multi-faceted evaluation & capacity building process. 

As you can see, there are options available to suit all levels of governance maturity and investment capabilities. To discuss the best board evaluation and development program for your board, book in for a 15-minute governance health check below. 

While board self-assessment is recognised by organisations including ASX, DHHS and AICD as an accessible, flexible and sound contributor for understanding and improving a board’s performance, the issue of subjectivity within a self-assessment is a long-standing point of discussion and debate. 

How realistic are boards at self-assessing their own performance? 

While the issue of subjectivity within a self-assessment is a real consideration, there are methods a board can employ to reduce the influence of subjectivity from the outputs of a board self-assessment. 

As illustrated below, the most important action a board can take to counter any subjectivity is to ensure the self-assessment is not the sole source of information, but rather is one of several key elements in the evaluation process. 

These elements should include: 

• A self-assessment questionnaire that asks about aspects of good governance that require supporting evidence rather than simply seeking perceptions. For example, a question may ask about the presence (or otherwise) of a policy or procedure, and the regularity of updates. This requires a more objective response than asking about how the respondent feels about the board’s performance in relation to the same policy or procedure. 
• Leadership and communication from the chair so that the board are assured about the confidentiality of their responses and the subsequent ways in which their responses will be used. For example, for professional development.  
• Ensuring a whole board discussion of the self-assessment findings takes place, which triangulates responses between members, and between group behaviours and responses.  
• Periodically bringing an objective aspect to the evaluation by engaging an external independent convener to facilitate the group discussion, or to enrich the entire evaluation and capability building process by undertaking desktop reviews, director interviews, and by facilitating and building group and director action plans.  
• Benchmarking the results of the board evaluation to those of other boards in similar industries and environments. Confidential benchmarking against the cohort average as well as the best performing boards in the cohort will stimulate further conversation about the board’s self-assessment findings.  
• Historical trending of results, so that themes that may have emerged in initial evaluations can be tracked in subsequent years.

How do boards translate the results of the evaluation into improvements? 

As well as the often-legislated requirement to ensure delivery of safe and quality services via a culture of continuous review & development, it is crucial for the morale and drive of the board members that the time they invest in undertaking a robust evaluation is rewarded via assurance that the evaluation will result in more effective governance of their organisation. 

The first step to achieving this is for the evaluation process to be comprised of multiple elements (as described above). 

Secondly, while the evaluation process is a vital snapshot in time, equally important are the discussions and actions that follow the evaluation. There are a variety of methods to translate the results of the evaluation to inform the group discussion: 

1. In an independent convener led process, the convener analyses the outputs of the self-assessments, confidential interviews, desktop review, peer review and committees review and presents them to the board as a recommendations report for review and discussion.  
2. In a chair led process, the chair analyses the outputs of the self-assessment and confidential interviews and presents them to their board either as a recommendations report or a facilitated discussion. 

Thirdly, with the priority areas identified, the board action plan must be built to convert the priorities to actions and then ultimately to results. The board action plan must include SMART (Specific, Measurable, Attainable, Realistic and Timely) actions set against each priority area that are assigned to a responsible person, and be tracked against deadlines. Regular review of the board action plan is vital to ensure that it remains current and actions are followed through across the remainder of the year. 

Individual action plans must be built in concert with the board action plan, which are developed and used by members to resource and address any individual gaps in knowledge, experience or skills uncovered during the evaluation process. The importance of gathering and acting on this information is also recognised by ASIC in their most recent Governance Principles. 

Next, the beginning of each new year provides an opportunity to challenge, and confirm or reset, the board’s current priorities by comparing performance to the average and best performers in their industry cohort via a board review of their Governance Capability Benchmark Report. 

Finally, annual re-evaluation is a vital component of continuous improvement, as it highlights areas of development and new areas of focus for the next capability building cycle. 

The very act of evaluating, discussing, choosing actions and being accountable for their implementation, then measuring both internally and externally, sets the culture of quality and continuous review and development from the top. As the Royal Commissions and prudential enquiries have determined, this type of culture is essential to effective governance and quality delivery of service. 

Despite accreditation processes being embedded in health systems across more than 70 countries around the world, the actual value of accreditation to health care organisations is not well understood; and more work is needed to determine its value and how to measure it. 

What is the value of accreditation? 

Accreditation is often viewed as a costly, time-consuming bureaucratic burden that adds little value in terms of patient care. Yet accreditation has also been found to be positively associated with high-quality care, high patient satisfaction and good outcomes. This means that accreditation processes could be used to develop and support a culture of safety and quality among health workers. Particularly when staff are aware of its purpose and are involved in the accreditation process. 

Measuring value in health care 

Our latest health policy evidence brief from the Deeble Institute for Health Policy Research, Australian Healthcare and Hospitals Association, assesses the value of accreditation to health service organisations against the health care quadruple aims of: 

• Improving the patient experience of care (including quality and satisfaction) 
• Improving the health of populations 
• Reducing the per capita cost of health care
• Meaning in work 

Findings from the brief advocate for a research-based approach to developing a common narrative on what constitutes value, so that value relating to interventions such as accreditation can be more appropriately assessed. 

Where do we go from here? 

A 2018 review by the Australian Commission on Safety and Quality in Health Care (ACSQHC) has resulted in revisions to the assessment process, the assessment team, use of data, regulatory oversight, communication of assessment outcomes, and resources and support for health services. 

The changes will be phased in from January 2019, and it will be interesting to see a formal evaluation of the results further down the track.