REALITY: There’s a Chip in the Windscreen
Every country in the world is imposing and endless list rules, guidelines and codes of conduct targeted at government agencies and publicly traded companies. Exhaustive resources, extensive literature, and a myriad of vendors proclaiming to be able to forge the answers you need is only adding to the apprehension of organizations needing to strategically evaluate governance effectiveness. That combined with a myriad of excuses I’ve seen in the field including but not limited to; “we don’t have enough time, we’re going through a reorg, no budget, no resources, we already have a spreadsheet” and the ever popular, “we’ve got everything under control”, are tell-tale signs that eventually the crack in the glass will shatter.
“…boards that assess their members and practices tend to be more effective than those that don’t”
MEASURE: How Big Is The Crack In The Windscreen?
The Directors at Blue|Zoo have always maintained that you simply cannot improve that which you cannot measure. Whether you are evaluating governance processes for Corporate Governance, Project and Portfolio Governance, Environmental and Social Responsibility or Occupational Health and Safety, the fact remains, a quantitative analysis and its output can easily identify gaps and cracks and levels of maturity that should be drawing attention to matters that need to be corrected.
The objectives of the exercise should be clear, measurement of effectiveness, opportunity for growth, sustainability, transparency and trust. Without these elements board effectiveness will never be realised. It is the responsibility of the Board to make decisions, strategic and effective decisions. With a diversity of experiences and styles, assessment of board effectiveness and process are critical. To ignore the criticality of assessments is to ignore the reality that this dynamic exits and hence the visibility for decision making impaired.
APPROACH: Duct Tape or Chip Repair?
While self assessments generally tend to generate a fair bit of dialogue, and qualitative data, the challenge we often see is that boards tend to struggle with corrective and preventative action items that resolve gaps or challenges. Those boards that are well intentioned with their approach to quantitative assessments very often lack experience in actually conducting an assessment and in doing so, easily overlook objectivity. This lack of objectivity more often than not allows political and personal agendas to seep through the gaps.
RESULT: Shattered Glass or Clear Direction
“Shareholders’ understanding of board and director assessment processes and criteria is indispensable to both board credibility and shareholders ability to appraise the board’s recommended resolutions and proposed slate of directors”
National Association of Corporate Directors, Report of the NACD Blue Ribbon Commission on Director Professionalism – 2005 Edition
Evaluation of the right elements of governance processes are critical, this only serves as a conduit for data compilation and the confidence the board of directors will have in the output. Justification for scoring elements of governance processes and assignment of corrective actions only serve to focus efforts, resources and expenditures on the governance practices that need immediate attention. Once a board of directors have experience with assessments and come to appreciate the quantitative results, assessments can be compared with previous assessment cycles, business units, supporting entities or national standards.
Much like a simple crack in the windscreen, assessments are easy to ignore, controversy and sensitivity around legitimate shortcomings are all real issues that must be addressed. Assessments however, are a critical investment in board effectiveness.