Appraising boardroom performance.

Abstract

Rare is the company that does not periodically review the performance of its staff, business units, and suppliers. But rare, as well, is the company that does such a review of one of its most important contributors--its board of directors. Reviewing a board's performance is not an easy proposition: it has to be done by the members themselves, people who generally have many other responsibilities and whose time is always at a premium. But done properly, appraisals can help boards become more effective by clarifying individual and collective responsibilities. They can help improve the working relationship between a company's board and its senior management. They can help ensure a healthy balance of power between the board and the CEO. And, once in place, an appraisal process is difficult to dismantle, making it harder for a new CEO to dominate a board or avoid being held accountable for poor performance. Done properly is the key here, though. Done incorrectly, board appraisals can degenerate into self-serving evaluations or unpleasant, time-wasting exercises. Worse, they can evolve into rigid mechanical processes that discourage innovation. In fact, all of the approaches the authors observed in two years of research were incomplete. The authors have therefore drawn on the strengths of several different approaches to synthesize a best-practice process that is both rigorous and comprehensive.

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