Board Evaluation: A Shareholder's Guide
Supervisory and Executive Boards must act in the interests of their shareholders. Not exclusively, but sustainably. How can the owners of a company go about evaluating their highest representatives and their achievements? On what criteria should Boards expect to be evaluated, and self-evaluate?
Financial results aside, this article focuses on the evaluation criteria we can find within two dimensions – material and human. Viewed systemically, these dimensions are closely interconnected. And they mutually affect each other. However, there’s a strong temptation for the people in the evaluating seat to leapfrog straight into the human dimension – forming a judgment of an organization’s leaders.
We recommend a primary focus on the material dimension, and only after this, a sound and objective examination of individual and team competencies.
The Material Dimension
This doesn’t just mean the formal ‘manual’ of obligations for Supervisory and Executive Boards. For the purposes of this article, let’s assume that formal legalities and contractual agreements related to control and management issues are respected.
Instead, we’re more interested here in the idea of a regular assessment based on a clear set of criteria and strategies. Products and markets, for example, or investments, digitization, structures, processes and people. We therefore need to ask:
- Are opportunities and potential avenues for development recognized and successfully leveraged?
- Are destabilizing forces and risks detected and acknowledged on time?
- To what extent is communication open, rather than secretive or glossed-over?
- Are organizational imperatives correctly recognised and put in context?
- Is resource management effectively and sustainably driven in that resources of all kinds are optimally-deployed (neither overstretched, nor left dormant)?
- Is the organization continuously and actively developed – and what are the vital signs of this?
- Is the brand portfolio properly cultivated? Are brand awareness and quality constantly growing and improving?
The Human Dimension
When it comes to evaluating the human dimension of Supervisory and Executive Boards, the following criteria, amongst others, should take center stage:
- The ability of Supervisory and Executive Boards to act as a self-critical and collaborative forum, defining strategic goals and implementing them in a timely way
- Their sense for societal shifts and the demands this makes upon the organisation – sensitivity to the first signs and signals
- The ability to handle complex and controversial situations – delicate subjects, conflicts, crises
- Credible and effective communications – both internally and externally
- Passion for the cause and goals of the organization – rated appreciably and demonstrably higher by Board members than personal gain or power.
Good personal governance is an essential part of the human dimension of Board performance. It demands, amongst other things:
- Well-trained and exercised competencies in self-reflection, self-evaluation and self-regulation
- Convincing reputation management – in the individual and collective sense, rooted in credible, ethically responsible Management Team policies.
Priority-Setting - a Decisive Factor
Multiple observers and stakeholders are busy analyzing financial results and plans. It’s essential to stream their conclusions into the indicators covered by the material dimension, providing an objective basis for priority-setting. In this way, Boards and their evaluators can decide upon the most urgent and important areas of attention, and address them.
In a Nutshell
Robust organizational leadership and corporate governance are only possible when they go hand-in-hand with equally good personal governance. If this is robust and sustained, the chances are high that the evaluation of Supervisory and Executive Boards will yield positive results.
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