The Value of Board Assessments

At Masters-Rudnick & Associates, we see the annual board and committee assessments as opportunities better to align directors and senior management and to maximize the value that independent directors bring to the enterprise by strengthening working dynamics among all directors.

Assessments can unlock a wide variety of issues.  For example, do all directors understand the company’s long and short term strategies? Are the board and CEO aligned on matters of strategy? Do directors understand the factors that drive the company’s success, as well as the risk elements that can destroy value? Are there disputes or other issues between directors or between directors and management that impede smooth board function? Do the board and management understand their respective roles? A carefully tailored assessment process helps the board itself answer these and other potentially thorny questions.

We structure assessments with four baseline principles in mind. First, a developmental approach – not a judgmental process that “grades” performance – best promotes the candid and thoughtful responses and conversations that improve board function. Second, because respondent candor is essential in an assessment, the assessment process must promise anonymity for respondents. Third, the methodology used must avoid embarrassment to any individual member of the board. Fourth, the board or committee’s planning should include follow-up sessions – perhaps the annual retreat – to discuss and deal with issues that the assessment identifies as requiring attention.

There is no single, prescribed assessment method. Most commonly, assessments involve written surveys, personal interviews, or a combination of these techniques. Each board is different, and the choice of methodology must be tailored to the particular needs of the board and the issues that it faces.  The art of assessment involves eliciting candid, thoughtful response from all participants without precluding any issues respondents wish to address.

One-on-one interviews conducted on a not-for-attribution basis provide the best opportunity for discussion in depth about issues. While we develop a baseline protocol of questions for discussion, our interviews are open-ended. Respondents can address or emphasize whichever issues they deem important. Our reports provide anonymity, and comments or remarks cannot be attributed to their originator.

Surveys are another, often used approach. When we conduct surveys, we take care to construct the questionnaire so as not to limit or steer responses, and we provide many opportunities for comments elaborating on answers or raising additional issues important to the respondents. We use a “trilateral” approach to data interpretation – collating responses to questions, analyzing comments, and conducting, when appropriate, statistical analyses of responses. This comprehensive approach highlights areas of consensus and matters on which full agreement does not exist. It also shows patterns of views and behaviors among the board or committee as a whole, thus providing guidance as to areas in which further work or development would be helpful.

We work with boards to determine the methodology best suited for that board and the issues that it and the company face. Regardless of choice of method, we structure assessments to permit directors to raise issues important to them, and we provide ample opportunity for them to expand on their thoughts in their own words.

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