Of the five responsibilities of a board, the fifth is the most problematic – “The board is responsible for itself.” That is, it has to monitor, critique and improve itself. It’s got to look at itself in the mirror. Despite how critical a board self-evaluation is to effective governing, it’s a tool that often gets overlooked.
There are plenty of reasons beyond responsibility for a board to self-evaluate. Let’s review some.
1. A board self-evaluation is an indication of good governance. It makes a statement that the board is willing to reflect internally, evaluate its performance and consider improvements. Self-evaluating annually is an important evolutionary step that shows the board takes its responsibilities seriously.
2. Outsiders value the significance of board self-evaluations. It’s among the characteristics rating agencies seek when rating bonds for healthcare organizations.
According to Moody’s “Not-for-Profit Healthcare Rating Methodology” report, “Self-assessment provides governing boards and management teams with the tools to identify challenges early on and develop strategies to address those challenges in the interest of maximizing efficiency …. The most successful organizations follow best practices in self-assessment, including use of a short list or “dashboard” of key metrics that are closely monitored on a regular basis to identify adverse trends quickly and [develop] contingency plans to make midyear adjustments when necessary.”
Attorneys general also regard the self-evaluation as a tool that aids good governance as well as a board’s intention to act responsibly.
3. Self-evaluations provide grounds for dialogue, which lead to open discussions of governance issues. Evaluations may unearth new issues to a board. Or, they may reveal “the elephant in the room” that everyone knows about, but ignores. Discussions of the issues and how to solve them provide a greater understanding of governance and board members themselves.
4. Self-evaluations refresh the board’s understanding of its role and responsibilities. Because the instrument covers all aspects of a board’s functions, it allows for the exploration of new areas that not everyone understands. There’s nothing wrong with occasionally reviewing a board’s functions for the sake of keeping all members on the same page.
5. A self-evaluation identifies important areas of board operation that need attention or improvement. These issues are highlighted via differing responses to the same question. For example, a self-assessment can identify disagreement regarding the appropriateness of the mission statement. The board then can discuss and attempt to resolve.
6. A board self-assessment defines the criteria for an effective and successful board. A good assessment will view ALL of the board’s functions and enable the team to note what it’s doing well and where it needs fine-tuning.
7. Implementing a board self-evaluation and following it with conversation builds trust, respect and communication. These three aspects are key to good board relationships among board members, the board chair and the CEO, who is usually a board member too.
8. A self-assessment allows individual board members to assess their own contributions and work more effectively as a part of a team. A typical self-assessment tool asks board members to rate their own effectiveness. Advanced self-evaluation tools require the board to assess each member and the chairman. Because this can be a painful process, we recommend you start with a basic assessment before focusing on an advanced assessment.
9. Board self-evaluation is an important step in eliminating term limits for board members. At Practical Governance Group, we don’t believe in term limits. We place trust in board self-evaluations so that the group progresses; poorly functioning board members are removed before their terms are up. Board self-evaluations are essential for board improvement. Many boards rely on term limits to remove ineffective board members. However, we feel that that only spreads the pain and suffering to other board members over a longer period – the entire term of the ineffective board members.
J. Larry Tyler, FACHE, FHFMA, CMPE, Chairman and CEO of Practical Governance Group, offers 40 years of experience partnering with boards in governance advancement and C-level search. Reach him at 678-296-6775 or ltyler@pgghealthcare.com.