Part 2 of WATSON’s 3-part Year of the Peer series

Shared purpose – check.
Evaluation ready – check.
Now what?

Whatever you do, do not just do what other boards are doing. Peer evaluations are nuanced and deserve a customized approach. After all, when it comes to governance, one size does not fit all.

9 Steps to Customizing Your Director Evaluation Process

Design a peer evaluation process that works for your board by ensuring there is agreement on the following questions:

1. What is the objective?

The true purpose of a director peer evaluation exercise is not to create a report card for directors but to provide each director with a sense of how fellow directors view their performance, where they are seen to perform well and where their peers see opportunities to contribute further to the board’s performance. Determine what your board hopes to get out of the process and work backwards from there.

2. Who will lead the process?

While the Governance Committee or Chair may lead the process internally, many boards use an outside party to gather and analyze feedback (either through the use of surveys or interviews). An externally led process offers the most confidential environment so directors feel comfortable sharing candid feedback on their fellow directors, which is central to a meaningful peer evaluation. Whether or not an external consultant is used, consider who is best positioned to lead the process on behalf of the board.

3. Who will be evaluated?

To be truly effective, all directors should receive personalized, confidential feedback on their performance. Directors may also receive feedback on their contribution as members and/or chairs of committees. The Board Chair should also receive feedback on their chair role, either through a separate chair evaluation process or as part of their director evaluation report.

4. Who will participate in the evaluation?

Most often, only directors provide feedback as part of a director evaluation process. However, when dynamics and board/management relations and strong, some boards also seek feedback from members of management who engage regularly with the board.

5. What will be evaluated?

A well-rounded evaluation balances the distinctive set of competencies that each director brings to the boardroom with the general competencies expected from all directors, as set out in a Director Position Description or Terms of Reference. The criteria for measurement typically include:

• Level of knowledge in key areas (e.g., industry knowledge, business knowledge, financial acumen)
• Observable, behavioural characteristics (e.g., preparation, strategic perception, boardroom contribution, boardroom style, interaction with management)

6. How will the feedback be collected and managed?

As with board evaluations, interviews typically yield deeper and more nuanced insight, although it is quite common for boards to seek feedback on individual director performance by way of a structured survey. Many boards opt to do both. When using a survey, include both quantitative and qualitative questions. Use open-ended qualitative questions to elicit deeper feedback, for example: How would you describe this director’s boardroom style (i.e., interaction with fellow directors and management)?

Provide directors with a primer outlining tips on how to share constructive feedback (specific, low in judgement and supported by examples) and make their comments as clear as possible to avoid misinterpretation.

If management is providing feedback as part of the process, care should be given to how they provide feedback. Often members of management feel more comfortable sharing qualitative feedback through open-ended survey questions or confidential interviews.

7. What will be done to ensure confidentiality?

Feedback is typically gathered from each participant on an attributed basis so the person leading the process can clarify feedback with the author as necessary. However, feedback is shared with each director on an unattributed basis. Careful attention must be paid to diligently strip language, phrases and examples from feedback that might be traced back to the author.

Regardless of who is leading the process, their ability to ensure strict confidentiality of all feedback is critical to the integrity of the process.

8. How will the data be compiled, analyzed, interpreted and presented?

Data is typically compiled, analyzed and interpreted by whoever leads the process. However, when internally led, analysis and interpretation can be susceptible to unintended bias and those leading the process should take great care to analyze and interpret the feedback in an objective and consistent manner. Results are typically presented in confidential written reports, seen only by the director in question and the Chair.

For quantitative feedback, it is common practice to provide each director with a summary of the feedback, showing the director’s self-assessment and the average assessment of the director by peers (and sometimes the average assessment of the director by management, if sought). For qualitative feedback, the feedback is categorized into key themes supported by specific comments or fed back as is. In the case of the latter, ensure those providing feedback are aware that their unedited feedback will be shared with directors (minus anything inflammatory or inappropriate) – this often changes the nature and tone of feedback provided.

When management provides feedback, it is important to consider whether their qualitative feedback is presented separately or woven into the director feedback. Often when the management team is small, their feedback is incorporated into director feedback to protect anonymity.

9. What will we do with the results?

Once the feedback has been gathered, the Chair leads a one-on-one coaching session with each director to review the feedback. If an external consultant is involved, typically the consultant first shares the results with the Chair and coaches them on how to deliver the feedback. In some situations, the consultant and Chair may jointly deliver the feedback. Some boards follow up with a written memo outlining specific agreed upon actions.

The Board Chair, Governance Committee or full board are often provided the average board and management rating for each question to guide board development.

As with board evaluations, many boards struggle with implementation and follow-up of director evaluations. To overcome this hurdle, we recommend directors acknowledge the feedback received and any action items discussed with the Chair. It is also useful to invite directors to reflect on their own performance – what do they think are their major contributions and where could they improve their contribution. Together, the Chair and director should agree on a follow up plan, based on the feedback provided in the evaluation.

Peer evaluation is an evolving practice. While some boards are reluctant to become too formal in their approach to individual evaluation and feedback, those who embrace the concept of feedback have found the process to be an important part of director development and continuous improvement.

Stay tuned for Part 3 of the Year of the Peer series: Mastering Peer Evaluation Feedback