Board evaluations are often treated as an obligatory exercise—an annual task to fulfill compliance requirements. However, when executed properly, they serve as a powerful mechanism for strengthening board performance, refining governance, and driving organizational success. The key is to shift the mindset from viewing evaluations as a bureaucratic burden to embracing them as a strategic tool for growth and accountability.
Recent data underscores the pressing need for a more rigorous approach to board assessments. According to a Harvard Business Review study of 187 boards, only 36% of companies believe they conduct a “very good” job of assessing individual director performance. Even more concerning, only about two-thirds of directors strongly believe their board leverages the skills of all members effectively. These statistics highlight a significant gap between what evaluations could achieve and what they currently accomplish.
The Challenge of Meaningful Evaluation
Many board evaluations focus narrowly on procedural and structural elements, such as meeting frequency, committee assignments, and compliance with governance requirements. While these are important, they only scratch the surface of board effectiveness.
Research from NASDAQ and EY suggests that the most valuable board evaluations go beyond the mechanics of governance to assess deeper issues, such as:
Boardroom dynamics: Are discussions robust, inclusive, and strategic?
Director engagement: Are all members contributing meaningfully?
Skills alignment: Does the board’s expertise match the company’s evolving needs?
Decision-making effectiveness: Are key issues being debated with sufficient rigor?
Boards that fail to evaluate these dimensions risk stagnation, groupthink, and strategic misalignment.
A Framework for Excellence: The NASDAQ Four-Step Process
To bridge the gap between compliance and strategic governance, NASDAQ Governance Solutions outlines a four-step framework for effective board evaluations.
Step 1: Custom Design Phase
Boards should tailor their evaluation process to reflect their industry dynamics, business model, and governance structure. A one-size-fits-all questionnaire won’t suffice. Instead, organizations should:
· Review governance documents and strategic priorities to frame evaluation objectives.
· Design questions that probe beyond surface-level compliance.
· Consider key challenges the board is facing and tailor assessments accordingly.
Step 2: Written Response Collection
Directors provide confidential feedback through structured questionnaires. These should be designed to elicit candid responses about both the board’s collective performance and individual director contributions.
Best practices for this phase include:
· Using a mix of rating scales and open-ended questions.
· Ensuring responses remain anonymous to encourage honesty.
· Allowing directors adequate time to reflect and provide thoughtful insights.
Step 3: Individual Follow-Up Discussions
Written evaluations are useful, but real insights often emerge through conversation. One-on-one interviews—either conducted by the board chair, lead independent director, or an external facilitator—allow for deeper exploration of key themes, uncovering nuanced perspectives that might not surface through surveys alone.
According to EY, 22% of Fortune 100 companies now use third-party facilitators for board evaluations. These external experts can help identify governance blind spots and ensure directors are providing unfiltered feedback.
Step 4: Results Analysis and Presentation
After gathering input, the next step is synthesizing findings into actionable insights. Boards should:
· Identify key strengths and areas for improvement.
· Benchmark performance against peer companies where possible.
· Prioritize actionable recommendations over vague observations.
· Discuss findings openly in an executive session.
The real value of a board evaluation lies not in the report itself, but in how boards act on its findings.
Key Areas for Assessment: Strengthening Board Architecture
Governance expert Mark A. Pfister outlines three critical dimensions for evaluating board effectiveness in his book “Across the Board: The Modern Architecture Behind an Effective Board of Directors”:
1. Sphere of Influence – Does the board have the right mix of expertise to oversee the company’s strategic direction? This assessment should include a skills matrix that maps director expertise against the company’s evolving needs.
2. Planes of Congruence – Are board members aligned in terms of temperament, leadership style, and communication effectiveness? Boardroom culture can be a hidden barrier to effectiveness.
3. Coverage and Balance – Does the board have sufficient depth in critical areas, such as finance, technology, regulatory affairs, and ESG? If expertise gaps exist, is there a plan to address them through director recruitment or education?
A board that lacks the right composition will struggle to fulfill its fiduciary responsibilities, regardless of how well its processes are structured.
Addressing the Skills Gap: Insights from "Smart Board Governance"
As highlighted in “Smart Board Governance for the AI Revolution” boards today face a widening skills gap in areas such as cybersecurity, digital transformation, and ESG. Many companies still rely on directors with traditional finance and legal backgrounds, even as their industries are being reshaped by disruptive technologies.
To stay ahead, boards must:
· Regularly update their skills matrix and identify emerging gaps.
· Recruit directors with expertise in fast-changing fields.
· Provide ongoing education and development opportunities.
An effective evaluation should directly assess whether the board has the right expertise mix for the future.
Moving from Insight to Action
According to the EY Center for Board Matters, only 20% of Fortune 100 companies publicly disclose actions taken as a result of their board evaluations. This suggests that many organizations fail to translate evaluation insights into meaningful change.
Boards that use evaluations as a catalyst for improvement typically focus on:
· Enhancing director orientation and ongoing education.
· Refreshing board composition to fill skills gaps.
· Improving meeting structure and materials.
· Strengthening succession planning for both board and executive leadership.
· Addressing interpersonal dynamics that may be hindering performance.
An evaluation is only as valuable as the actions it inspires.
The Case for External Facilitation
While boards can conduct evaluations internally, external facilitators offer several advantages. The National Association of Corporate Directors (NACD) highlights the benefits of third-party involvement, including:
· Greater objectivity in assessing board strengths and weaknesses.
· The ability to benchmark performance against best practices.
· A structured approach to surfacing sensitive issues without interpersonal friction.
Periodic third-party evaluations can prevent complacency and ensure that boards continue evolving to meet new challenges.
Conclusion: Elevating Board Effectiveness
Board evaluations should be more than an annual compliance exercise; they should be a cornerstone of governance excellence. When designed thoughtfully, they provide boards with a structured way to assess their performance, enhance accountability, and align governance with long-term strategic goals.
The most effective boards are those that embrace evaluation as an opportunity for growth—using it not just to check a box, but to refine leadership, strengthen oversight, and create sustained value for stakeholders.
The question for directors is not whether to conduct a board evaluation, but how rigorously to approach it. Is your board making the most of this critical governance tool?