Assessing Board Performance

Without a doubt, a co-op's board of directors plays a key role in the co-op's success. Yet too often, an assessment of the board's performance in that role is overlooked or ignored. Why is this? What can conscientious boards do?

It was the end of a long day of board training. Everyone had worked hard all day -- with good results. Although discussions had been wide ranging -- from board liabilities to conducting management evaluations, from assessing member benefits and capital requirements to planning the co-op's future---there was one clear theme. What is the coop board's responsibility, and how does a board carry out its business effectively? As the day proceeded, a clearer picture emerged of the complex yet vital leadership role that boards play in co-op governance.

But one director still wasn't satisfied. As the session entered its last hour, she asked, "What about us? How do we measure our performance as a board?" After all, she reasoned, shouldn't the board hold itself to the same standards it holds for all other areas of co-op operations? Wouldn't the same pattern of planning, goal setting, implementing, and then evaluating apply to the board's work? Couldn't directors provide members with a more meaningful measure of accountability and bring the governance process full circle if the board's performance were subject to some sort of formal appraisal?

This director is not alone. Many responsible co-op board members have wrestled with the question of how a board can effectively gauge its own performance. Yet a formal process for assessing board performance is very rarely included in a board's workplan. Nonetheless, conscientious board members need not bypass the idea of a review of the board's systems and scope of operations.

What it does and doesn't do

The arguments in favor of some sort of regular, formal assessment of board operations and activities are compelling. To begin with, such an appraisal provides the board with a chance to reflect on and assess its areas of strength and weakness. Additionally, a review of this type can provide a board with an invaluable yardstick by which it can prioritize its activities for the future. Finally, such an assessment can serve an educational and consensusbuilding function -- by clarifying and defining the overall standards of performance for the board.

Beyond just producing data on relative strengths and weaknesses, a formal board appraisal can optimally result in all directors contributing to setting goals for the board.

In other words, a formal assessment provides the board with a structure to guide an internal review of its work. The discipline of a formal appraisal encourages all directors to reflect on what the board has accomplished as well as what it should be doing and how it works. Beyond just producing data on a board's relative strengths and weaknesses, such a review can optimally result in all directors contributing to setting goals for the board. The commitment of all directors to the board's priorities and to improving board effectiveness makes those goals all the more likely to be completed.

There are some directors who are uncomfortable with the idea of evaluating a board's performance. After all, directors are voluntarily contributing their time and efforts to the co-op. Let's clarify from the beginning what is and isn't involved. A board assessment evaluates the performance of the board as a whole: whether the board is fulfilling its responsibilities, whether the board is providing members with meaningful accountability in the co-op's overall direction, whether the board is spending its time effectively.

A good board appraisal will, in general:

• review the board's systems (e.g., committees, meetings, officers, written documentation);
• measure the quality of its basic functions (e.g., setting basic standards of performance without interfering with operations, evaluating management performance, analyzing financial reports, monitoring key membership functions); and
• assess its overall role in the organization (e.g., effectively dealing with controversy, communications with members, overseeing elections).

While such a review may provide directors with a chance to reflect on their own performance as board members it's inadvisable for a board evaluation to be a personal performance review. Directors should not be asked to assess the performance of other individual board members; better for directors to reflect on the overall performance of the board as a whole. A few questions asking directors to comment on their own contributions to the board (e.g., being prepared for meetings, working to improve one's understanding of the co-op, being impartial in considering issues) are appropriate. However, the primary value of those questions is the personal reflection they encourage of all directors.

What criteria to use

A written evaluation form will provide the board with the best method for conducting a comprehensive board appraisal. Simplicity has great value when collecting a lot of input. Keep the questions simple and clear. Each question should ask about one item or aspect of performance. Most similar questionnaires use a simple rating scale -- such as 5 to 1 (5 for outstanding or excellent performance; 1 for performance that is non-existent or needs improvement). It's also advisable to allow directors to indicate where they don't know the answer to a question.

Depending on how much detail you want to collect in such a review, directors can also be allowed to write in comments on individual questions or in topic areas. While comments can be very insightful and can provide directors an opportunity to expand on an area, they can also be very time-consuming to compile and to review. Be sure you will be spending the time reviewing comments if directors take the time to write them.

Perhaps most significantly, the specific questions on an assessment form should be based on the best practices of an effective board. They should comprehensively cover all areas of board responsibility and outline the most productive systems a board can employ. It's OK to ask one or two questions about improvements in the board's systems and activities. However, directors should be focused on rating the board's performance against the ideal, not against past practice and not against other boards' activities. Reading the form should provide directors with an idea of what the board should be doing -- how it would optimally use its time -- as well as a tool for measuring current practices.

How to proceed

Once a form is prepared, it should be distributed to all board members. While there are some who advocate having management complete a board appraisal form, others feel it is not appropriate. The directors are elected by members to direct the co-op's overall operations, including hiring management. While management undoubtedly has a perspective on the board's effectiveness, a board appraisal is arguably not a suitable forum for management comment on board practices. Management involvement as the board sets goals for the future -- including goals for improving its own performance -- can be valuable in the right situations.

All directors should complete a form. If a board review is to be of value, 100% participation by all directors should be the goal. Even for larger co-op boards (with 11-13 directors), full participation is neither unrealistic nor onerous. For such an exercise to be fully useful, boards will want the benefit of all directors' perspectives.

A compilation of all directors' responses to questions should be prepared and copies distributed to all board members. But this is not the end. Indeed, the true value of such a review depends a lot on what happens to the data generated by such a survey. (All too often boards focus so much on the mechanics of a review that no thought is given to what will be done with the results, and the evaluation ends with the collection of data -- rendering the process largely useless). Optimally, one or two board members can review the data and prepare an initial analysis for the board. Most importantly, the entire board should review the data and then discuss priorities for future board work -- setting goals for the board for the next year or directing a committee (probably the Executive Committee) to follow up on low-scoring areas.

In summary, six steps for an effective board assessment can be identified:

• Gain commitment by all board members to the process.
• Set performance objectives -- i.e., create the form and the criteria for appraisal.
• Plan the process -- through data analysis and follow-up.
• Gather the information -- distribute, collect, and compile forms.
• Discuss and interpret the data.
• Develop a work plan for the board -- identify areas for change and set goals.

Where to go for help

Naturally, many boards find that it can be valuable to bring in outside assistance for such a review. This is especially helpful if there are tensions among board members or controversy about the assessment process. Even in the absence of such problems, having an outsider, especially someone with experience in working with boards, provide the board with an analysis of the results of the appraisal can add valuable perspective. An outsider can also help a board avoid being hypercritical and can make sure an assessment highlights accomplishments and strengths as well as areas for improvement.

Directors interested in additional resources on this subject will want to review the excellent article written by Sue Futrell that is included in the Challenges to the Cooperative Board of Directors manual (available through Cooperative Grocer). Sample board appraisal forms can be found in a variety of resources -- from books on boards (especially those on non-profit boards) -- to those used by other co-ops. The Contemporary Director has a short sample specifically for co-op boards, but it is not very comprehensive; most others will require some adaptation.

Perhaps the best resource for boards interested in board assessment is a recent project by the Cooperative Grocers Association of the Northeast (CGANE). With the support of the NCB Development Corporation, CGANE has been working on the development of a standardized board appraisal system. Now in the testing phase, their form offers over 80 questions in eight sections (see sidebar). Directors rate board performance on a numerical scale, and the association then provides the board with averages and standard deviation scores on all questions. For boards that elect to have an analysis provided with the data, a report highlights areas of strength and weakness. Eventually, the group hopes to develop a data base that will also provide boards with some comparative statistics.

How about it?

A formal board assessment is one way for a board to reflect on its accomplishments, achievements, and fulfillment of its overall responsibilities. As such, a board evaluation process serves as a tool to help a board comprehensively appraise its performance. Such a review can also help a board identify areas of weakness and set goals for improving its own systems and work. And, a comprehensive evaluation process can help focus directors' attention on appropriate areas of responsibility and priority board actions. That is, it can be instructive in reminding all directors what the board needs to accomplish and how it should be going about its job.

Ideally, a board appraisal can be a valuable exercise each year, as retiring director terms expire and just before new directors begin their service. However, a comprehensive review is preferable to a cursory one. If a review is best accomplished by being scheduled every other year, that will be more valuable than a perfunctory review every year.

Most importantly, a board assessment should provide guidelines for effective board and director performance. A board appraisal should answer the question, "Are we as a board contributing to the co-op's ability to meet its purpose?" An effective review process goes beyond just collecting data on a questionnaire. An honest and frank assessment of board performance and practices should serve as a starting point for discussions about how to improve the board's systems and overall effectiveness.

How Would Your Board Be Appraised?

Here is a sampling of the questions included in the new board appraisal form developed by the Cooperative Grocers Assocaition of the Northeast:

BOARD ORGANIZATION AND MEETINGS

• An annual calendar of board activities and key decisions is established and followed.
• The board has an active and effective committee system with charters for all committees.
• Meeting packets include written agendas and clear written report with recommendations or options from the General Manager and committees.
• Board meetings are the right length and generally accomplish what needs to be done.
• Board discussions allow for all view to be aired and deliberated thoroughly and respectfully.

BOARD/MANAGEMENT RELATIONS

• A written job description for the general manager has been approved and is reviewed regularly by the board.
• The GM evaluation provides clear feedback from the board as a whole, and results in goals for the GM.
• The board provides overall personnel guidelines to management and remains uninvolved with specific personnel matters.

PLANNING

• Board decisions are made consistent with the purpose, values, goals, and objectives of the co-op.
• Each director has an understanding of the market forces affecting the co-op.
• The board monitors operational and organizational performance against goals, budgets or key indicators.

FINANCES

• The board ensures that capital and operating budgets are established annually and in a timely fashion.
• The board selects an outside auditing firm to conduct an external audit or review each year.
• All board member are able to read financial statements and analyze basic trends.

MEMBERSHIP ACCOUNTABILITY, GOVERNANCE

• The board has established goals with respect to membership (e.g., the percent of sales to members, number of new/terminating memberships, levels of membership investment, percent of members voting in an election).
• The co-op's capital plan creates an adequate capital base for the co-op's current and future needs.
• The board actively solicits member input on decisions which are the board's responsibility but which affect the long term direction of the co-op (such as through meetings, surveys, or focus groups).
• The board ensures that an annual report is presented to members that clearly describes the co-op's operations and financial status.

BOARD LEADERSHIP

• A written code of ethics for the board has been established and is approved annually by the board.
• Once the board has reached a decision, all directors stand behind and support that decision.
• Annual board elections present members with more well-qualified candidates than there are vacancies.

INDIVIDUAL DIRECTORS

• I am thoroughly familiar with the background material sent to me prior to board meetings.
• I openly and impartially consider all issues being considered by the board.
• My views have had adequate airing and respect during board deliberations.