Tag: corporate culture and strategy

Board evaluation benefits: 7 of the most important merits

Board evaluation benefits come in many forms. Taking stock of the effectiveness of your board of directors is so much more than just filling out routine documentation for governing bodies or regulators – it’s actually an opportunity to reap a number of additional board evaluation benefits. If we don’t measure effectiveness how can we know if we are performing efficiently and with impact?

Employees need smart goals and measured annual to their performance. Company directors are no different, and need to be annually assessed through evaluations of the board and its committees. These evaluations are useful as they help assess individual directors and the board and committee as a whole. The average age of directors on Russell 3000 and S&P 500 is 62.6 and 63.4 respectively¹ and the average tenure is over 9 years. Director turnover remains very low and Chairmen are reluctant to have difficult conversations with underperforming directors.

Even though many board members of Russell 3000 companies consider the performance of at least one fellow director as suboptimal, only 14% of these companies disclose that individual directors are reviewed annually. ²

The S&P 500 had a period of 31 months where there was at least one women director on each board of directors. This changed when Monolithic Power Systems Inc. joined the index in February 2021. Institutional investors BlackRock Inc., Vanguard Group Inc. and State Street Global Advisors stated they will vote against directors at companies lacking a female director. ³ The benefits of having an independent board evaluation is that the whole area of diversity, composition and competencies can be discreetly assessed.

Governance Gurus work with boards from across the globe to help them evaluate their board and committees. We offer tailored options ranging from questionnaires, surveys and 360 degree board and committee evaluations. We can review the overall performance and effectiveness of the board and individual directors, the CEO and the company secretary. Contact us today for a confidential discovery call to understand your needs and how we can add value to your next board evaluation.

At first glance, some of board evaluation benefits might include:

Helping the organisation attract high-quality investors.
Helping the board and senior management identify potential opportunities and areas for organisational improvement.
Ensuring board members are regularly reminded of their role and responsibilities.
Directors are annually provided an opportunity to confidentially raise any concerns or give feedback.
An annual tool for the Chair to address any performance shortfalls in the board or any of its committees.

There are also many other deep-rooted benefits that go far beyond the surface. Here’s a closer look at 7 of the most important board evaluation benefits of conducting regular evaluations of the performance of your board of directors. All boards are different and the mix of skills, competencies and knowledge and experience will vary greatly. The effectiveness of the board and its committees depends on how well directors work together to make strategic decisions and consider opportunities and risks.

Good board dynamics and having the right directors is necessary for efficient and effective decision making. Directors have a legal and fiduciary duty to act in the best interests of the company and its stakeholders. The regulators in many countries require that the board of directors are evaluated annually. It is usual for listed companies and for banking and financial companies to conduct independent annual board assessments or evaluations of the board and the committees.

For many year the United Kingdom has required boards to be evaluated independently every three years and large listed companies are encouraged to conduct these board and committee elevations annually. In recent years we have seen Malaysia and the United Arab Emirates require listed companies to conduct annual board evaluations. Should companies neglect the board evaluation benefits?

We help companies assess and improve their board and committee performance through independent annual assessments or board evaluations. Board evaluation benefits outweigh the cost and time involved in conduction these assessments.

7 important board evaluation benefits

Benefit #1: Promotes a sense of accountability

One of the primary benefits of conducting regular board evaluations is accountability.

A well-conducted board evaluation can highlight:

The overall board effectiveness.
The effectiveness of its individual board committees.
The effectiveness of individual board members.
The effectiveness of C-Suite management.
Any gaps within the skills matrix of the board and the its committees.

When faced with an annual evaluation, board members and management have no other choice but to follow through on what they say they will do. Additionally, their ideas and recommendations are also put to the test; ensuring that they are the best fit to support the organisation’s common goals. Board evaluation benefits outweigh the cost and time involved in conducting these annual assessments.

Benefit #2: Establishes and embeds organisational culture

Culture is everything and a rock-solid organisational culture must be integrated from the bottom all the way to the top. The tone from the top is also vital in helping set the desired behaviours.

Effective board evaluations help to further embed the organisational culture by setting an example to employees, investors, partners, and management. The board evaluation benefits of regular assessments encourages collaborative decision making and high performance by individual directors. It also encourages directors to work together effectively to reduce conflict in the boardroom and embed a culture of good governance and team spirit.

The correlation between strategy, culture and corporate governance is intrinsic linked. Unfortunately many boards focus more on the strategy and not the culture or the benefits of good governance.

Board evaluation benefits can:

Ensure alignment between the board’s actions and organisational values;
Establish expected behaviours;
Set the organisational tone; and
Promote openness, honesty, and trust.

Benefit #3: Ensures transparency

Transparency is crucial for building long-term stakeholder relationships, cultivating a sense of trust, and ensuring the organisation is not at risk of a reputational crisis due to any dishonourable activities.

Regular board evaluations help to promote transparency by providing all stakeholders with the opportunity to better understand:

What the board is doing; and
How they serve the organisation.

Additionally, it’s also a chance for board members to be transparent among themselves and hold each other accountable.

Benefit #4: Builds and maintains stakeholder relationships

Another board evaluation benefit from having regular board evaluations is its impact on relationships.

Relationships are built on open, honest, two-way dialogues – and regular board evaluations help to establish a process for just that. Individual board members can safely express any concerns, and organisations have the opportunity to gain valuable insight into the board’s activities.

Each board evaluation process should be considered a relationship-building opportunity. Each evaluation can ultimately help boards work together more effectively in the future.

Benefit #5: Assists with decision-making and risk oversight

In order for boards and senior management to make good decisions, they need to have accurate information along with insights from multiple perspectives. These decisions need to be effective to safeguard shareholder value and ensure the sustainability of the business.

Effective board evaluations can act as that source of knowledge for decision-makers. How well does the board and its committees make decisions. What was the impact of these decisions. How well does the board and senior management collaborate and are decisions made in a timely nature.

This can help them determine:

How to better utilise the skills of the directors;
How to help the board better serve the organisation;
Areas of high risk and emerging risks;
The need for any new strategic changes; and
Many other insights.

Benefit #6: Clarifies leadership roles and responsibilities

The sixth point in our list of board evaluation benefits focuses on leadership. The leadership of an organisation can make the difference when it comes to empowering the CEO and their senior management team to carry on day to day operations.

In order to avoid issues with having “too many cooks in the kitchen”, board effectiveness evaluations can help to re-establish and solidify the specific purpose and roles of the C-Suite management and the Board of Directors.

By setting clear guidelines for expectations, obligations, and duties, each individual has a clear understanding of what their responsibilities are and what they are expected to bring to the table.

This simple reminder on a regular basis can help individuals and any subcommittees avoid distractions, stay in their lane, and be the most effective. Some directors might question the board evaluation benefits but some assessment is better than nothing.

Benefit #7: Builds a framework to develop the board and its capabilities

The final of our points on the most important merits of board evaluation benefits is the framework to develop board capabilities and skillsets.

The concept of board evaluations and the benefits are quite well established. In 2018, the OECD published an overview of international practices relating to board evolution. The board evaluation benefits are numerous and they positively keep directors mindful of their role and responsibilities to perform to a high standard. Annul assessments to evaluate the board and its directors shouldn’t be a daunting experience.

We design and work with the chairman and the company secretary to use the right type of annual assessment for your board and its committees. These annual assessments help directors keeping in mind the board evaluation benefits for transparent performance reporting and annual accountability. They are can also be used by the chairman as a tool to discuss individual performance or the performance of the board as a whole.

It’s good corporate governance to at least independently assess the performance of the board every three years or more often. The results are kept confidential and details are only provided to the chairman as collective data to help assess any performance gaps at the board or its committees. Reports might also be director specific to allow for the chairman to focus on any development areas with an underperforming director.

In the US, many of the listed companies still combine the role of chairman and CEO. From a corporate governance standpoint, board evaluation benefits are increased when the board and its directors are independently assessed. The role and responsibilities of the chairman and CEO should be clearly defined and their performance assessed objectively. The board evaluation benefits might not be maximised if the chairman and CEO are combined as the assessments may become subjective.

S&P 500 companies continue to use this duality model of board leadership (53% in 2018 versus 50% in 2016) while only 39% of the Russell 3000 companies combine these positions of CEO and board chair. ²

^{1. https://corpgov.law.harvard.edu/2020/10/18/corporate-board-practices-in-the-russell-3000-and-sp-500/}

^2. ^{Grove, H., Clouse, M., & Xu, T. (2020). Benchmarking boards of directors for better corporate governance. Corporate Board: Role, Duties and Composition, 16(2), 8-18. https:/ /doi .or g/10 .224 95/c bv1 6i2a rt1}

^{3. https://www.bloomberg.com/news/articles/2021-03-09/reshuffling-of-the-s-p-500-marks-a-return-of-the-all-male-board}

We are here to help you evaluate your board and its committees – contact us for a confidential conversation

If you require professional assistance with your board and committee evaluations please contact us by emailing [email protected] or give us a call at +971(0)4387 3554 for a confidential conversation on the board evaluation benefits and the value we add to this process.

To find out more on executive coaching and board evaluation benefits see our website for more details. Scan the QR code to join our leadership and governance newsletter.

April 16, 2021Tags: board evaluation benefits, corporate culture and strategy

The winning leadership formula for a successful culture transformation in your organisation – Leadership training courses in Dubai

Leadership training courses in Dubai – Leadership courses for leadership development and director training in Dubai and internationally

As a leader, you must know what truly inspires your team to enthusiastically perform at a high level consistently. It is your responsibility to increase employee and workplace engagement in your organisation. The key to achieving this is fostering a culture of empowerment, open communication, and care in your organisation. However, strong leaders are needed to build the engagement levels of the workforce to achieve this cultural transformation.

What are the qualities that such leaders possess? They are aware of their strengths and can leverage them to support and empower their teams or workers. This allows their employees or workforce to come to work each day with a motivated mindset. If you lack these leadership qualities, then you can build them through leadership courses and leadership development programs.

“Culture eats strategy for breakfast, lunch and dinner and has an insatiable appetite to disrupt the best laid plans of business leaders.”

These programs are specifically designed to coach and mentor leaders in an organisation such as directors, senior executives, and company secretaries to get the best out of their employees. Additionally, they train these leaders to successfully fill in the key roles that ensure a successful cultural transformation in their organisations.

Some of the key roles that leaders need to nurture – Leadership training courses in Dubai

1. Vision Creator

The first step in building an inspiring work culture is determining where you want to go. This means creating a vision that gives team members a sense of purpose, value, and meaning. If you don’t have the end in mind, then you and your team members would just be wandering around and could end up anywhere. A vision must be supported with a mission, the way you will achieve your business objectives and should be backed by core values, the way you and your workforce are expected to behave.

Aligning all your efforts with strategic objectives will provide much-needed direction to team members. Having set objectives will galvanize their ambition, enthusiasm, and commitment. If you are lost on how to approach this, then you can enrol in leadership courses and leadership development programs for guidance.

2. Motivator

From lower management to board advisory, building a company culture is the responsibility of everyone in the organisation. However, the focus and inspiration for it must come from the leadership, such as directors, senior executives, and company secretaries. Building a company culture needs to be high on the agenda of these leaders.

As a leader, you must reinforce the importance of a successful culture transformation from the very beginning by engaging, focusing and inspiring the entire team towards agreed objectives. Director training can come in handy here as it focuses leaders on how to get the best from their workforce. Do you have a training plan for leadership courses for leadership development and director training in Dubai and internationally?

3. Priority setter

Each organisation has unique values, structure, and objectives. It is the responsibility of leaders in an organisation, such as the board advisory, to review progress and decide on what’s important for the organisation. They also need to motivate employees towards these organisational priorities

Leaders needing help with the process should seek focused leadership courses, director training, or leadership development programs that provide relevant knowledge and training.

4. Role Model

To ensure a successful culture transformation, leaders in an organisation, namely the board of directors and senior executive team must understand the importance of their work and behave accordingly.

Additionally, they must recognise and encourage the behaviour of employees, even when they make mistakes or miss the target. This doesn’t mean that employees are not held to account but that the working environment is a safe place to take calculated risks and occasionally make mistakes. Mistakes should form part of the business transformation improvement process driving the organisation to business excellence.

When people take new actions, mistakes are bound to happen. However, the quality of good leaders is that they make risk-taking safe for employees, demonstrating through their own words and actions that mistakes are an opportunity to learn, improve, and grow. If you don’t have this skill, then you can develop it with director training or executive coaching. Employees work better when their role and responsibilities are clearly defined. Everyone also needs to be held accountable for their actions and the way they achieve individual and corporate objectives.

5. Innovator and trend setter

Successful organisations must evolve and change in order to stay relevant and continue to provide products and services their customers want and need. organisations need to provide an environment which encourages creativity, collaboration and idea development at all levels of the business. If we think of some of the most successful companies; Microsoft, Apple and Samsung they have developed products and services to meet the growing demands of diverse customers and business users through innovative design, functionality and fulfilling the business needs of organisations.

The board of director and the senior management team of an organisation must be able to predict the future trends and set strategies and business objectives to focus on current customers and how to attract new customers and increase brand loyalty. The 4^th industrial revolution is forcing established businesses to readdress their strategies, services and products to maintain and grow their market share and avoid disruption from new entrants and competitors. Think of the traditional taxi services and how the likes of Uber, Grab and Lyft have disrupted this industry. Even when we think of the automotive and financial services sectors, these industries are facing challenges through alternative solutions provided through electric and hybrid vehicles and virtual assets and digitalisation respectively. The world is evolving much quicker through technology and digital solutions and organisations must invest in novel and innovative products and services to remain relevant.

6. Implementer

There is no point setting a strategy, business objectives or a business plan if you are not going to manage your corporate culture effectively. Peter Drucker was credited for coining the phrase that “culture eats strategy for breakfast” but I would go further to say, ‘culture eats strategy for breakfast, lunch and dinner and has an insatiable appetite to disrupt the best laid plans of business leaders’. Corporate culture is almost intangible, but it is exhibited through behaviours, employee engagement and how employees are rewarded or penalised. If you think of an organisation with a culture of ‘fear’ versus a culture of ‘empowerment’, the way employees operate will be totally different. Each organisation has its own corporate culture, and this can change if not managed successfully.

I have worked with some very successful businesses who faced issues through neglecting their corporate culture or by adopting the incorrect leadership style. One such business changed their leader in a division and the new leader tried to impose a very different management style which quickly resulted in a lack of employee engagement, reduced productivity and a massive drop in profitability as employees were treated as mere resources rather than stakeholders.

7. Planning for cultural transformation through leadership

Whenever we are planning a change, we need to consider the implications of the proposed change or transformation. By gaining buy-in and identify ‘change agents’ who will work with us, we stand a better change to implement the desired change or transformation.

The board of directors sets the strategy and oversee the implementation of that strategy, but it is the CEO and their team who manage the implementation, operational matters and cultural tone of the organisation. Having the right team, with the necessary experience is vital to successful implementation and execution of the directives from the directors. The key aspect of corporate culture centres around people and how we as leaders communicate with individuals and teams to keep them involved in the change and fully engaged throughout the transformation.

8. Mental fortitude and resilience

Being a leader and driving change is never easy and it requires mental fortitude and resilience to work through blockages, setbacks and a loss of momentum. During more complex transformation projects employee buy-in fluctuates and engagement can wane. Sometimes it may feel like you are alone but remember you have a team. Encourage your executive team and trusted employees to remind you of some of the successes along the transformation journey.

It is during these times leaders need to keep faith in the transformation project and continue to drive forward with enthusiasm and find ways to reinvigorate employees and change agents. People need to be reminded why the the cultural change is needed and what the benefits are to the organisation and to employees for long-term success and sustainability. Anyone can lead during good times but it takes a special leader to remain positive and committed to driving change even when all about them are negative or doubtful.

“It may feel like you are alone but remember you have a team. Encourage your executive team and trusted employees to remind you of some of the successes along the transformation journey.”

Remember no matter how hard things get during any project eventually the pain, fear and resistance will fade away and you’ll gain employee acceptance. Try to think back to a time when you were facing difficulties or hardship and how you pulled through, these hard times build our character and prepare us for bigger things. This mindfulness will help focus you on the end goal to achieve the cultural transformation project set at the outset of the project.

Get in touch for bespoke Leadership training courses in Dubai for leadership development and director training in Dubai and internationally.

At Governance Gurus, we provide effective leadership training courses in Dubai and internationally. This training equips corporate leaders with the knowledge and skills needed to bring about a successful cultural transformation in their organisation and encourage innovation. If you want to know more about our training solutions or executive coaching programs click here. We create bespoke in-house leadership training solutions and consulting services to help your organisation remain sustainable, success and profitable through accredited CPD training. Join us for one of our leadership training courses in Dubai.