Despite boards being more diverse and skilled than ever, concerns around board performance persist. Only 30% of C-suite executives rate their board as “good” or “excellent”, and our research on board effectiveness shows that boards are grappling with a range of challenges, from information overload to overcrowded agendas.
So, how do you tackle these obstacles and improve board effectiveness?
It starts with understanding the drivers of board impact, evaluating the metrics behind them, and adopting tools and systems that enable you to track your board’s progress.
Why do we measure board effectiveness?
Measuring board effectiveness is important for delivering good corporate governance and ensuring boards add value. Organisations should regularly assess the performance of their boards and committees to identify areas for improvement.
Many corporate governance codes and best practice guidelines recommend periodic board effectiveness reviews to maintain high performance standards and hold boards to account.
What board effectiveness metrics should you assess?
Boards today face a wide range of challenges. They are dealing with an ever-expanding remit, persistent geopolitical and economic uncertainty, and rapid business model changes brought about by AI.
To help boards successfully navigate this complexity, it’s important to think about board effectiveness in its broadest sense. That means going beyond measuring the three traditional pillars of board effectiveness — individuals, information, and infrastructure — and digging into other factors, like the board’s role in innovation and its decision-making agility.
Success criteria and benchmarks
What does success look like for your board? This is the first question you need to ask before you start measuring anything.
To answer it, ensure your board has a focused and clearly defined mandate. Not only does this help with things like agenda planning and board reporting, but it also ensures everyone is clear on why the board exists and what it needs to achieve.
From here, you can define your board’s “success criteria” — the specific objectives, outcomes, and metrics that indicate whether your board is delivering value. They are likely to cover areas such as board composition, communication, culture, and processes.
It can also be helpful to identify benchmarks for these success criteria. By evaluating performance against industry standards or past achievements, you can put your board’s performance in context and assess whether things are moving in the right direction.
Key performance indicators
A KPI dashboard pulls together relevant metrics to provide a snapshot of the board’s performance against its agreed objectives. These objectives can include speed and quality of decisions, board independence, director engagement, and board evaluation scores.
By setting clear KPIs and regularly tracking the board’s progress against them, you can connect board performance with tangible outcomes and spot and respond to emerging trends quickly. High-quality KPIs also drive well-informed and objective discussions about what the board or individual board members might need to do differently.
A well-structured KPI dashboard can cut through the noise of a limitless supply of data points and help directors focus on the issues that matter most.
Which board assessment frameworks and tools work best?
Once you know what success looks like, you can begin to collect and report on the relevant metrics. You can use a wide range of frameworks and tools to do that.
Bear in mind that, if you want your board assessment process to add value, it should tell you things you don’t already know. Going beyond a “tick box exercise” requires fresh insights, and they aren’t always easy to surface.
So, take a scientific approach to analysing board performance — whether you’re looking at board composition, agenda focus and discipline, meeting structures and behaviours, or reporting. By doing so, you’ll deepen your understanding of the drivers of board effectiveness and open up new methodologies, tactics, and strategies to improve board performance.
This “marginal gains” approach to building high-performing teams has proven successful in a wide range of other fields, from sports to trading, and will add great value to boards, too.
Evaluation methods
The board evaluation process should be designed to rigorously test whether the board’s composition, operations, structure, and dynamics are effective, considering the organisation’s unique context and strategy.
Evaluation methods include:
- Self-assessment
- Peer reviews
- Facilitated external evaluations
- Chairperson and CEO evaluations
- Stakeholder and investor feedback
- Tracking board KPIs
Digital tools can be used to support each of these methods, for example with gathering information, providing benchmarks, and identifying areas for improvement.
External vs internal assessment
Internal reviews, though valuable, can sometimes follow a routine pattern and may be less objective or in-depth. External evaluators bring a fresh set of eyes and help ensure the process remains transparent and unbiased. This is why organisations are increasingly turning to external reviews, factoring periodic board evaluations into their board calendar. Regular external reviews are also mandated by some corporate governance codes.
What are the quantitative and qualitative measures of board effectiveness?
Qualitative measures focus on the “why” and “how” behind board behaviour and outcomes and add context and detail to our understanding of board performance.
While these insights are powerful, they should not be used in isolation; we also need hard numbers to work with. That's where quantitative questions come in, giving us empirical data about factors like meeting frequency, time spent (preparing or in meetings), board alignment on key decisions and director satisfaction levels, for example, that we can measure and compare over time and across different organisations.
Board dynamics and culture
Each board has an internal culture shaped by how board members communicate with each other, work as a team, and make decisions. This culture is further shaped by factors such as board size and composition, and the organisation’s governance structure (for example, if the CEO and chair roles are held by the same person, or if the organisation has a two-tier board).
Culture is an important driver not just of team performance, but company performance too. Research by the Board Intelligence Think Tank found that organisations with a healthy culture deliver 200% higher shareholder returns. Corporate board dynamics can shape the success of organisational transformation programmes, with studies showing that board structures, board diversity, and decision-making processes can facilitate or impede transformation initiatives.
Implementing measurement systems
There are a wide range of measurement tools available, and they are increasingly easy to implement. For example, boards can make use of online self-assessment tools, get real-time data from their board portal, or track the quality of their board papers through tools like Lucia, Board Intelligence’s AI-powered board reporting platform which analyses board papers as they are written. Together with the Chartered Governance Institute UK & Ireland, Board Intelligence has also created two free tools to help organisations evaluate the quality and efficiency of their board reporting: a board reporting self-assessment tool and a board reporting calculator.
Tools like these can surface actionable data-driven insights that help you measure your board’s effectiveness and take action to improve it.
Data collection and review cycles
Questionnaires and surveys are commonly used to evaluate board performance as they allow for efficient data collection from large groups of respondents.
It’s considered best practice to conduct a survey-based board assessment once a year, and an external board evaluation once every three years. These evaluation processes should also include the board’s committees.
Action planning and implementation
Once you’ve surfaced actionable insights into board performance, you’ll be able to formulate a plan to address any issues identified, improve your board’s processes, and enhance its impact.
Prioritise the issues and opportunities that you want to focus on first. Ensure actions are well defined and measurable, with clear owners. You should also establish a system to track and review progress against each item and report back to the board on implementation. You can read our guidance on best practice performance reporting here.
Tracking progress and improvement
Board meeting minutes record the outcomes of board discussions but don’t track the progress of board actions or delegations. Board packs should include an action tracker to record the progress of actions agreed upon, separating the outstanding from the in-hand and closed actions.
Where your board has delegated discussions to committees, high-quality committee update reports are essential for tracking progress. A board portal platform makes it easy to share this information securely.
Performance monitoring and feedback
AI tools, when used responsibly, can help to monitor board member sentiment, measure individual and collective performance, and identify non-compliant behaviour.
Performance can also be monitored through board observations conducted by a trusted external observer attending board meetings. The observer would closely monitor interpersonal dynamics, decision-making processes, discussions, and adherence to governance principles, then provide feedback on the board’s interactions and engagement levels.
Continuous improvement
The chair should encourage open, honest and regular discussion about the board’s performance and create a safe environment where board directors can provide constructive feedback and share their perspectives.
You can establish a culture of continuous improvement by regularly reviewing the methodologies, tools, and metrics you use to evaluate board effectiveness, and changing them, when required, to ensure they align with the organisation’s needs.
Use our assessment tool to find out how effective your board reporting is and get actionable tips on how to improve the quality of your board pack.
Start nowFAQs
How often should boards conduct effectiveness reviews?
This depends on regulatory requirements, best practices, and the organisation's specific needs. Most organisations conduct a high-level performance review yearly. Assessments could be conducted more frequently during periods of significant change, such as mergers, leadership transitions, or regulatory updates.
What are the key metrics for measuring board performance?
Key metrics focus on operational efficiency and strategic impact. Common indicators include board composition and independence, board engagement and attendance, alignment with corporate strategy, and risk and compliance oversight. Other metrics include stakeholder satisfaction and financial oversight.
Should boards use internal or external evaluators to measure their effectiveness?
For UK-listed companies, using both internal and external evaluations aligns with best governance practices and regulatory requirements. Annual internal reviews ensure ongoing monitoring and regular calibration. External evaluations every two to three years provide an unbiased perspective and benchmarking, keeping in mind that high-risk industries such as finance and energy may benefit from more frequent external reviews.