Board evaluations have become the norm for public companies, and a growing number of boards are also using individual director assessments to increase their effectiveness. Since 2018, our annual U.S. Spencer Stuart Board Index has tracked an increase in the percentage of S&P 500 boards disclosing that they conduct some sort of individual director evaluation as part of their annual board assessment. Our recent pulse survey of 326 directors at U.S. public company boards found that 62% of respondents conduct individual assessments, and of that subset 83% do so yearly.
Boards take a variety of approaches to self-assessment, at both the collective and individual level. As more boards consider the potential value that individual assessments offer, they are figuring out how they fit into the larger board review process and the most effective practices for collecting and providing feedback on individual director performance. This pulse survey explores these areas.
Value in peer feedback and self-assessments
More than half of pulse survey respondents (54%) use both peer feedback and self-evaluations in their individual director assessments. Thirty percent of respondents said they use peer feedback only. Whatever process boards use, the goal should be to gather feedback that facilitates impactful discussions. Individual assessments can provide value by highlighting individual contributions, understanding the relevance of director skill sets and identifying areas for performance improvement.
What is the source of information upon which the individual director assessment is based?
Advances in board effectiveness and individual growth
Individual director assessments provide value both at the individual and board levels: 71% of respondents said they improve overall board effectiveness, and 63% said they help directors grow and perform better.* In the words of one board member, “Individual feedback supports setting goals for education, changes in communication styles and supporting better board dynamics.” Another director said, “Feedback is constructive in strengthening individuals’ interactions with management and fellow board members.” These benefits apply whether a company is private or public.
Information gathered from individual director assessments can also help identify areas where new skills or perspectives are needed and inform conversations around board refreshment, helping leaders devise a strategic plan.
What benefits have you received from performing individual director assessments?
|Improves overall board effectiveness
|Helps our directors grow and perform better
|Identifies skills or capabilities we may need to add to our board
|Clarifies director performance expectations
|Leads to needed changes in director behavior
|Demonstrates accountability to our shareholders
|Improves communication between directors and board leadership
|Sets the right “tone at the top”
Support from independent facilitators
Individual assessments require directors to ask and answer candid questions about themselves and their colleagues. Some board members (34%) said that individual assessments may make directors uncomfortable and potentially disrupt working relationships. However, an experienced adviser can help make these conversations safe and productive. Indeed, the majority of respondents (56%) said they have or may use a third party to conduct individual director assessments in the future. When asked why, 59% said third-party facilitators are skilled in fostering candid and productive sessions, 47% said they can optimize the effectiveness and value of individual assessments and 41% said it is a best practice.** For example, an independent facilitator can collect feedback, anonymize it, share it with directors and develop a road map for improvement, helping strengthen individual and overall board performance all while providing an impartial perspective.
What were the top three reasons your board chose to use a third party?
|A third-party is skilled in fostering candid and productive sessions
|A third party can optimize the effectiveness and value of individual assessments
|It is best practice to use a third party
|To help with board refreshment / handle difficult decisions and conversations
|They bring renewed vigor to the process
|A third party can help to create accountability
* Respondents could choose all responses that apply.
** Respondents could select up to three options.