Know Thyself…

As the UK Corporate Governance Code and many other frameworks for that matter suggest, boards should carry out a robust, self evaluation of their performance on a regular basis. Knowing thyself and all that this entails for boards will take them on the journey to greatness. This is as true for individuals as it is for boards and although my examples in this article will refer to boards, I am sure that whether you serve on a board or not you can benefit from the principles.

Sir Michael Wilshaw, the Chief Inspector of the School’s regulator, Ofsted, recently suggested that governors lack the required skills and competence to properly fulfil their duties. This has offended many governors and governing bodies who feel that this is an unfair criticism. The report from the public enquiry into Stafford Hospital by Robert Francis QC illustrates another case in point. He laid much of the blame on the trust’s ruling board. The action they took to investigate and resolve concerns “was inadequate and lacked an appropriate sense of urgency”. The report also highlights that board members “chose to rely on apparently favourable performance reports by outside bodies, such as the Healthcare Commission, rather than effective internal assessment and feedback from staff and patients.” I think this criticism may also be levelled at other non-executives whether they are known as directors or trustees, in the private, public or voluntary sector. It would be remiss of me not to remind us here of Sir David Walker’s review of the banks and the number of recommendations in relation to non-executive directors and the lack of appropriate skills and ability to challenge and scrutinise. Sir David’s main aim was to change the culture of governance rather than the rules. He summed it up as an attempt at “making the boardroom a less cosy, comfortable place.”

The challenge then is how we can determine how good or bad a board is, or when the criticism of board members is justified. Could it be that the external regulator is wrong sometimes and board members are used as scapegoats being competent at their role but unable to prove it? Or are the regulators right but it is the board members that believe they are competent when in fact they are not? They may have gaps in skills which they don’t admit, don’t contribute collectively and don’t challenge appropriately…

The question is one of evaluation and I present a model in the four steps below. Before we take a look at the model, I would like us to consider as a refresher, the ‘Johari Window’ which has influenced my thinking in developing the four steps. The ‘Johari Window’ is a technique created by Joseph Luft and Harrington Ingham in 1955. It is used to help people better understand their relationship with self and others. Charles Handy calls this concept the Johari House with four rooms. Room 1 is the part of ourselves that we see and others see. Room 2 is the aspects that others see but we are not aware of. Room 3 is the most mysterious room in that the unconscious or subconscious part of us is seen by neither ourselves nor others. Room 4 is our private space, that which we know but keep from others.

As we reflect on these four rooms as a means of gaining awareness of our boards, I would encourage us to consider not only how we see ourselves, but also how others perceive us when carrying out evaluations. The high performing boards that I have worked with have an intimate knowledge of their strengths, how they are perceived and have used self- evaluation with external support to develop themselves.

The Model

Step one – Preliminary Evaluation

“I know that I don’t know…”
This is where the board accepts that there are areas of weakness that they are unaware of. They are consciously aware that there are areas of development that will move them to the next level of performance, areas that they have not considered. The task for them is to find tools, techniques and appraisal approaches to identify gaps. Schools and other governing bodies must accept, in the co-regulatory environment that we find ourselves in with more responsibility levied on boards, that they must recruit additional skills and find better ways to challenge and scrutinise. Skills, competence and experience audits should be regularly carried out and then compared to the needs identified by the ever changing external environments and the strategic needs of the organisation.
Step two – External Evaluation

“I think I know but I don’t…”
This is where the board think they are better than they are, or frankly they are not aware of weaknesses or gaps. They have deluded themselves and believe that because the organisation is performing well that it must be because of something they are doing. Sometimes the excellent performance of an organisation is in spite of the board rather than as a result of the board. These boards have not compared themselves to their peers or had the benefit of external support. They carry out self-evaluations but their perceptions of themselves don’t match reality. The task for them is to benchmark, observe their peers and get external feedback. There is a real danger that boards become complacent and don’t recognise that the highest performing organisations use external facilitation to observe board meetings in action, to interview individual board members and run workshops with the board to help them determine how to improve. They receive and act on 360 degree feedback which includes feedback from executive staff.

Step three – Build evidence

“Others think they know but they don’t…”
This is where external perception of the board is lower than reality or it is difficult to come to any conclusion as to how good or bad the board is. The board can be perceived as being weak when in fact this is not the case. The task for the board is to not only ensure that regular appraisals are carried out but that they demonstrate what actions have been taken as a result of the evaluations. Evaluations should not be done as a tick box exercise and not every form of evaluation is suited to every organisation. Boards should ensure that they provide evidence of how their existence as a governing body makes a difference to the stakeholders that they serve by continually challenging themselves. It is important to challenge the executive team and scrutinise their performance and the boards own performance but the highest performing boards are also able to show how they have done this. Their self assessments are outcome driven and reports show a direct link between activity and pre-determined outcomes as opposed to the generic outputs that we have become accustomed to.

Step four – Maximise your strengths

“I know and others know…”
This is where the board are aware of how their unique set of skills, diversity and experiences create the ideal board. They have thought about the most appropriate succession strategies, terms of office and ways of working that best suits them. Boards should ensure that they consider the best practice recommended by their adopted governance code and the regulatory requirements of their articles and other governing instruments. They should make decisions about how they will best apply the principles of good governance to their own idiosyncrasies. Boards tend to keep this information to themselves, (if they have even considered it), but the strength of good governance is the openness and transparency that is expected from every organisation. Annual reports should articulate the governance approach with a clear steer from the Chairman about the importance of good governance.

In conclusion, board evaluation is a crucial component of good governance. Boards should find appropriate mechanisms to carry out governance reviews and develop an integrated approach to governance that is practised across the whole organisation. The governance framework should employ a cycle of activity that covers the core principles discussed in this article over a three year period, providing assurance to internal and external stakeholders. The best performing boards stay that way in as much as the best sportsmen stay that way by continually evaluating their performance. I leave you with the words of Lao Tzu – “He who knows others is wise. He who knows himself is enlightened.”

Until next time…