How to improve board performance

Boards really matter. A successful board of directors adds significant value to an organisation and its stakeholders. Good boards do not happen by accident. Nor does board effectiveness last indefinitely. Many boards don’t achieve their potential because they remain collections of individuals and never form into a team.

It is clear that governance failure is an existential business risk. Recent organisational crises at the Post Office and the Captain Tom Foundation have demonstrated that organisations which operate with ineffective boards may be forced to pay a high price. But these case-studies of failure should provide lessons for all boards. Even high-performing boards can degenerate into passive “cheerleading” boards and fail to maintain processes of rigorous review and challenge.

Finding talent is not enough. Recruiting talented individuals is only the first stage of creating a team. Highly talented individuals are often individualistic in nature, and without well designed processes, the board may remain a collection of individuals, each working on their own private missions. Forming such talent into a genuine team involves work. A key part of this team building work is regular review. 

A board performance review (also known as a board evaluation) is a process by which an appointed party examines the workings of a board and its members along with its effectiveness, the quality of its decision making and strategy, and its relationship with the executive management. If performed effectively, reviews can bring many benefits such as: improving board cohesiveness, enhancing decision making and helping organisations achieve strategic objectives.

UK listed companies are required to perform a performance review annually, with FTSE350 companies expected to conduct an external review once every three years.

According to the Financial Reporting Council’s latest guidance, board performance reviews: “provide a powerful and valuable feedback mechanism for improving effectiveness, maximising strengths and highlighting areas for further development” (FRC, Corporate Governance Code Guidance, 2024)

Reviews offer the chair and directors valuable insights into how the board can be made more effective. A rigorous review will present the board with a report which outlines current strengths and weaknesses, and which proposes a measurable plan for improvement.

What benefits do boards get from board reviews?

Board reviews do not automatically improve boards. Only by careful design will a board performance review be able to provide the board with actionable feedback.

Whilst every board is unique, boards tend to face similar challenges. Some of the benefits which board members most commonly get from well-conducted board reviews include:

• Spending more time on high-value matters like strategy and performance improvement rather than details
• Reducing the size of the board-pack and improving its quality
• Helping board members to prepare for meetings by providing information in user-friendly (e.g. graphical) formats 
• Balancing board reporting between data and commentary

On the other hand, as a cautionary aside, a board review conducted poorly can exacerbate problems. The very operation of the board review process raises expectations that board members and stakeholders will be listened to, and that sensible recommendations and improvements will follow. Boards must follow through the process to its end and commit to appropriate and credible changes to iron out any wrinkles which have been found during the data collection process.

How does an external board performance review operate?

Processes vary, but a typical process might include the following stages:

• The Chair (advised by the company secretary) will decide on the procurement process; which may involve the nomination committee or full board.
• Following the process, a suitable individual or firm will be contracted to conduct the review and jointly they will set the parameters, objectives and timescale of the review:
• Which people will be included in the review?
• What questions should be covered?
• Which stakeholders will be asked to contribute?
• Who will review the Chair’s performance?
• How will the board review connect with individual director appraisals?
• Who will receive the final report?
• A sequence of data-collection exercises will then be used to gather information. This will typically include such exercises as:
• Review of job descriptions and board processes
• Detailed assessment and review of board papers over the last 12 months
• Observation of board and committee meetings
• The completion of a questionnaire by board members
• 360-degree appraisals
• Face-to-face interviews with board members
• Surveying the opinions of major stakeholders
• An initial report with draft recommendations will be presented to the chair
• Presentation of the overall report to the board including recommendations and follow up actions
• A summary of the process and outcomes should be included in the Annual Report. The institute has produced a helpful guide on this matter which can be found here.

Are performance reviews good value for money?

In the past, there was little, if any, quality control over the providers of reviews, leading to understandable scepticism in the market that reviews represented good value for money.  In 2018 the Institute was asked by the Government to review the market for performance reviews. In response, the Institute published a major report in 2021 and has since emerged as the principal player in setting the standards of board performance reviews in the UK. In furtherance of good standards, the Institute has produced two documents which together will help organisations to ensure that they obtain a high quality review which represents value for money:

• Code of Practice for independent board reviewers. This document helps both parties to set expectations by understanding what good practice looks like.
• Guidance to help organisations who are buying external reviews.

Both documents can be downloaded here:

NB Due to low price transparency in this market (as with all consultancy services), prices for similar services can vary substantially. Requesting quotes from multiple providers is highly recommended; although the final decision should not be made on price alone.

How do I choose an external board reviewer?

There are now many providers of external board review and evaluations in the market, but careful selection is vital. Before hiring an external board reviewer, check that they have a strong track record in delivering external board reviews.

In addition to providing guidance the Institute has established a rigorous accreditation process to help match organisations with reputable reviewers. Reviewers who pass the accreditation process and commit to our Institute Code of Practice are added to the Directory of Accredited Board Performance Reviewers.

How do I find out more about board performance reviews?

Visit the “board performance review hub” with this link Accredited Board Performance Review to get FREE access to all Institute guidance.

The Institute has developed a training programme to support those conducting, procuring and facilitating board performance reviews. Introduction to Board Performance Reviews provides governance professionals with all the information they need to conduct an internal review or procure an external review.

In-house training is also available; email Tara Wilson on twilson@cgi.org.uk to discuss your requirements.

Interesting in becoming accredited as a board reviewer?

The Institute’s training course: Board Performance Reviews: Advanced provides current and aspiring board reviewers with everything they need to conduct a rigorous review.