a typical board review

Johnson Partners has an excellent track record of assisting with performance reviews of boards and identifying ways in which boards can improve governance and effectiveness. We have developed a comprehensive model for review that can be tailored to the specific needs of any board.

No two board reviews are the same but many share common elements. Like any exercise, the benefits gained are directly related to the effort expended. Many clients have a clear idea, when they commission Johnson Partners to facilitate a review, of their broad objectives. This will affect the design of the particular approach.

STAGES OF THE REVIEW PROCESS

Our experience tells us that there are certain core steps in any successful review process. While the emphasis is different for every client, the key parts of the process are:

  1. Establish the scope and objectives of the review

The discussion would establish the background of the review, the key business issues facing the organisation, the board’s principal roles and the key issues affecting the board’s situation. An agreement would also be made on both the review model and process to match the organisation’s situation.

The discussion would identify the key participants for the review. This would generally include all members of the board, senior members of the company management and key stakeholders (shareholders, customers and suppliers).  With government boards, Ministers and advisors may be included.

  1. Gather information

This could include material about the organisation as well as board specific documents which would provide background and context (e.g. Charters; Board papers). This assists with understanding the operating environment, highlight issues and major trends in the industry and allow us to become familiar with any previous review work. If interviews were a part of the process, then one or more principals of Johnson Partners would conduct these with each of the agreed participants. Using a third party guarantees responses are kept confidential which encourages participants to contribute in a full and frank way. Many of our reviews include on-line surveys and follow up interviews, although some are based on one rather than the other.

This stage generally involves the issue and collation of surveys, conducting interviews and any additional information that would be relevant for the review. Each client will have different issues and the selected approach will be designed to match the agreed scope and objectives.

  1. Analyse results and identify key issues

Our surveys are issued and processed by a specialist survey host in USA and are strictly confidential. Results are available only to staff in our offices and surveys are processed when all responses are complete. Similarly, interviews are confidential and are conducted by professional staff of Johnson Partners, and interview notes are used to identify issues, always without identification of the respondent. This stage allows for a thorough analysis of all available materials in preparation for a discussion with the review sponsor to discuss key findings.

  1. Review all materials and draft a written report

After completing a full review of the organisation’s materials, survey responses, interview records, details of other organisations and any relevant standards for the organisation, Johnson Partners will draft a report and ideally discuss this with the Chair of the board before proceeding to a final version.

  1. Report to the board and discuss recommendations

Written reports from Johnson Partners generally are issued with board packs in either electronic or hard copy form and we would generally attend a suitable board meeting to discuss the findings, recommendations and agree next steps.

  1. Follow up and assist with implementation as required

We generally make contact after six months or other agreed period to confirm that progress is on track and to offer assistance, if required.

FRAMEWORK FOR REVIEW

Johnson Partners has identified four key areas of the board’s operations that form the basis of our quadrant model. A typical board review would usually include questions and research on each of the following dimensions:

WHO is on this board and why?

WHAT are the role and functions of this board?

HOW well does this board go about its business?

WHEN does this board make a difference?

We have developed a bank of questions for each of these sections, which is customised, for each client. The format of questions also varies from client to client and questions are prepared accordingly.

An example of the questions and format used in one of our assignments is shown below. (In this instance, Directors all completed a short questionnaire identifying key issues and then were interviewed about matters arising).

Where a board wishes to review individual contributions, a second set of questions, using the same format, is available. Again, these follow our four-quadrant format and explore the dimensions of board composition and culture described below:

WHAT do you (and others) bring to the board?

HOW effectively do you (and others) use your skills and expertise?

HOW do you (and others) rate your individual contributions?

WHEN do you (and others) have the most impact as a director?

Results from questions such as these are collated into confidential reports issued to the director and the Chair only, with all results included without attribution.  Reports are generally provided in a complete set to the Chair for discussion with each director, and Johnson Partners may also participate in these sessions, if required.

COMPARISONS WITH OTHER BOARDS

Industry ‘norms’ for boards do not really exist in Australia. While some quantitative data is available on such things as size of board, remuneration of directors, time spent on boards meetings and the like, qualitative comparisons are highly subjective and of less value.  We have our own ‘20 Best Practices’ and we tend to use this quick ready reckoner as a part of the review process, but it acts more as a checklist of activities rather than an absolute comparison. The principles developed by the ASX Corporate Governance Council and other standards are also useful as a broad measure of comparison with others, although these mainly relate to good governance, a necessary but insufficient condition of good performance.

Over the years, we have built ‘benchmarks’ from results to core questions that are included in each review. These provide a good yardstick for comparison and each review is built into this dynamic database. Our ‘Chair performance’, for example, includes results from over 20 years of reviews of Australian boards.

We find that the most requested type of comparison is from boards wishing to know if their issues are common or peculiar e.g. the allocation of time; the silent director; the style and form of minutes or the responsibility for review of CEO performance.

All of these are issues with which we can speak with some authority, based on the variety of board reviews we have completed in our years of experience.

There will be other comparisons that will emerge from the review that the board may find significant. For example, it will be possible to compare the responses of participants on individual issues. Participants may agree that board meetings are run in an efficient manner but may disagree about the time allocation in board meetings.

It will also be possible to compare answers from one participant to another or one group of participants to another group. Stakeholders and the board will have quite different views on the same criteria and this may warrant explanation.

Comparisons are also possible by the board itself on relative performance from year to year. If the board gets into the habit of reviewing its performance on an annual basis it will be easy to compare assessments on particular issues and monitor progress.

COSTS

We prefer to agree to costs upfront recognising that every assignment is different. Some organisations include a review of individual directors in the exercise, which adds to the cost but deals with the problem of underperforming directors. A very basic board review process might be completed in eight to ten consulting days, whereas a full review of the board and individual directors will involve significantly more time and, therefore, costs. Once the nature of the review is established, we will assess the time required and provide a firm quote.


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