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Benchmarking board performance: 500 board reviews later
Unlock evidence-based insights into board performanceGuidance on developing a documented policy on board and individual director performance assessments
Most superannuation trustee boards we know embrace some sort of review or “health-check” process to assess how well they are travelling and how the board is adding value to the organisation. |
Whether undertaken informally or formally, in-house or externally facilitated, collectively or individually, in our experience the value of many performance assessments is rarely optimised.
Under the new Prudential Standard SPS510 – Governance effective 1 July 2013, all trustee boards of superannuation funds will be required to undertake a board performance assessment:
“17. The Board must have procedures for assessing, at least annually, the Board’s performance relative to its objectives. It must also have in place a procedure for assessing, at least annually, the performance of individual directors.”
In undertaking such, the Australian Prudential Regulation Authority (APRA) expects that a board would ordinarily have in place a documented policy on performance assessments which includes:
a) the timeframe within which assessments will be conducted;
b) how sufficient independence in performance assessments will be achieved;
c) how the Board will manage the outcomes of performance assessments and recommended courses of action in the event that performance is below expectations; and
d) a reasonable timeframe for action after performance assessments have been conducted.
Insync Surveys has facilitated many board and individual director 360 assessments over time and has observed many successful assessment processes that have helped good boards become great boards. Equally we have also seen assessment processes go off the rails or be inadequate in delivering effective change and performance improvement.
So what makes a good board performance assessment and what else should you consider when developing or reviewing the adequacy of your policy on the matter?
Whilst the standard requires annual procedures, in our experience a cycle of reviews is more effective in allowing sufficient time to implement recommendations and review outcomes (and still meet the APRA requirements). Think of it like servicing your car – two minor services followed by a major service and in between you may replace the tyres. Similarly, a board performance assessment cycle could take the following schedule:
Year 1
Baseline online board performance assessment and individual director surveys
Year 2
Online board performance assessment and individual director surveys
Post implementation review of year 1 recommendations and outcomes
Year 3
Comprehensive externally facilitated board review, including:
The cycle should be aligned with the board renewal/rotation process and the strategic cycle of the organisation.
APRA requires an externally facilitated assessment at least once every three years, as a minimum.
The value of a good performance assessment can be significantly undermined if undertaken internally without regard to the objectivity necessary to identify the real issues, access to insights into better practices (what makes a good board great), importance of frank and considered reporting and the time investment to complete the work (typically in an already full board schedule).
What defines “sufficient independence” will be up to each board to decide, however we find that we are most often engaged by boards that take their review process seriously, seek to embrace better practices and want a “no fear, no favour” approach.
The beauty of a three year cycle is also the mix of light-on and more considerable engagement from the external facilitator, enhanced by the use of online and anonymous board survey tools.
Unfortunately we see the results of many board reviews end up either sitting in the Chairman’s desk drawer because there are too many recommendations to implement, in too little time, without enough access to resources and diluted by too much rhetoric. Others use the process to “box-tick” their compliance requirements.
In our experience, boards that make the “good-to-great” transition identify no more than 3 to 4 priority areas coming from the performance assessment and agree on a roadmap to implement actions for continuous improvement. These actions form part of the “actions arising” schedules and are owned by a champion on the board who has the licence, currency and time to ensure that higher performance is embedded sustainably in the board’s workload and effectiveness.
Again, a three year cycle allows the staggering of continuous improvement actions over a period of time to avoid change fatigue and blend with the board’s agenda and calendar.
Insync Surveys has developed a super fund board survey that is specifically designed to align with APRA’s new requirements effective from 1 July, 2013. This survey can be used separately or in conjunction with an unobtrusive Director 360 (or Director Peer) survey designed using cutting edge technology.
For further information please contact:
Nicholas Barnett, CEO nbarnett@insyncsurveys.com.au or
Michael Rich, Board Advisory mrich@insyncsurveys.com.au
Documenting a policy on the manner and desired impact of the board’s performance assessment has the benefit of providing clarity and agreement on:
Superannuation boards can demonstrate their leadership, their commitment to good governance and their accountability to their varied stakeholders (including regulators like APRA) by conducting regular externally facilitated reviews.
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