BOARD OF DIRECTORS SCORECARD

BOARD OF DIRECTORS SCORECARD

Herb Rubenstein
Founder and President, Herb Rubenstein Consulting

Introduction

Today there is a great need for effective Boards of Directors. There are many evaluation and assessment systems on the web and available from consulting firms. However, few evaluation systems analyze all of the proper clusters of factors that we know from the literature affect board performance. The list below organizes each of the key factors and forms the basis for the next generation of measures to allow us to assess and improve the operations and effectiveness of Boards of Directors.

In addition to these clusters, one needs to know what stage of development each Board is currently operating since a new Board at a start up can not be compared to the 100 year old Board of a publicly traded company. Using a “maturity model” is an essential ingredient to proper evaluation of Boards of Directors and Boards of Advisors. The clusters are listed below. Every Board should pay careful attention to each of the clusters

Cluster 1 – Human Capital

Competency Focus
Does organization know what competencies are needed for Board members
Does board currently have right people with right competencies
Does organization have system for identifying when new competencies are needed
Does organization have ability to add/subtract board members based on fit, competencies and performance
Does the board have a nominating committee that takes competencies into account
Does the board have a resume file or waiting list for board positions
Is the board willing to increase the size of the board to accommodate the need for new competencies.

Cluster 2 – Organizational Capital
Are board rules in place and enforced
Is board structure appropriate
Does board have evaluation system for board as a whole plus individual members
Does board have someone responsible for ethics oversight
Do board members have written agreements with the organization that identifies their roles and responsibilities
Are the CEO and Chairman different people
Are board member expectations consistently realized
Are all past board records accessible and well organized

Cluster 3 – Performance Capital
Does the board meet as often as appropriate (at least quarterly)
Is a board book prepared and distributed at least 10 days in advance of a board meeting
Do board members meet regularly without management
Is board attendance 80% or higher at every meeting
Can each board member identify a significant contribution he/she has made to the organization within the last 60 days
Can each board member identify a significant contribution that he or she will make to the organization in the next 60 days
Can each board member identify a significant contribution that each other board member has made to the organization in the last 60 days
Does the board have a system for collecting information on best practices of other boards
Does the board have a system for recommending best practices to the organization and following up to see if they are implemented

Cluster 4 – Resource Capital
Is there a person who is the director of board relations
Is there an adequate budget for the board
Do board members actively participate in bringing new resources to the organization, (i.e. money, strategic alliances, professional services, customers, etc.)
Does the board assist on a regular basis in developing a strategy for the organization
Is the board compensated in any way for being on the board
Is there D&O Insurance for the board

Cluster 5 – Accountability Capital
Are board minutes, votes and action items identified all in order
Is there a procedure where a board member can question the actions of the organization
Is the board meeting run by the Board Chair
Are there sufficient outside directors

Cluster 6 – Financial Oversight Capital
Is the board exercising informed reviews and making key financial decisions for the organization
Do board members sit on too many other boards, have other conflicts of interest or are family members of other board members
Does the board have a direct link to the organization’s accounting firm and law firm
Has the board made 5 key financial decisions in the past 90 days

Cluster 7 – Transformational Capital
Does the board have a clear statement of its deficiencies
Does the board have a board improvement plan that is being carried out
Does the board have a leader with a clear vision for the future of the board
Does the board have a clear vision of the future of the organization? the industry or sector?

Cluster 8 – Governance Capital
Does the board govern the organization or just provide advise
Are their five examples where the Board voted in key areas to the company
The board has a 3-5 outlook or plan to direct the organization
Violations of board rules or board set policies are dealt with quickly, publicly and consistently
Are there term limits for board members

Cluster 9 – Reputation Capital
How well known is the organization and its board
How well respected is the organization and its board
How many articles, speeches and books have board members written or given as a board member
Does the organization have a plan for promoting the board’s reputation and the organization’s reputation

Cluster 10 – Results Capital
Can the board show it has contributed 10% to the top line/bottom line in the organization in the past year
Has the board corrected or improved at least 3 major problems in the organization in the past year
Does the board know and have a plan to correct or improve 3 major problems the organization will face in the next year.

Conclusion

The process of getting your board into top operational shape has never been more important. Having a non-producing board of directors or not having a board of directors at all is no longer acceptable in the business and non-profit communities.