NED and Chair Appraisals: Are Your Board Members Still Adding the Value You Need?

Appraisal is an accepted part of working life for executives and employees. Objectives are set, performance is reviewed and development needs are identified.

But what about the Board?

Non-Executive Directors (NEDs) and Chairs occupy positions of considerable responsibility. They help shape strategy, challenge management, oversee risk, support senior executives and contribute to the long-term success of an organisation.

Yet in some organisations, once a NED or Chair has been appointed, surprisingly little formal consideration is given to how effectively that individual is performing or whether they continue to provide the contribution the organisation needs.

A good appointment does not automatically remain the right appointment indefinitely. Organisations change, strategies evolve and the skills required around the board table change too.

Regular appraisal of both NEDs and the Chair should therefore form part of good governance rather than being regarded as an uncomfortable exercise to be avoided.

Why appraise a Non-Executive Director?

A NED appraisal should go considerably further than determining whether somebody attends meetings and reads the board papers.

The more important question is:

What value is this individual adding to the board and the organisation?

A meaningful appraisal should consider areas such as:

• contribution to strategy and longer-term thinking;

• the quality of questioning and constructive challenge;

• independence of thought;

• understanding of the organisation and its operating environment;

• knowledge, skills, experience and networks brought to the board;

• contribution to committees or particular areas of responsibility;

• relationships with fellow directors and the executive team;

• the ability to support executives without becoming part of the executive;

• contribution to governance, risk oversight and organisational culture;

• preparation for and participation in meetings;

• contribution outside formal board meetings; and

• whether the individual's skills remain relevant to the organisation's future needs.

  
  

The process should also allow the NED to comment on the effectiveness of the board itself.

Are the right issues being discussed? Is sufficient time devoted to strategy? Is constructive challenge welcomed? Are board papers providing the information directors need? Are meetings focused and effective?

Appraisal should therefore be a two-way conversation rather than simply an assessment of the individual.

Should NEDs have objectives?

There is a strong case for giving NEDs objectives, although these will normally differ from those of executive directors.

A NED should not usually be given sales, profit or operational targets for which management is responsible. Neither should objectives compromise the independence that makes the NED role valuable.

Instead, objectives may relate to areas such as:

• contributing particular expertise to strategic discussions;

• strengthening oversight of an identified business risk;

• supporting development of the executive leadership team;

• improving the effectiveness of a board committee;

• helping the board explore a strategic opportunity;

• developing knowledge of an emerging issue;

• supporting succession planning;

• strengthening stakeholder relationships; or

• taking a greater ambassadorial role on behalf of the organisation.

The starting point should be the organisation's strategy and the reason the individual was appointed.

What was that NED expected to bring to the board, and is that contribution still being made?

What might a practical NED appraisal look like?

A NED appraisal does not need to become overly complicated or bureaucratic.

One practical approach is to combine self-assessment with an assessment by the Chair or another designated reviewer.

Both can consider the same broad areas before meeting to discuss where their perceptions are aligned and where they differ.

A useful framework might cover five areas.

Contribution to board work

Is the NED well prepared and engaged? Do they make a useful strategic contribution? Do they challenge constructively? Do they add value beyond formal board meetings?

Governance and oversight

Do they understand their duties and responsibilities as a director? Do they hold executives appropriately to account? Do they maintain the distinction between governance and operational management?

Strategic value

What particular knowledge, skills, experience or networks do they bring? How have they influenced strategy? Can examples be identified where their contribution has created value, identified an opportunity or helped avoid risk?

Behavioural dynamics

Do they work constructively with fellow directors? Do they respect different viewpoints? Do they help create consensus without avoiding necessary challenge? Do their behaviours reflect the organisation's values?

Future fit

Are their skills and knowledge current? Do they remain aligned with the future direction of the organisation? Is their contribution still distinctive?

This leads to perhaps the most revealing question of all:

If this individual were no longer on the board, would their absence genuinely be felt?

That question moves appraisal beyond whether someone is performing adequately and towards whether they continue to provide meaningful value.

Appraising the Chair requires a different approach

The Chair should also be subject to regular appraisal.

In many respects, the Chair can be assessed against the same criteria as other directors.

They remain a board member and should contribute strategically, demonstrate sound governance, behave appropriately and remain relevant to the organisation's future needs.

But the role carries additional responsibilities.

The Chair is responsible for helping create an effective board environment, ensuring directors are able to contribute, facilitating constructive debate and maintaining an appropriate relationship between the board and executive management.

For that reason, the Chair's appraisal should look specifically at matters such as:

• leadership of the board;

• the quality and focus of board meetings;

• whether all directors are encouraged to contribute;

• whether constructive challenge is welcomed;

• the quality of relationships between NEDs and executives;

• the relationship between the Chair and Chief Executive;

• whether difficult issues are addressed;

• whether the board remains focused on strategy rather than becoming drawn excessively into operations;

• board composition and succession;

• the quality and timeliness of board information; and

• whether the Chair is getting the best from the board collectively.

Who should appraise the Chair?

This is one of the most important differences between a NED appraisal and a Chair appraisal.

The Chair cannot meaningfully be the sole judge of their own effectiveness.

Self-assessment remains valuable, but it should be complemented by feedback from others who experience the Chair's leadership first-hand.

This is likely to include:

Fellow NEDs, who can comment on whether debate is encouraged, challenge is welcomed and individual directors are able to contribute effectively.

Executive directors, including the Chief Executive and other senior executives who sit on the board, who can provide valuable insight into the balance between support and challenge and the quality of the Chair's engagement with management.

The Company Secretary or governance lead, where applicable, who may also provide useful observations on board processes, information flows and governance arrangements.

Where a Senior Independent Director or Deputy Chair exists, that individual may lead the process. In other organisations, another independent NED or external facilitator may be appropriate.

The result is effectively a focused, board-level 360-degree appraisal.

This is particularly important because a Chair may believe that meetings encourage open debate, that all directors are able to contribute and that the relationship with the executive is appropriately challenging.

Only the other people around the board table can confirm whether that is how the Chair's leadership is actually experienced.

Appraisal should lead to action

There is little benefit in conducting an appraisal simply because good governance suggests one should take place.

It should result in action.

For a NED, that might include new objectives, development activity, revised committee responsibilities or a greater external or ambassadorial role.

For a Chair, it might involve changes to meeting structure, board papers, agenda management, relationships, succession planning or the way debate is facilitated.

Sometimes the conclusion may be more fundamental.

Is this still the right NED — or the right Chair — for the organisation today and for where it is heading next?

That does not necessarily represent criticism of the individual concerned.

Someone may have been exactly the right appointment several years earlier but may no longer provide the particular experience or perspective required for the organisation's next stage of development.

Board succession should be driven by future requirements rather than simply by whether an individual is willing to serve another term.

How frequently should NED and Chair appraisals take place?

An annual review provides a sensible starting point.

For many privately owned businesses, charities and smaller organisations, this does not have to become a burdensome exercise. A structured self-assessment followed by an informed appraisal discussion may be sufficient.

Periodically, however, there can be considerable value in introducing external independence, particularly when reviewing the Chair or the effectiveness of the board as a whole.

An independent facilitator may be able to identify issues, behaviours or concerns that individuals around the board table might otherwise find difficult to raise.

Making a good board better

NED and Chair appraisals should not be regarded as exercises designed to find fault.

At their best, they create an opportunity for reflection and improvement.

What is the board doing well? What could it do better? What does the organisation now need from its directors? And are the right people, skills and behaviours around the table to provide it?

The strongest boards should be prepared to apply the same standards of accountability, development and continuous improvement to themselves that they expect from the organisations they oversee.

Is it time to review the effectiveness of the board?

Pinchbeck Marketing & Advisory supports business owners, Chairs and boards with independent thinking around board effectiveness, NED and Chair objectives, appraisal, skills requirements, succession and board development.

For organisations seeking an independent perspective on whether their board is structured and operating effectively — and whether its members continue to provide the contribution required — Pinchbeck Marketing & Advisory can help.

This also keeps the article sufficiently separate from the existing piece on NED objectives and appraisal: the existing article can introduce the issue, while this one becomes the more detailed “how to conduct an appraisal” piece, with Chair appraisal giving it an additional search angle.

Is your board still adding the value your organisation needs?

Regular review of NEDs and the Chair can help ensure the board continues to provide the right mix of challenge, experience, skills and strategic insight as the organisation evolves.

Pinchbeck Marketing & Advisory can provide an independent perspective and practical support with NED and Chair appraisals, objective-setting, board effectiveness, skills reviews and succession planning.

If you are considering how effective your board is — or whether its composition remains right for the future — get in touch for an initial conversation.

Frequently Asked Questions

How often should a Non-Executive Director be appraised?

An annual appraisal is a sensible approach for most organisations. It provides an opportunity to review the NED's contribution, consider development needs, agree future objectives and determine whether their skills and experience remain aligned with the organisation's future requirements.

Who should appraise a Non-Executive Director?

The Chair will commonly lead the appraisal of individual Non-Executive Directors. Depending on the organisation's governance structure, another designated director or independent reviewer may be involved. The process can usefully combine the NED's own self-assessment with feedback from the reviewer.

Should a Non-Executive Director complete a self-assessment?

Yes. Self-assessment encourages a NED to reflect on their contribution, identify examples of value added and consider areas for further development. It should, however, form part of the appraisal process rather than replace independent assessment and discussion.

What should a NED appraisal cover?

A useful NED appraisal should consider more than attendance at meetings. It may cover contribution to strategy, constructive challenge, governance and oversight, relationships with executives and fellow directors, skills and expertise, contribution outside board meetings, board behaviours and whether the individual remains relevant to the organisation's future needs.

Should Non-Executive Directors have objectives?

There is a strong case for NEDs having appropriate objectives. These should normally relate to their contribution to governance, strategy, particular areas of expertise, stakeholder engagement, committee responsibilities or board development rather than operational targets normally associated with executive management.

Who should appraise the Chair?

The Chair should not be solely responsible for assessing their own performance. Where there is a Senior Independent Director or Deputy Chair, that individual may lead the process. In other organisations, another independent NED or an external facilitator may be appropriate.

Should executives contribute to the Chair's appraisal?

There can be considerable value in seeking feedback from executive directors as well as fellow NEDs. Executives experience first-hand the Chair's ability to balance support and challenge, maintain appropriate boundaries and create an effective relationship between the board and management.

The process should be structured carefully so that feedback can be provided openly and constructively.

What should a Chair appraisal consider?

A Chair appraisal should consider the individual's contribution as a director as well as their effectiveness in leading the board. Areas may include the quality of board meetings, encouraging contribution and challenge, relationships with the Chief Executive and other directors, board culture, agenda management, governance, succession planning and whether the Chair gets the best from the board collectively.

Can an appraisal lead to a NED not being reappointed?

Yes. Appraisal should help inform decisions about development, objectives, succession and reappointment.

A decision not to reappoint does not necessarily mean that the NED has performed poorly. The organisation's strategy or circumstances may have changed and the board may now require different skills, experience or perspectives.

Do smaller and privately owned businesses need formal NED appraisals?

The process does not need to be bureaucratic. Even a relatively small organisation can benefit from an annual structured conversation examining contribution, challenge, governance, future requirements and objectives.

The principle is more important than the complexity of the process: board members should periodically consider whether they continue to provide the value the organisation requires.