Let me be honest with you reader most board evaluations add no value because they are designed to fail. Why is that so, you may ask?
Many boards operate with vague, feel-good “political statement” targets like “enhance stakeholder value” or “drive innovation.” These moving targets make it impossible to measure success or hold anyone accountable.
The result? Evaluations turn into a checkbox exercise. Fill out forms, say the right things, and congratulate yourselves. There are no tough conversations, no actionable insights, and no accountability. It’s governance theatre, for lack of a better word.
Here’s how it should work:
- Set specific targets aligned to strategy (4Dx style)
I usually recommend that boards adopt the 4 Disciplines of Execution (4DX) framework to create measurable, focused targets. For example, instead of “improve profitability,” set a target like “grow net profit margin by 9% within 12 months to USD 3M.” Without clarity, you’re just shooting in the dark. With that target, a board or EXCO evaluation is meaningful as it has a specific target to compare actual performance.
- Define risk appetite levels
Don’t just review risks broadly clearly state the acceptable risk appetite levels for the organization and evaluate whether decisions aligned with those thresholds. E.g. Maintain a non-performing loans (NPL) ratio of no more than 5% of the total loan portfolio. Was the board’s oversight proactive, or did it fail to protect the business? Specific targets provide a good guidepost. In this case, if the NPL ratio exceeds 5%, it signals that the institution is taking on too much risk, and corrective measures need to be implemented immediately, such as revising credit policies or improving borrower assessments. If the NPL ratio is significantly below 5%, it might indicate that the institution is being overly conservative, potentially missing out on profitable lending opportunities. The Chairman of the committee in charge of loan approvals together with his team must be evaluated against this target. Did they deliver?
- Hold directors individually accountable
Assign specific targets to individual directors based on their skills. If someone oversees finance, their evaluation should focus on financial performance targets. If someone handles governance, assess them on governance metrics. This ensures every director contributes meaningfully and can be held accountable first individually, and then as a team.
A strong board doesn’t fear accountability; it demands it. Evaluations should not just ask, “Did the board perform?” but instead, “Did each director deliver on their specific responsibility?” Did each committee add value? What are the targets of the board as a whole? Which of these belong to which specific committees of the board? Which ones are the responsibility of a specific director on a committee?
Without this clarity, you’re just wasting time.
Mr. Strategy All rights reserved, 2025.
