One specific challenge is where the underperforming director is also the chair.
This can occur where the chair is imposed on the board by another person or organisation, such as a government minister, where it is the individual’s first opportunity to chair or where the chair has particular personality characteristics that diminish their chairing effectiveness.
As with individual directors, any issues with the chair should be highlighted through a board or peer- driven individual director evaluation. The same processes — mentoring and development — can be used. Mentoring might be undertaken by a senior director on the board, or a board coach can become involved.
On a five-to eight-person board, one or more directors not pulling their weight may significantly impact board and company performance. But what can actually be done about a director or chair who is significantly underperforming?
There are many types of performance issues. First, the person may not have the relevant skills, competencies and experience to meaningfully contribute to the board. Their life experience and training may be completely irrelevant to the organisation’s business or they may not have had previous experience as a director.
Second, they may exhibit behaviours at the boardroom table that diminish the performance of the entire board. For example, many of us have seen directors who talk too much or too little, directors who are overemotional, directors who are reluctant to make a decision, directors who rarely read the board papers, and those who attempt to dominate discussions. In these situations, director performance management may be the answer. This is a planned, structured, ongoing process of working with an individual to improve their performance.
This shouldn’t be confused with “performance managing” a person out of their position. If the person shouldn’t be on the board, then matters of board structure, director selection processes and the use of nominations committees should be reviewed. While it is often difficult to remove a director, if this is the best course of action, it should be directly addressed and not disguised as performance management.
Performance management is appropriate where the board believes the director has real potential to substantially contribute, but needs assistance in getting up to speed; or where the structure of the board is such that removal is not a viable option — such as when the person is a major owner or representative of another entity with the right to appoint a director to the board.
Performance management is more than undertaking an individual director assessment. This is where each director evaluates every other director, with feedback provided to the director and chair. Individual assessments can be an important tool to identify performance issues and provide feedback to the underperforming director, but are not by themselves a solution to managing poor performance.
Four steps to performance manage a director
1. Obtain reliable data that identifies the issues. This can be done as part of a regular board evaluation or a peer-driven individual director evaluation process. This data should point to issues that need to be addressed to increase the person’s effectiveness. Sound feedback from peers is a good starting point.
2. A person or committee will work with the individual in the performance management process. This may be the board chair, the chair of the nominations committee, or one or two experienced directors. In some situations, it may be valuable to arrange a “director coach” for the person — someone not directly involved with the board, who can provide impartial feedback to the person. Of course, this may mean the director coach sitting in on board meetings to observe first-hand the matters of concern about the director. It is essential that the director receiving the performance management accepts the need for such advice and respects the individual or individuals who provide the advice.
3. Establish clear objectives as to what will represent strong performance by the particular director. This may mean objectives around the acquisition of new knowledge and skills — for example, a sound knowledge of financial matters relevant to the particular board. It may involve behavioural objectives, such as being more or less verbally active during board meetings or developing listening skills.
4. Two major and complementary performance management interventions can be employed — mentoring and director development. A mentor is available to provide ongoing advice, encouragement and support for the mentee. The mentor regularly meets with the director, providing guidance on appropriate board behaviour as well as recommending tools/techniques used by effective directors.
He or she can answer questions and suggest development opportunities. The mentor may be the same person who oversees the performance management process.
Keep on learning
Director development involves a program of training to address skill gaps of the performance- managed director. It may involve specific training in a particular knowledge area such as accounting or operations, or attending different conferences to learn more about the relevant industry if the director does not have this background. If the performance issues are more behavioural than skills-related, sessions may be arranged with an organisational psychologist who profiles the individual and works with them to address specific personality attributes that may detract from their performance in the group.
No matter what program of activity is agreed, an important aspect of director performance management is the regular provision of feedback to the director — providing opportunities for questions, advice and direct observations of the director at the boardroom table.
One valuable technique is the post-meeting evaluation undertaken by many boards. If there are one or more underperforming directors on the board, these can be focused on each director providing advice for all other directors as to where they made strong contributions to the discussion and where, as a group, the board could have provided additional value.
Often, boards do not have complete or partial influence over who becomes a director — a case of dealing with the board we’re given rather than the board we’d like. However, there is no reason to accept limitations resulting from underperforming directors. The critical factor is engaging the underperforming director in a process to improve their performance and, consequently, that of the entire board.
Professor Geoffrey Kiel FAICD is chair of Strategic Governance Pty Ltd.
Learn about AICD’s Boardroom Mastery course at bit.ly/3we25vm