This is Part 5 in our blog series on Board Evaluations. To access other posts, see below:

Throughout this blog series, we’ve stressed the importance of selecting the right facilitator, whether internal or external. In this blog, we take a quick look at the factors that your board should weigh as it decides when to use an outside facilitator and who might be the best person(s) for the job.

If your board is taking a three-year approach to board evaluations (as we recommended in Part 4), then you’ll likely be alternating between internal and external facilitators. As part of this multi-year approach, your board should review the objectives and methodologies for each year of the plan to determine which ones necessitate a third-party facilitator and which years can be kept in house.

Selecting an Internal Facilitator

The question all boards must ask themselves is “Who on the board (or in the organization) elicits trust and is adept at making others feel open and at ease?” Whether the facilitator will be conducting one-on-one interviews or delivering feedback from a questionnaire, this skill set is highly important.

While many boards rely on the chairman or independent lead director to facilitate, it’s necessary to acknowledge the inherent risks and biases when using a sitting director. For one, board members tend to be less open when evaluations are conducted by a fellow director. In some cases, the board member who’s facilitating may be part of the problem—or they may be a friend of the person who’s part of the problem, and so on.

For many companies, that leaves the general counsel, the corporate secretary (if different from the GC), or possibly the Chief Human Resource Officer (CHRO). From this pool of internal candidates, the Nom/Gov committee should return to their assessment of traits (i.e., Who elicits trust from our directors? Who can balance all the various factors at play: collegiality, performance feedback, etc?).

Additional factors that may influence internal vs. external facilitators:

Lack of an internal candidate who has the experience or board members’ trust. As we continue to emphasize, it takes a very special person to conduct peer-to-peer evaluations or to discuss declining performance with an individual director. If your board/company does not have the right internal candidate for the job, then it would be wise to seek out a third-party candidate with the proper skill set. This is where the Nom/Gov committee chair, the board chairman, or the independent lead director must be decisive in their assessment and recommendation of facilitators.

Length of time since the last third-party evaluation. When was the last time your board brought in an outside facilitator? We highly recommend that a third-party be brought in at least every third year to ensure that internal bias doesn’t affect evaluation results. This is particularly important for boards that otherwise rely on a sitting director to facilitate.

 

Selecting an External Facilitator

When selecting an outside facilitator, there are a few general criteria your board should take into consideration. Depending on your board, the facilitator research and selection process may fall into the hands of the corporate secretary, general counsel, Nom/Gov chair, board chairman, independent lead director, or CHRO—or maybe a combination of these. Here are a few questions to ask:

(A) Does the facilitator use a one-size-fits-all approach? Avoid facilitators who appear to have a generic approach from one board to the next. Good third-party facilitators will engage in a discovery process to learn as much as they can about your board before making recommendations on methodology or content. They are not committed to a specific board evaluation format, but are comfortable with all evaluation tools (including peer-to-peer).

(B) Have you met with the individual(s) who will be conducting your evaluation? Whether you’re using a law firm or another company/consultant specializing in board evaluations, be sure you’ve met with (or spoken extensively to) the specific individual who will be conducting the evaluation for your board. This might seem like a silly reminder, but if the firm can’t tell you right away who your facilitator will be, then proceed with caution.

(C) Is the individual trustworthy? Do they have the right experience? You’re inviting this person into the boardroom to become intimately acquainted with the dynamics and performance of your board. Both the board and the CEO should feel comfortable with this individual. It’s also beneficial if the facilitator has experience as a corporate director and/or C-suite officer; these candidates tend to better understand the nuances of the delicate board evaluation process.

(D) Have you considered the legal implications? Information from evaluations may be discoverable in a lawsuit if surveys or board reports are not handled prudently. While we are not familiar with any such incidents, it’s important to acknowledge the possibility. In certain situations, selecting a law firm to facilitate can ensure attorney-client privilege if a lawsuit does happen to materialize down the road; however, boards shouldn’t feel that their hands are tied. In some cases, boards will hire a facilitator through their company’s law firm to protect attorney-client privilege, particularly in sensitive legal situations. We encourage boards to engage their company’s legal counsel on this matter.

As with all aspects of board evaluations, the right facilitator will vary from one board to the next. Yet, we find that sound judgement and due diligence will get you on the right track 99% of the time.

In the next blog of this series, we’ll be discussing the most important (and often-overlooked) step of the board evaluation process: taking action on results!