In the latest annual review of Corporate Governance conducted by Grant Thornton they noted that the shape of the board evaluation market was changing. In the past a small number of providers dominated the market – especially for companies in the FTSE 350. In 2018 one provider conducted 30% of all FTSE 350 Board evaluations. Last year, whilst Grant Thornton found that the top two providers were still responsible 38% of the market, 34 organisations were working with FTSE 350 companies on their board evaluations – including divisions of accounting firms, search companies, academics and one-person specialist firms. In the wider market for board evaluation amongst public sector bodies and charities the range of providers is even more diverse.
The breadth of the market and the low barriers to entry mean that for a chairman or company secretary who is thinking about issuing an ITT or selecting a supplier for an upcoming evaluation market there are a lot of different approaches and people with very diverse experience to choose from. Whilst this diversity could be seen as enabling competition and innovation it can also be very confusing and make the selection process for what is a significant and sensitive piece of work in the board lifecycle seem like a bit of a lottery. And with those low barriers to entry meaning it’s difficult to maintain high quality standards across the market a selection lottery is not what a board wants when choosing an evaluator.
In 2019 BEIS sponsored a review of the board evaluation marketplace by the ICSA (now known as The Chartered Governance Institute) which may in time lead to a more standardised approach to the disclosure of outcomes of evaluations and possibly a process of registration for board evaluators. But as we await the result of that review, here at the Board Effectiveness Guild we’ve been discussing between ourselves, and with our clients, what they most value when it comes to selecting a provider for an evaluation.
Five key qualities
We distilled this down to five qualities: open-mindedness, inquisitiveness, flexibility, rigour and empathy. Open-mindedness and inquisitiveness are necessary to unearth the most deep-seated and significant issues that boards need to address. Flexibility and a rigorous process help to ensure that those issues are well understood and evidenced and result in both insightful analysis and pragmatic solutions. Empathy is essential to work within the context of the different personal dynamics of each board we work with and to develop recommendations that are appropriate and implementable within that context, without of course compromising governance standards.
These qualities, along with the basic requirements of a demonstrable understanding of client requirements and evidence of experience in delivering similar evaluations, can form a set of criteria for a company secretary or selection panel to use when comparing bids and conducting interviews with possible suppliers.
A code of practice for board evaluators
Having established these five key qualities we went on to develop a code of practice that all members in the guild sign up to. This code covers: our shared values of integrity and independence as evaluators; our approach to client relationships, based on the highest standards of confidentiality, our methodology, with its foundations of a clear statement of requirements and agreement on the appropriate governance code to be used as the yardstick for a specific project, our use of 1-to-1 interviews as the key data gathering element of our project methodology, and our accountability for the quality of the work undertaken.
We hope and believe that this code – which is freely available on the guild website – can be of value to board members who are looking to navigate their way through the increasing number of providers and may help them to establish some common standards when they are faced with the question of how to evaluate the evaluators.