A peer group evaluation offers an effective way for a co-operative to ensure that its directors are performing effectively. It is an in-depth and established process in which directors evaluate one another and can play a key role in a well governed co-operative.
In an interview with an independent professional non-executive director (IPNED) of one of the UK’s largest agricultural co-ops, who commissioned Co-operatives UK to lead a board peer evaluation process, we explore the process, and the challenges and opportunities it poses.
This co-operative undertakes peer group evaluations regularly, and the IPNED feels peer group evaluation should be part and parcel of good governance: “I’m a big believer in utilising the power of anonymous evaluation of people to help them do better, because they gain more self-awareness and the findings are more accurate.”
He sets out five ingredients that make the process work:
Finding the right route for you
There are a number of routes to approach peer group evaluation for boards.
Richard Self, Co-operatives UK’s Agricultural Manager, has 15 years’ experience working in the sector and has established a peer group appraisal service that allows members of a Board to appraise each other, in confidence, across a number of critical themes or skills important to the business. The appraisal, says the IPNED, “has been is a very good way of making our directors more self-aware, so that they can improve themselves for the benefit of their business and the group that they are sitting with.”
Peer group evaluation is not an easy thing to do and can result in difficult or uncomfortable conversations, but this is what makes it more effective than other processes.
The agricultural co-operative IPNED says for this reason it’s important to use an independent or external party to facilitate: “I don’t believe our internal HR people would be comfortable running the process,” he said, “because they are then getting access to how good or bad the directors are; something they don’t normally have.”
In addition, he asked the Chair to champion the process – someone respected within the business as opposed to someone viewed as an ‘outsider’. Introducing a process that feels non-confrontational is critical to getting buy-in. This process should be instigated with agreement from all board members, but inevitably some may be more bought in that others:
“We had one director who decided this was an outmoded, outdated way of doing things. Everyone else was very supportive and thought it was a good idea because it allows people to say things anonymously that they probably wouldn’t want to say face to face.”
The process – how it works?
The peer group appraisal consists of a questionnaire covering 16 criteria representing 4 key qualities:
- Personal qualities
- Interaction with others
- Understanding of the role
- Knowledge of key areas
The 16 criteria are changeable dependent on sector or circumstances – tailored completely to the needs of the board – and agreed in discussion with whoever runs the process.
Each director gives a score against each criteria for themselves and each other director – if 10 people are on the board, there will be a total of 160 scores. Directors also have the opportunity to add comments to encourage or to give constructive criticism.
Individual ‘radar charts’ are produced for each director, comparing the ‘self’ assessment to the average assessment from other directors. The charts and accompanying report also indicate the level (or lack) of consensus on each criteria within the board. For example, with the criteria ‘Sharing information appropriately’, you sometimes find a greater range of opinions. In this is the case, it gives a clear indication that further consideration needs to be given to either how this person shares information, or how s/he communicates the way in which they share information with the board.
Image: Example radar chart produced for peer group evaluations
The individual reports also give an indication of where each director is scoring relative to others – top, middle or lower. Any comments are used to give feedback in the form of advisory notes. However, rather than being included as verbatim, they are rephrased to inspire a productive conversation:
“Richard [Self] doesn’t allow individuals comments to be shared verbatim because then that individual focuses on ‘who said that about me?’ rather than the broader meaning of it. Instead the comments that require a follow-up will be smoothed and broadened to be used in conversations the chairman is having with the individual directors.”
Valuable insight can be gained and development opportunities identified about individual and overall board performance. It gives hard information and makes recommendations about what can and should be done when, for example, any or multiple directors are scoring in the lower third of criteria. There is also an option to include a separate and more specific skill set for Executive Directors in the process, which is reviewed separately. This can include tasks like ‘Presenting information to the board’ and ‘Building business partnerships’.
A consolidated report is also produced for the board and management to consider when looking at training and development.
Act on the results
A trusted figure needs to champion the peer group evaluation process, both during the appraisal and action on the results.
Because the outputs of the evaluation will vary between people – and because all the directors have put considerate effort into the evaluation – time needs to be given to ensure each director gets appropriate feedback.
“If it’s only one person who thinks someone else is not doing a very good job, then it’s not a problem because it disappears in the average. If everyone thinks that someone is not doing a good job on one or several areas, then it’s clear that something should to be done about it. In our case, there are three directors who the chairman is actively having a discussion with, in most cases related to particular parts of their performance, rather the overall.”
In this case, the results of the evaluation were positively received by board members, but the IPNED suggested it might be necessary to handle some cases more sensitively than others:
“Two of the directors who had scores that warranted a discussion contacted the chairman straight away, voluntarily. One of the others didn’t arrange an appointment but we had an informal chat after another meeting he attended. I asked what he thought of his scores and he said ‘I’m surprised about the gaps’ – I suggested we talk about how we think that’s happened. This is how you might manage it well.”
Another sensitive outcome, and an example of where the process can benefit the board and the individuals alike, involved a less experienced director:
“He is full of confidence and scored himself four or five on everything, which is not bad. But all of his peers scored him one point down to his own score – pretty consistently. What it says is he needs to think about how he is coming across. He needs to develop more board experience and expertise. But actually it is for his benefit as he is bright and we believe he is a future chairman. So the conversation needs to be positive and encouraging along the lines of ‘you need to think about how you come across which means you might not maximise your contribution.’”
There were of course positives to come from this particular evaluation process, but it also highlighted areas that several of the board members scored poorly on, such as developing stronger relationships with growers through better, more frequent communications from the board: “A lot of what this does is 1. reinforce what everyone probably knew or thought in the first place and 2. reinforce it to the individual to the point where they might try and do something about it.”
Follow-up and repeat
Once you are at the end of a process the IPNED insists that the results are acted upon and the process repeated every few years.
“Each time we've done it we got a better response than the previous one. I insist on following-up the results, something that didn’t happen the first time the evaluation took place. If you agreed to do a process, you make sure it works properly.”
“We’ve got a process that works. If you are able to connect the first one, the second one, the third one, you can see whether we are getting better or worse. If you do it through a different format each time, you don't get comparability. Richard’s feedback was very helpful; we went through the historic, the previous ones and he gave me information about what has changed over time.”
“It's a very neat way of doing it and it’s relatively cost effective, the people have got used to it, and we get some results out of it. So why change? I recommend this.”
Interested in how a peer group appraisal could work in your co-op?
If you are interested in hearing more about the peer group appraisal service discussed above, please contact Richard Self, Co-operatives UK's Agriculture Manager via [email protected] or 0161 214 1786.