Over the last year the chairman of Standard Life, Gerry Grimstone, has been visiting Ministry of Defence offices to meet and speak with civil servants from across the department. It's not a very personal bid for defence civil servants to reconsider their savings choices, but part of his role as the department's lead non-executive director. Grimstone, in common with many other departmental non-executive directors, wants to improve communications between boards and civil servants.
Emran Mian, executive director of the Cabinet Office’s Governance Reform and Partnerships Unit, explains that this work was recommended by several ‘board effectiveness evaluations’ – the reviews of performance and board structures which departments must carry out annually. At the Ministry of Defence, for example, lead NED Gerry Grimstone has visited several offices to talk with staff about the board’s work. “It feels like that’s been received very well,” says Mian.
Reviewing the performance of an organisation’s board seems a fairly obvious thing to do, says Roger Barker, head of governance at the Institute of Directors, but even in the private sector it’s a relatively recent development: the requirement that businesses carry out annual evaluations was added to the UK Corporate Governance Code in 2003. Companies vary widely in their approach to these reviews, he says – from a legalistic focus on the responsibilities of the board, to a more psychological approach looking at the behavioural dynamics between board members.
In government, it’s up to the chair of each board – the secretary of state – to decide how these evaluations are run. But in practice, explains Mian, all departments have asked their lead NED to run them, assisted by their board secretary or the department’s internal audit team.
Most departments have chosen to conduct the evaluation by carrying out a survey of all board members – both executive and non-executive – to seek their views on the board’s performance over the past year, then conducting follow-up interviews with most members. The lead non-executive has then prepared a report presenting the findings and including recommendations of how the board can improve its performance.
In 2013-14, and at least once every three years thereafter, departments will be expected to include “independent input” in their board evaluations; though it’s not yet been decided whether this will come from an external agency or via some sort of peer review – for example, by having lead non-executives review other departments’ boards.
Barker notes that in choosing someone to provide external input into an evaluation, it’s important to consider potential conflicts of interest, and to be transparent about who is providing the support so observers can be confident that the evaluation is independent. Another risk he flags is that evaluations could become simply a ‘tick-box exercise’, rather than boards entering into the “full spirit” of evaluating and improving their performance.
Mian believes that departmental boards have so far avoided this risk. Lead NEDs are “pretty practical, action-oriented people”, he points out, and the reports they draft are usually similarly straightforward. Recommendations so far have included changing the membership of the board to include different representatives from the civil service, and creating more board ‘away days’ to allow for deeper discussion of certain issues.
As each board seeks to improve the way it operates, they will meanwhile be playing an ever-more important role in advising and supporting your department to achieve ministerial aims – so NEDs are set to play an increasingly important role in senior civil servants’ working lives. We hope these profiles will help you to understand the business chiefs who’ll be checking your strategies, testing your ideas and scrutinising your projects; and, of course, to look suitably well-briefed if one day you do find a NED standing by your desk.