Evaluating Co-op Boards

One of the important jobs of a co-op board is to evaluate -- evaluate the management, evaluate the co-op's financial performance, evaluate the membership and structure of the co-op, and occasionally step back and evaluate the basic mission and goals of the co-op. Evaluation is a way of checking to see whether the co-op is getting where you want to go, by a route you like. For the same reason, it is important for the board of directors to evaluate its own performance on a regular basis.

The board plays a key role in the success or failure of a co-op. It is easier for a co-op to succeed with good management and a weak board than with a good board and weak management; but even the best management will eventually falter without board support.

One reason that board evaluation is so important is that it is easy for a well-managed operation to camouflage an ineffective board, sometimes for long periods of time. A board that is actively, aggressively making mistakes can be easy to spot -- management turn over is usually a clue -- but a more common problem is a board that is ineffective, neglecting critical duties, or inadequately informed. Problems like this are harder to spot, and they usually surface during a crisis or at a key turning point for the co-op, when management and members turn to the board for direction and find none. An evaluation can pinpoint weaknesses in time to address them, and helps keep the board focused on their important responsibilities.

There is another reason for boards to evaluate themselves, especially when there are no obvious problems or crises against which to measure board performance. Boards of cooperatives are made up of people who contribute time, energy, and a variety of skills and expertise to help perpetuate an organization about which they care very much. Being a responsible board member is hard work, in a sometimes confusing role, and is often a thankless job. An evaluation which points up strengths as well as weaknesses can give a board a sense of its own competence and accomplishment as a group. This is a good foundation on which to build positive change.

What to Evaluate

The co-op boards I have worked with the most -- in wholesale and retail food co-ops -- have often tended to look at evaluations as an internal, reflexive process, focusing on group interactions, communication skills, and performance of individual board members. This is an important aspect of how a board functions, but it is only part of the whole. An evaluation that looks only at the board in relation to itself misses some key areas of board performance in relation to the co-op as a whole.

When I work with a co-op board to evaluate their performance, I look at four major areas of the co-op with which the board has a key relationship. By looking at specific responsibilities in these areas you can get a good sense of the effectiveness of the board.

Examine the board in relation to:

• Members
• Management
• Internal Board Operations
• Business Overview

Members

The board is the representative of the members and the steward of their interests. Here you want to look at what specific procedures the board has set up for: admitting new members, orientation, informing members about board decisions, involving members in decisions where appropriate. Does the co-op provide special benefits to members? Does the co-op offer services to the community, services of which members can be proud? Do members have a mechanism, other than attending meetings, for giving input into the longterm direction of the co-op? Encouraging and maintaining communication is an especially important role of the board in relation to members. How is the board meeting its responsibilities in this area?

Management

Board-management relations seem to be the most challenging area for co-op boards and managers. The line between board and management roles can be blurred at times, and board and management responsibilities often change as the co-op grows. This is another area where established procedures and strong communication are important. Look for clear policies on hiring and firing the manager, a written job description, regular performance evaluation and review of compensation, and training opportunities provided for management. Does the manager meet with and report regularly to the board? Is there a board chair or executive committee with whom the manager can work more closely between meetings? In looking at whether the board is taking an appropriate role in relation to management, ask if the board supports the manager in decisions regarding operations of the co-op, or if the board regularly spends time discussing day-to-day operations. Do board and management work together to determine the direction the business will take? To have an effective board, you want to focus your attention on goals and results, and leave methods up to the manager.

Board Operations

Here is your chance to look at the board's internal process. Review policies regarding board terms, elections, officers, orientation of new board members, meeting attendance, and committee structures. Examine the conduct of your meetings: are agendas and background information prepared in advance? Are meetings completed on time? Do all board members participate in discussions and follow agreed-upon procedures? Are decisions made in a timely manner? Be sure there is a written record of board policies and decisions that is kept up to date, and that there is an established procedure for quick decisions between meetings. A look at the way the board members work together, and the standards and procedures you set for decision-making, can reveal a lot about the overall effectiveness of the board and its ability to respond to both problems and opportunities that face the co-op.

Business Overview

The board's responsibility for overseeing the business needs to be evaluated in three key areas: legal, financial, and planning.

Legal: To assess the adequacy of the board's legal overview, start by looking at the degree to which board members are informed. Do they have copies of bylaws and articles, and are they reviewed and updated annually? Does the board read and approve minutes of each meeting? Also look for a written policy on board ethics and conflict of interest, and be sure that a review of legal responsibilities is included in orientation for new board members. (For a summary, see "Duties and Responsibilities of Cooperative Board Members," by Kathryn Sedo, in Cooperative Grocer #4.)

Financial: This is another area where the degree to which the board is informed is crucial. Be sure the board receives regular financial reports, approves annual budgets, and reviews financial performance regularly. See that board members understand enough basic financial analysis to interpret the information they receive. It is also the board's responsibility to establish policies for member equity, and to arrange for a financial audit on a regular (annual) basis.

Planning: Does the board approve an annual business plan, review and approve a 3- to 5-year plan, and update the co-op goals and mission statement every few years? Evaluate the mechanisms provided for member input into the planning process. Also ask whether the board is adequately informed about the particular business and market environment in which the co-op operates.

Tools

When I am asked to evaluate a board, one of the most useful tools I have found for looking at their performance is a survey or questionnaire which asks specific questions about board actions and policies in each of the areas outlined above. Each individual board member might answer the questions, or the board might review and answer them as a group. The questions serve as a checklist of key board responsibilities, which can be reviewed each year. Add, drop, and revise the questions each time to address specific areas of concern for a particular board or a particular stage in the co-op's development.

Setting goals during an annual planning process can also be the basis for an evaluation. By setting goals and objectives for the board in each of the above areas, you can measure your success in achieving them and update them for the next year. It is often helpful to set aside a special board meeting or retreat to conduct this review.

Outside Evaluations

There are pros and cons to bringing in an outside person to conduct an evaluation of your board. If your board has never evaluated its performance before, or if you are experiencing definite problems-especially problems in relation to management -- it can be very helpful to bring in someone from outside the co-op. They can provide some objective criteria, offer a perspective on other co-op board standards, and can help you set up criteria on which to base future evaluations.

Once you have established some clear criteria, conducting the evaluation internally can be a good process in itself. As a board, you have an opportunity to know your own strengths and weaknesses better than someone who has had only limited contact with you.

The disadvantages of conducting the evaluation yourself, especially for the first time, are not having clear criteria or standards against which to measure, and the difficulty of being objective. Where there are emotionally charged issues, or where the board's internal process has not been the best, the board may tend to gloss over problem areas. On the other hand, there may be a tendency to be overly critical and to ignore real strengths and accomplishments that should be brought out.

A good evaluation process will leave you with a sense not only of problem areas, but also of strengths and successes. It will help you pinpoint weak spots and will help keep the board focused on its key responsibilities.

See also CG #60: Board Evaluation