Evaluating before the failures

The UK Post Office scandal stands as a profound cautionary tale of systemic governance failures, sending shockwaves through boardrooms around the globe. Over the course of two decades more than 900 sub-postmasters were wrongfully prosecuted due to errors in the Horizon IT system. Their lives were shattered by a toxic organisational culture and a lack of effective governance that allowed the crisis to fester unchecked.

The scandal, which continues to unravel as new information surfaces from the recently concluded Inquiry, is far more than a case of technology gone awry. It highlights the critical importance of ethical leadership, accountability and stakeholder engagement within organisations.

On the surface it’s about IT failure, but at its core, the Post Office debacle raises troubling questions about governance – oversight failures, groupthink and silencing dissent. As directors navigate their own governance challenges, the lessons from this crisis must inform their efforts to build resilient, transparent, and ethically sound organisations.

The IoD UK produced a white paper with key lessons for directors – one of those lessons is board evaluations:

“Robust board evaluation processes might have offered the Post Office board an opportunity to reflect on its functioning. In particular, an externally facilitated review would have provided an independent perspective on director behaviour. This might have helped counter excessive complacency and groupthink. However, this opportunity does not appear to have been adequately grasped.”

In 2010 the UK’s Corporate Governance Code was updated requiring boards to have an independent, external board evaluation undertaken every three years. Within the NZX Corporate Governance Code it is recommended boards should have a procedure to regularly assess director, board and committee performance. This includes assessing whether directors have received appropriate training to best perform their current duties.

In a fast-evolving governance environment, the efficiency of a board is pivotal to an organisation’s success, and board evaluations are a cornerstone of effective leadership and decision-making – they are no longer a “nice to have”. At their best, evaluations foster transparency, sharpen performance and enhance board dynamics, creating the foundation for long-term organisational success. 

An effective evaluation can also enable better alignment between strategic goals and board performance, fostering resilience and agility by helping organisations to adapt to shifting priorities and market dynamics. 

Despite this, governance failures are continuing, often because boards don’t want to ask the hard questions.  If run internally, there can be apprehension that people will know what has been said and by who. For chairs, a poor evaluation may be considered to reflect negatively on their leadership. However, the process is an opportunity to reflect on individual and collective contributions and identify areas for professional growth - but directors need to be prepared to answer hard questions and potentially hear some constructive criticism. 

The chair plays a pivotal role in shaping board culture and effectiveness yet their performance is often overlooked in evaluations. An evaluation of the chair ensures accountability at the highest level and sets the tone for a culture of self-improvement across the board. Moreover, such assessments can help address potential blind spots, such as an over-reliance on established practices or insufficiently challenging discussions, ensuring the chair remains an effective leader.

Board evaluations can also focus too heavily on technical measures such as attendance rates, clean audits and compliance monitoring as opposed to behavioural measures such as ethical leadership, ability to challenge respectfully and inclusive environment.

Board evaluations are more than a compliance exercise; they are a strategic investment in your organisation’s future. Fostering a high-performing board doesn’t happen by chance – it is built through intentional assessment, feedback and action. By embracing evaluations, directors can build cohesive, high-performing boards that are well-equipped to navigate complexity and drive success.

The IoD has produced a new quick guide to support boards with the evaluation process. To download a free copy visit IoD Resources.

*AI assisted.

 

The UK Post Office affair - further reading:

The UK Post Office scandal – the cost of justice

IoD Webinar (available to members only):

Trust the IT? Governance lessons from the UK Post Office scandal