A board of directors must set clear direction for the bank. That was part of the message industry consultant David Kemp delivered at the Spring Seminar of the Bank Holding Company Association on Tuesday, May 7, in Bloomington, Minn. About 300 people attended the two-day meeting. Kemp was one of five main-stage presenters delivering ideas and analysis to the bank owners, board members and bank managers in attendance.
Kemp reminded the group that the CEO works for the board, “thus the board has a responsibility to the CEO to provide formal and informal feedback on performance.” He asked board members to consider how effectively they manage the CEO. Many boards implement some form of a performance management system, designed to enhance CEO performance.
The success of such systems, he said, depends on the ability to measure results. Kemp suggested using quantitative measures such as a 1-5 numbering scale, on areas such as leadership, communications, and administrative and organizational. Each area should include sub-points. The communications area, for example, might include further review in areas such as community relations and negotiating skills. Each area should include written comments.
The board should also be prepared to evaluate its own performance, he said. Board evaluations should happen every three to five years, he said. Often, the most effective evaluations are conducted by an outside facilitator. Areas that should be evaluated include: Willingness to improve banking knowledge, business planning and budgeting skills, meeting preparation, and communication. Board members should rate themselves and their peers on the board. Composite scores should be calculated and shared.
Kemp is president of Bankers Management Inc., based in Atlanta. Look for coverage of the BHCA Spring Seminar in the June 1 edition of NorthWestern Financial Review.