BOARD OF DIRECTORS PAPER COVER SHEET. Meeting Date: 27 January 2010

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1 BOARD OF DIRECTORS PAPER COVER SHEET Meeting Date: 27 January 2010 Agenda Item: 19 Paper No: O Title: BOARD EVALUATION PROCESS Purpose: To approve the process by which The Board of Directors will undertake a formal and rigorous annual evaluation of its own performance and that of its committees and directors. Summary: The Board of Directors has agreed that its performance review process should be undertaken internally on an annual basis identifying areas for the Board to work on in following years, with a wider external review every three to five years. This paper asks the Board of Directors to approve the evaluation process proposed in this paper Recommendation: For approval Prepared by: MICHAEL BESWICK Company Secretary Presented by: PETER HARVEY Chairman This report is relevant to: (Please tick relevant box) Assurance Framework Risk Register I/D No. Healthcare Standards: Financial implications YES / NO Please specify which standard Monitor compliance Human Resources implications YES / NO Internal monitoring Legal implications YES / NO

2 POOLE HOSPITAL NHS FOUNDATION TRUST COMPANY SECRETARY S OFFICE Report to the Board of Directors 27 January 2010 COUNCIL AND BOARD LEVEL ANNUAL APPRAISAL/EVALUATION PROCESSES This paper sets out the current Annual Appraisal/ Evaluation processes for the Council and Board organisational level at Poole Hospital NHS Foundation Trust. At Council and Board organisational level there are five distinct elements of annual appraisal/evaluation: 1. The Council of Governors as a Collective Body 2. The Chairman 3. Individual Non Executive Directors 4. Individual Executive Directors 5. The Board of Directors and its Sub Committees (as collective bodies) There is one element, element 5 - The Evaluation of the Board of Directors and its subcommittees - which requires a review of the process in light of the Board of Directors decision (July 2009) to have annual internal review and a wider external review every three to five years. 1. The Council of Governors as a Collective Body As part of Monitor s Code of Governance, the Council of Governors led by the Chairman should periodically assess their collective performance: The Process agreed by the Council of Governors is: the collective performance of the Council of Governors will be presented in the form of a separate annual report which covers the annual period November to October; the report will include the following: 1. Purpose of Report 2. Overview 3. Council of Governors Membership 4. Compliance with the Constitution 5. Council of Governors Meetings 6. Council of Governors Roles and Responsibilities 7. Council of Governors Sub Committees and Forums (Nominations, Remuneration and Evaluation Committee and Reference Groups) 8. Membership 9. Communication with Members 10. Development 11. Conclusion Since gaining foundation trust status there has been one report to the Council of Governors in March 2009.

3 2. The Chairman The appraisal/evaluation process and outcome for the Chairman are considered by the Council's Nomination, Remuneration and Evaluation Committee and agreed by the Council of Governors (CG D.2 & A.1.3) The Process agreed by the Council of Governors is: for the appraisal of the Chairman, feedback on general performance will be sought via the 360-degree mechanism that will include eliciting views from a minimum of 10 people, internal and external, who come into contact with the work of the Chairman, including members of the Council of Governors. The Senior Independent Director will manage the 360-degree appraisal process; the Senior Independent Director will make a report detailing the outcome of the reviews for the Chairman to the Council of Governors once a year; Since gaining foundation trust status the outcomes have been agreed by the Council on two occasions (June 08 & June 09). 3. Individual Non Executive Directors The appraisal/evaluation process and the outcome for individual non executive directors are considered by the Council's Nomination, Remuneration and Evaluation Committee and agreed by the Council of Governors (CG D.2 & A.1.3) The Process agreed by the Council of Governors is: individual formal performance review will be undertaken, by the Chairman, on an annual basis at the beginning of each financial year (April) so that outcomes from the previous years objectives can be measured and evaluated and objectives for the forthcoming year set in accordance with the organisation s Annual Plan; However, it is important to note that the formal review is only part of on going individual performance management arrangements which usually include regular one to one meetings throughout the year; formal performance review will be undertaken in personal meetings between the appraised and the appraiser. The meeting will focus on: measuring achievement against previously agreed objectives; feedback on general performance and progress; agreeing objectives for the forthcoming year; exchanging views about what both the appraised and the appraiser need to do to support ever improving performance; personal development needs and plans and future aspirations; information to support the appraisal will be gathered by the appraiser and may include 360-degree feedback; 3

4 the outcome of performance reviews will be documented using the Trust s standard paperwork and signed by both the appraised and the appraiser. Copies will be kept; the Chairman will make a report detailing the outcome of the reviews to the Council of Governors once a year; Since foundation trust status the outcomes have been agreed by the Council on two occasions (June 2008 & June 2009). 4. Individual Executive Directors The appraisal/evaluation process is determined by the Chairman and Chief Executive and the outcomes reported to the Board of Directors. The Process is: individual formal performance review will be undertaken, by the Chairman for the Chief Executive and by the Chief Executive for the other executive directors, on an annual basis at the beginning of each financial year (April) so that outcomes from the previous years objectives can be measured and evaluated and objectives for the forthcoming year set in accordance with the organisation s Annual Plan. However, it is important to note that the formal review is only part of on going individual performance management arrangements which include regular one to one meetings throughout the year; formal performance review will be undertaken in personal meetings between the appraised and the appraiser. The meeting will focus on: measuring achievement against previously agreed objectives; feedback on general performance and progress; agreeing objectives for the forthcoming year; exchanging views about what both the appraised and the appraiser need to do to support ever improving performance; personal development needs and plans and future aspirations; information to support the appraisal will be gathered by the appraiser and may include 360-degree feedback; the outcome of performance reviews will be documented using the Trust s standard paperwork and signed by both the appraised and the appraiser. Copies will be kept; a report detailing the outcome of the reviews will be made to the Board of Directors once a year; Since foundation trust status the outcomes have been reported to the Board of Directors on two occasions (June 2008 and June 2009). 4

5 5. The Board of Directors and its Sub Committees (as Collective Bodies) Monitor Code of Governance, main principles D.2 states: The Board of Directors should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and Directors. The Board should state in the annual report how performance evaluation of the Board, its committees and its individual directors including the Chairman has been conducted, bearing in mind the desirability for independent assessment and the reason why the Trust adopted a particular method of performance evaluation. The following process was agreed by the Board of Directors in June 2008: an overall Board effectiveness review should be undertaken annually. The first of these reviews is to take place in January 2009, 14 months after authorisation as a Foundation Trust. A statement complying with Monitors Code of Governance (see paragraph 1.1) can then be published in the 2008/09 Annual Report; the review will include a review of the Board and two of its sub-committees: Finance and Investment Committee; Audit and Governance Committee; the review will cover the whole range of the Board s activities including strategy and operational performance and with focus on five domains: focus on core business; trust and support; contribution and execution; engagement with stakeholders; board leadership; the review will be undertaken by an external organisation using a variety of methods interviews, questionnaires, review of organisation outputs and 360 degree assessment against a set of best practice indicators; the detailed outcome of the review will be for Board of Directors use only, but a report highlighting key points will be submitted to the Council of Governors; the Chairman will use the outcome of the review to consider the strengths and weaknesses of the Board; the review will be undertaken in a cost effective manner. The review was undertaken by independent assessors, KPMG and the outcome was reported to the Board of Directors in May 2009 and an action plan presented in July A report was also given to the Council of Governors in June

6 At its July 2009 meeting the Board of Directors agreed that the Board review process should be undertaken internally on an annual basis identifying areas for the Board to work on in following years, with a wider external review every three to five years. As the independent assessment by KPMG took place in 2009 the next annual will take place in 2010 The attached Annex 1 sets out a proposal for the revised process for the formal and rigorous annual evaluation of the performance of the Board of Directors and that of its committees and directors. MICHAEL BESWICK Company Secretary January

7 ANNEX 1 POOLE HOSPITAL NHS FOUNDATION TRUST BOARD PERFORMANCE EVALUATION PROCESS 1. INTRODUCTION 1.1 The Board of Directors is responsible for the success of the organisation and therefore optimal Board performance is essential and would want to, as a matter of course, evaluate its own performance. 1.2 Board performance relies on a number of factors: the skills, knowledge and expertise of the Directors; the effectiveness of Board meetings; setting appropriate agendas; the effectiveness of Board sub-committees; the leadership shown by the Board; the sharing of agreed values, standards and objectives; having robust governance arrangements; having a clear and understood strategic intent. 1.3 Board performance can be measured by: financial health; achievement of targets; patient safety; patient satisfaction; staff satisfaction; reputation. 1.4 It is important to review overall Board effectiveness and the arrangements for this should be clear and openly communicated. 2. BACKGROUND 2.1 The Board of Directors has agreed that the Board performance review process should be undertaken internally on an annual basis identifying areas for the Board to work on in following years, with a wider external review every three to five years. 2.2 Monitor's Code of Governance states (D.2):

8 The Board of Directors should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and Directors. The Board should state in the annual report how performance evaluation of the Board, its committees and its individual directors including the Chairman has been conducted, bearing in mind the desirability for independent assessment and the reason why the Trust adopted a particular method of performance evaluation. 2.3 To ensure compliance with Monitor's Code of Conduct the Board of Directors will undertake a formal and rigorous annual evaluation of its own performance and that of its committees and Directors. The Board will also make the necessary declarations in its Annual Report including the reason for the particular method of performance evaluation adopted. 2.4 The Board has chosen to adopt a formal and rigorous annual internal performance evaluation process with a wider review every three to five years for two reasons: on economic grounds, the cost of using external assessment is estimated at around 30,000 per annum; The Board has undertaken an independent performance evaluation assessment in 2009 and believes elements of the outcome and action plans cover a strategic cycle greater than one year. 3. ANNUAL INTERNAL EVALUATION PROCESS 3.1 The process will apply to the Board of Directors and two sub-committees: Audit and Governance Committee; Finance and Investment Committee. 3.2 The process will be internally driven and will require full and open cooperation from all directors to ensure that it is evidenced as a formal and rigorous evaluation of the Board of Directors and its committees 3.3 The process will comprise of three key themes covering seventeen areas: Board and Committee Practices; Robust Governance; Board Performance. 1 Board and Committee Practices (seven areas) i. Securing Skills, Knowledge, and Expertise of Board Directors; where evaluation is covered by: the Nominations, Remuneration and Evaluation Committee being tasked with reviewing the composition of the Board of Directors. (C.1.1); 8

9 the Board of Directors including in its annual report a description of each director's expertise and experience and making a clear statement about its own balance and completeness; individual directors' appraisal identifying the skills, knowledge, expertise and capabilities of directors with any gaps being the subject of personal development plans. Board of Directors Audit & Governance Committee Finance & Investment Committee ii. Appropriateness of the Agenda iii. Effectiveness of Meetings iv. Sharing of Values, Standards and Objectives: the evaluation process for areas ii, iii & iv will be by questionnaires to committee members v. Attendance at Meetings: Where the evaluation is covered by the Trust s Annual Report vi. Board Leadership of the Organisation: Where evaluation will include questionnaires to internal and external stakeholders (linked to strategic intent and reputation) X X vii. Strategic Intent: Where evaluation will consider, by way of questionnaires how well the strategic intent and plans of the Trust are understood by internal and external stakeholders. 2 Robust Governance (four areas) Where evaluation will consider four areas: i. The Trust's compliance with the twenty six key conditions of its Terms of Authorisation. ii. iii. The Trust's compliance with the six schedules of its Terms of Authorisation; The Trust's self certification process and quarterly (and exception) Monitor returns. 9

10 iv. Monitor's Code of Governance and the Trust's comply or explain processes 3 Board Performance (six areas) i. Financial Health; For this area evaluation will look to the Trust's financial risk rating, reports made to Monitor, and any response to these, the Trust s published Annual Report and Accounts and where appropriate, benchmarking reports; ii. Achievement of Targets: For this area evaluation will look to the Trust's governance risk rating, reports made to Monitor and any response to these and the Trust s published Annual Report and Accounts and where appropriate, benchmarking reports; iii. Patient Safety: Where evaluation will consider what has been reported to and by the Quality Care Commission and the Trust s standing with the NHSLA and where appropriate, benchmarking reports ; iv. Patient Satisfaction Where evaluation will consider local and national survey results and where appropriate, benchmarking reports ; v. Staff Satisfaction: Where evaluation will consider local and national survey results and where appropriate, benchmarking reports ; vi. Reputation: Where the evaluation will include questionnaires to internal and external stakeholders (linked to Board Leadership and Strategic Intent). 3.4 The next annual evaluation process is to be undertaken in To identify the areas for the Board to work on in 2011/12 it is suggested that the evaluation process takes place in the autumn of The overall evaluation will be presented in a corporate document for the Board of Directors and a report highlighting the key points will be made to the Council of Governors. 3.6 The Chairman and the Board will use the outcome of review to consider the strengths and weaknesses of the Board with action plans drawn up as appropriate. 3.7 The review will be undertaken in a cost effective manner. 10

11 4. THREE TO FIVE YEAR WIDER INDEPENDENT REVIEW PROCESS 4.1 This process will apply to the Board of Directors and two sub-committees: Audit and Governance Committee; Finance and Investment Committee. 4.2 An overall Board effectiveness review should be undertaken every three to five years. 4.3 The review will cover the whole range of the Board s activities including strategic and operational performance with focus on five domains: focus on core business; trust and support; contribution and execution; engagement with stakeholders; Board leadership. 4.4 The review will be undertaken by an external organisation using a variety of methods: Interviews, Questionnaires Review of organisation outputs 360 degree assessments Assessments against a set of best practice indicators. 4.5 The overall evaluation will be presented in a corporate document for the Board of Directors and a report highlighting the key points will be made to the Council of Governors. 4.6 The Chairman and the Board will use the outcome of review to consider the strengths and weaknesses of the Board with action plans drawn up as appropriate 4.7 The review will be undertaken in a cost effective manner. MICHAEL BESWICK January