Boards are operating in a challenging and constantly changing environment. Their decisions have far-reaching consequences. The board of directors is the pinnacle of corporate decision-making; it is the main instrument to ensure effective corporate governance. On the surface, the board consists of a group of people. However, for the effective operation of the board, the dynamics and interactions between the members are just as important as the individuals themselves. Understanding the board dynamics at play can help maximize the individual director’s contribution and thus improve overall board effectiveness.
Avoiding groupthink
It seems obvious that dialogue is at the core of a board meeting. Based on the provided input and following the agenda, the board of directors dissects, analyzes, and discusses the burning questions and ideas to push the organization forward. One of the biggest pitfalls in this process is groupthink. Groupthink means that the members of the group - in this case, the board of directors – have the tendency to keep the harmony of the committee and reach consensus by minimizing disagreement or questioning each other. They literally think as a group instead of independently. General Motors chairman, Alfred P. Sloan, once famously postponed the decision on a thorny strategy issue to the next board meeting because everyone around the top table was in complete agreement. A healthy board dynamic is characterized by a balance between cohesion and dissent, and between harmony and discord. Conflict around the top table is inevitable and necessary, but at the same time, the dialogue should be inclusive and cohesive. Questioning and listening are the critical drivers for fruitful boardroom conversations.
Shaking things up
When a board member is added or replaced, the board dynamics change along with the board composition. The mix of traditional board members and newer – or even first-time – directors can shake up rusted patterns and help the board steer clear of groupthink. Board refreshment and diversity are generally effective strategies to combat groupthink. Today’s boardrooms are increasingly diverse: Over 70% of S&P 500 board directors appointed in 2022 belong to an underrepresented group, and 18% of the new generation on S&P boards is younger than 50. Newly appointed board members often bring in necessary expertise on present-day challenges like the digital transformation and ESG, but often also have a more diverse profile regarding age, gender, nationality, ethnicity, etc. In this way, every director brings his/her own perspective, leadership style, and personality to the mix. Assuming healthy board dynamics, a new director is often more likely to challenge and question deep-rooted organizational beliefs.
Optimizing board dynamics
Groupthink may be one of the best-known and criticized stumbling blocks of board dynamics, it is far from the only one: Power dynamics, information overload, and time pressure are all areas affecting boardroom behavior that also conclusively impact the decision-making. For optimal board dynamics, everyone around the table should get a chance to speak yet contribute in a constructive and additive manner rather than tooting their own horn or starting tangential discussions.
Board dynamics are complex and play out at the individual and group level. Apart from their expertise and experience, directors need strong interpersonal skills and know how to balance good listening and questioning. At the end of the day, everything comes down to the question: Are the right people looking at the right problems in the right way?
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