4. Psychology of the board Flashcards
Karl George, MD of the Governance Forum - key quote on failing companies
‘Bad board behaviour is the thing that scuppers good governance every time. The people element of governance is so essential. It’s the number-one reason companies fail.’
Richard Leblanc’s (a researcher) study into board effectiveness found which 3 factors were most important?
- Board process
- Board membership (dir. characteristics)
- Board structure (distant no.3)
Solange Charas’ (a researcher) study found what link between board working together as a team and profitability
8 times more impactful on performance than demographic factors
Define boardroom dynamics
The interactions between board members individually and collectively in the boardroom
Define board dynamics in reference to boardroom dynamics
How internal boardroom dynamics influence and are influenced by their wider stakeholder system external to the board
10 specific and in some ways defining characteristics of boards (compared to other groups/teams)
- infrequent meetings
- duty to solve complex challenges
- severe time restraints
- working with imperfect info
- includes outsiders
- high public profiles
- other board or leadership commitments
- expected to represent particular stakeholder group while also being part of board as a unit
- larger than senior management teams
- specific and lengthy compliance process
Why might a board be considered a group but not a team?
(in terms of unitary boards) their will always be two sides in the execs and non-execs, with conflicting motivations
Example of when boards can function as teams
During the process of decision-making
Why would a board want to act as a team?
Study shows that teamwork produces better results in a number of fields including hospital teams and in business
Definition of group
Two or more people who interact with one another, share similar characteristics, and collectively have a sense of unity
Definition of team
A small group of people with complementary skills who are committed to a common purpose, performance goals, and approach for which they hold themselves mutually accountable
How to analyse whether a board is functioning as a team?
Break down the definition of a team and see which elements apply and to what degree
Define high performing team
A team that possesses unique and expert-level knowledge, skills and experience related to task performance… and adapts, coordinates and cooperates as a team, thereby producing… superior or at least near optimal levels of performance
3 key aspects of high performing team definition
- full of experts
- adapt, coordinate and cooperate as a team
- strong performance
Four areas of performance for boards to be measured on
- Vision, mission and values
- Strategy and structure
- Supervision of management
- Responsibility to shareholders and other stakeholders
Which of the four areas of performance for boards to be measured on is considered the most important (by board chairs) in order to be high-performing?
Vision, mission and values
Two key behavioural outcomes listed by 11 Cs model
Cohesion and Challenge
Define cohesion
The tendency for a group to be in unity while working towards a goal or to satisfy the emotional needs of its members
3 elements that create cohesion in teams
Social element - group likes each other and wants to work together
Task element - group approaches challenge with the same mindset
Utility element - group will jointly gain meaning from working together
5 benefits to team cohesion
Enhances decision-making by encouraging increased dialogue
Reduces information asymmetry
Enhances motivation and commitment
Reduces stress and anxiety
Improves ability to learn from performance
Two counterarguments to benefits of team cohesion
Overly cohesive boards can be distracted by too much banter and personal exchange, therefore becoming detrimental to decision-making and performance
Cohesiveness is most noted cause of groupthink
How, in theory, do boards benefit from cohesiveness without being detrimentally affected by it?
Ensuring there is an appropriate amount of challenge among members
What is meant by challenge at the board level? And what is not meant by it?
Disagreements in terms of viewpoints, ideas and opinions
NOT personal attacks
Key dynamic that must exist within the board to enable success
Balance of cohesion and challenge
