Psychology of the Board Flashcards
THE IMPORTANCE OF BOARD DYNAMICS
Understanding board dynamics is vital if we are to do what?
Why?
What is the starting point for understanding board dynamics?
What are the 3 Cs that broadly capture board dynamics?
to do a better job at corporate governance
the people element of corporate governance is the number-one reason companies fail = boardrooms are not necessarily always rational places and human factors, such as trust, power, influence, and relationships, are going to be key to performance
starting point is to develop a clearer understanding of what board dynamics actually is, what its components are, and how we might influence these for the better
COHESION and CHALLENGE, which pair together to describe what effective boardroom dynamics are like, and CULTURE, which captures the theme of how the board’s behaviour influences and is influenced by external stakeholders
DEFINING BOARD DYNAMICS
How can board dynamics be defined?
How does psychology come into play?
Board dynamics are the interactions between board members individually and collectively, and how these interactions influence, and are influenced by, their wider stakeholder system
The definition employs the words ‘interactions’ and ‘influence’, hinting at their underpinning in the more human aspects of governance
DEFINING BOARD DYNAMICS
What is psychology?
What are the 6 psychological topics that relate to board dynamics?
Psychology = the scientific study of the mind and how it dictates and influences our behaviour
(1) Team cohesion/challenge
(2) Decision-making
(3) Stakeholder conversations
(4) Leadership culture
(5) Diversity (deep)
(6) Board environment
CHARACTERISTICS OF BOARDS AND BOARD MEETINGS
What are the 10 specific characteristics that make a board different from any other group or team?
- Meet episodically and at a low frequency
- Only have a duty to solve complex and strategic challenges
- Operate within severe time restraints (meeting time often limited)
- Always working with imperfect information (e.g., past performance)
- Includes outsiders = NEDs
- Board members can have high public profiles and strong personalities
- Board members often have other board or senior leadership role commitments
- Board members are expected to represent a particular stakeholder group but are also members of the board unit as a whole
- Boards are typically larger than senior management teams
- Board meetings have a specific compliance process that they must follow based on a governance mandate prescribed for boards
CHARACTERISTICS OF BOARDS AND BOARD MEETINGS
What are the ‘three gears’ of board meetings by Hawkins?
What are Chait’s three modes of governing framework?
monitoring/mentoring, strategising, and decision-making
Type I = fiduciary governing = the board’s responsibility is to see that resources are used efficiently and responsibly
Type II = strategic governing = strategic thinking and planning are the primary focus
Type III = generative governing = focuses primarily on framing problems and issues and making sense of them, so that goal-setting and decision-making are then possible
BOARDS AS HIGH-PERFORMING TEAMS - DEFINING BOARDS AS TEAMS
What is the definition of a group?
What is the definition of a team?
Are boards groups or teams?
Group = 2 or more people who interact with one another, share similar characteristics, and collectively have a sense of unity
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
a board may function as a group or as a team for limited periods, but they should aspire to become a continuously high-performing team
BOARDS AS HIGH-PERFORMING TEAMS - DEFINING BOARDS AS TEAMS
A team is 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 does a board stack up against the definition of a team? (6)
(1) ‘small group’ = average board size globally is 10
(2) ‘complementary skills’ = boards are much more likely to function as teams if they have a diverse and balanced skillset and mindset
(3) ‘committed to a common purpose’ = a key attribute of effective directors is their level of motivation and commitment
(4) ‘performance goals’ = boards that work as teams regularly reflect on the appropriateness of their performance goals and ensure that all board members are on the same page at all times
(5) ‘approach’ = a board will only function as a team when there are also agreed group norms and ground rules of appropriate and inappropriate behaviour in place
(6) ‘mutually accountable’ = board members as a team will support and challenge each other and not wait for the chair to fulfil this function
BOARDS AS HIGH-PERFORMING TEAMS - WORKING GROUPS VS TEAMS
What are Hawkin’s 9 factors that distinguish working groups from teams?
- Leadership
WG = defined by strong, clearly focused leadership
T = share leadership roles (in boards that work well as teams, all directors take responsibility at different times) - Accountability
WG = members have individual accountability
T = members have individual and mutual accountability - Purpose
WG = group purpose is the same as the broader organisational mission
T = purpose different from both the organisational mission and the sum of individual team members’ objectives - Work products
WG = produces individual work products
T = produces collective work products - Meeting style
WG = run efficient agenda-based meetings
T= focus more on creating generative dialogue, with open discussion and active problem-solving - Performance measures
WG = measures its effectiveness indirectly by its influence on others
T = measures performance directly by assessing their collective work products - Working together
WG = discuss issues, make decisions, delegate to others
T = discuss issues, make decisions, do ‘real work’ together - Working boundaries
WG = only exist when its members are together
T = member will still be part of the team when they are not together - Board focus
WG = task-focused
T = task-focused and process and learning focused
BOARDS AS HIGH-PERFORMING TEAMS - DEFINING HIGH-PERFORMING TEAMS
What is a high-performing team according to Salas et al. (2006)?
A high-performing team possesses unique and expert-level knowledge, skills, and experience related to task performance… and adapt, coordinate, and cooperate as a team, thereby producing… superior or at least near-optimal levels of performance
BOARD TEAM OUTCOMES
One indirect measure of a board’s teamworking dynamics will be what?
However, this influence has many intermediary steps. Name one of these.
Dulewicz and Herbet (2004) defined and measured 16 tasks of the board. Which task has been considered most important for high organisational performance?
What are the broad behavioural outcomes that lead to these board task outcomes? The 11 Cs model lists two key behavioural outcomes in answer to this question.
their organisation’s performance
how board dynamics influences board performance
whether boards are able to ‘determine the company’s vision and mission to guide and set the pace for its operations and future development’
cohesion and challenge
BOARD TEAM OUTCOMES - COHESION
How is cohesion defined? (The tendency…)
Various components create cohesion in groups and teams. Name 3.
How can cohesion be increased? (4)
= the tendency for a group to be in unity while working towards a goal or to satisfy the emotional needs of its members
(1) a social element, such that a group likes each other and will want to work together, (2) a task element, such that the group approaches a challenge with the same mindset and information, and (3) a utility element, such that a group will jointly gain meaning from working together
(1) enhancing the frequency of interactions, (2) improving the quality of relationships, (3) providing more opportunities for team members to notice each other’s similarities, and (4) decreasing group size
BOARD TEAM OUTCOMES - COHESION
What are the 4 benefits of cohesion?
Can too much cohesion be a bad thing?
Benefits:
(1) Can enhance decision-making = enables ‘team mind’ which is highly influential to team performance because it reduces information asymmetry
(2) Enhances motivation, team commitment, and team member satisfaction
(3) Can reduce levels of stress and anxiety = higher creativity, higher levels of sustained performance, and board members feeling able to express challenge
(4) Can improve the team’s ability to learn from its performance
Yes = overly high levels can prove detrimental to the quality of the board’s decision-making = cohesiveness is the most frequently noted cause of groupthink
BOARD TEAM OUTCOMES - CHALLENGE
How is groupthink defined?
To protect from the dynamic of groupthink, cohesiveness must also be accompanied by what?
This challenge is often termed in psychology as what?
How can this happen and be encouraged?
Groupthink = a dysfunctional mode of group decision-making characterised by a reduction in independent, critical thinking and a relentless striving for unanimity among members
an appropriate amount of challenge among members
‘cognitive conflict’, which refers to task-orientated differences in judgement among team members
If a board has selected a diverse range of directors who have complementary skillsets, cognitive conflict is both likely to happen and to be encouraged
BOARD TEAM OUTCOMES - SUMMARY - THE NEED FOR BALANCE
The key dynamic that must exist within the board to enable them to achieve their tasks, and thus positively influence organisational performance, is what?
It is therefore essential that a board can facilitate processes that what?
a balance of cohesion and challenge
that engender a team mind so that they can trust each other to share information but that also enable them to express high levels of cognitive conflict to enable appropriate challenge
BOARD TEAM PROCESSES - SLT PROCESS BEST PRACTICE
There is much transferrable learning that boards can take from the research on senior leadership teams.
Wageman et al (2008) identified 6 conditions that were required to be present for a team to be classified as outstanding. How are they split?
The research also uncovered 6 key challenges that arise when a chief executive officer is contemplating their leadership
Name the 6 conditions.
Name the 6 challenges a chief executive officer faces.
split into 3 ‘essentials’ and 3 ‘enablers’, which are the signature processes of outstanding leadership teams
Essentials:
(1) Condition 1= A real team; Challenge 1: Do I want a team?
(2) Condition 2 = A compelling purpose; Challenge 2: What is the purpose of the team?
(3) Condition 3 = The right people; Challenge 3: Who should be on my team?
Enablers (these push towards outstanding performance):
(4) Condition 4 = Solid structure; Challenge 4: members thinking meetings are a waste of time
(5) Condition 5 = A supporting context; Challenge 5: team not always productive when working together
(6) Condition 6 = Team coaching; Challenge 6: team is stuck
BOARD TEAM PROCESSES - SLT PROCESS BEST PRACTICE
CONDITION 1: A REAL TEAM
What are the 3 things required to be a real team?
(1) the team need to be ‘bounded’ = members must be clear who is, and who is not, part of the team (usually straightforward for boards)
(2) a real team needs to be stable = the team membership needs to be kept intact for some time (may or may not be possible for some boards depending on the environment board exists in and any compliance on tenure)
(3) a real team needs to be interdependent = members share accountability for a common purpose = requires the board to recognise that it is possible for NEDs and EDs to work interdependently for a common purpose
BOARD TEAM PROCESSES - SLT PROCESS BEST PRACTICE
CONDITION 2: A COMPELLING PURPOSE
To be compelling, a purpose needs to be what 3 things?
CONDITION 3: THE RIGHT PEOPLE
The research indicated that well-composed teams include people who what? (3)
Compelling purpose:
(1) clear = the purpose can be easily imagined and envisioned;
(2) challenging = it must stretch capability in order to achieve it, but not be impossible; and
(3) consequential = it must have an important impact on the success of the organisation and on the lives and work of others
The right people:
(1) can take an enterprise-wide perspective
(2) have the ability to work collaboratively
(3) do not exhibit derailing behaviour
BOARD TEAM PROCESSES - SLT PROCESS BEST PRACTICE
CONDITION 4: SOLID STRUCTURE
How is creating a solid structure defined? (3)
What else is key for a solid structure?
Creat a solid structure by:
(1) having a SLT that is the right size (quite small),
(2) having meaningful team tasks (the work members do together is vital and connected to the strategy), and
(3) there being clear norms of conduct (members understand what must always be done or not done)
Ensuring the existence of a process to clarify norms
BOARD TEAM PROCESSES - SLT PROCESS BEST PRACTICE
CONDITION 5: A SUPPORTIVE CONTEXT
How can a supportive context be created? (4)
CONDITION 6: TEAM COACHING
Even with all other conditions being in place, for some reason, there may still be no shift in performance.
What can be done?
Supportive context:
(1) create rewards appropriate for team excellence,
(2) provide the right information in a form that can be used,
(3) provide training and technical education to build expertise, and
(4) provide the appropriate space, time, and general environmental conditions for working together on difficult decisions
Team coaching:
Implementing expert team coaching - often an external coach can become a useful addition
BOARD TEAM PROCESSES - RESILIENT TEAM PROCESS BEST PRACTICE
There is much transferrable learning that boards can take from the research on effective team processes from high-performing sports teams.
Resilience at a group level seems to be more than the sum of a collection of resilient individuals. What are the 3 main themes from the research?
(1) resilient teams all spent time articulating clear team vision, purpose, values and norms
(2) resilient teams have high levels of ‘social capital’
(3) resilient teams regard the role of learning as being vital
BOARD TEAM PROCESSES - BOARD TEAM PROCESS BEST PRACTICE
The 2009 ICSA Report ‘ Boardroom Behaviours’ identified that boardroom best practice is characterised by what 9 behaviours?
- a supportive decision-making environment;
- a clear understanding of the role of the board;
- a common vision;
- the questioning of assumptions and established orthodoxy;
- rigorous debate;
- the appropriate deployment of knowledge, skills, experience and judgement;
- independent thinking;
- challenge that is constructive, confident, principled and proportionate; and
- the achievement of closure on individual items of board business.
DIFFERENCES BETWEEN BOARD DYNAMICS AND BOARDROOM DYNAMICS
What are the 2 differences between ‘Board dynamics’ and ‘boardroom dynamics’?
(1) Definition
boardroom dynamics = interactions between members individually and collectively
Board dynamics = interactions between members individually and collectively and how these interactions influence and are influenced by a wider stakeholder system
(2) Described as
boardroom dynamics = the way directors appear to each other within the confines of the boardroom
Board dynamics = the way directors separately or jointly appear to the world outside the boardroom
DIFFERENCES BETWEEN BOARD DYNAMICS AND BOARDROOM DYNAMICS
What are the 3 things to mention about ‘boardroom dynamics’ in an exam answer? / What 3 things does ‘boardroom dynamics’ include?
Boardroom dynamics = inside the boardroom
(1) Board meeting culture = bound by parameters of time, frequency of meeting, need to make decisions, asymmetrical information, mixture of insiders (EDs) and outsiders (NEDs) etc.
(likely dynamic that will exist been lawyers, accountants, IT and HR professionals (generalist versus recruitment) and the CEO and Finance Director and why they might take different perspectives)
(2) Concept of a Board as a high-performing team = views differ as to whether a Board should be a team with a united view, or a group with a healthy continual scepticism and challenge
(the former risks groupthink, the latter risks chaos and conflict)
(3) Meeting forum = online versus physical meetings and impact on culture of the meetings
(Meeting design characteristics = temporal, physical, procedural, attendee)
DIFFERENCES BETWEEN BOARD DYNAMICS AND BOARDROOM DYNAMICS
How is ‘Board dynamics’ interpreted from a psychological dimension?
Name an example.
According to the 11Cs model, ‘Board dynamics’ are formed through what?
‘Board dynamics’ is about individuals expressing and doing what?
Board dynamics = outside the boardroom
Interpreted as behaviourism, observing and measuring how people behave, including concepts of stimulus and response
e.g., STIMULUS = challenging question from an activist investor
requires a RESPONSE from the director the question is aimed at BUT if it is a pre-agreed united response, this will have been pre-formed in the boardroom through effective board dynamics
Board dynamics are formed through pairing of cohesion and challenge to create a culture
Expressing their independence but also combining as a ‘unitary’ Board to portray corporate culture and activity
