The social processes that undermine Board decision-making

The social processes that undermine Board decision-making
Promoted by The social processes that undermine Board decision-making

Author: Mike Rugg-Gunn

Introduction

The recent report by the International Monetary Fund’s (IMF) Independent Evaluation Office suggests that the IMF’s top team made a number of serious misjudgements during the Greek financial crisis resulting from poor governance and a lack of accountability and transparency. Following closely on the heels of the publication of Sir John Chilcot’s Iraq Inquiry report, this suggests that even august institutions like the IMF, supposedly run by intelligent and technically respected people, rode roughshod over due process; showed a lack of analytical depth in addressing complex problems; and indulged in poor decision-making practices (e.g. there was no open discussion on the pros and cons of available options for the restructuring of Greek debt).

Most board members would like to believe that their governance and board dynamics enable them to make rational and logical decisions. This is not, however, always the case: like most teams, boards are subject to social processes that undermine their effectiveness as a decision-making body. This short paper identifies three such processes and proposes ways in which their pervasive influence can be counteracted.

Social loafing

It is a scientific fact that, under most circumstances, team members will reduce their performance as a function of an increase in group size. Thus, team productivity does not equate to potential productivity and the reasons for this are twofold. Firstly, team members will reduce their effort where their own contribution is not specifically identifiable and thus freeride on the efforts of others (motivation loss); and second, that team members may not all pull in the same direction or synchronise their efforts at the right time (co-ordination losses).

Group polarisation

There is a widely held belief that groups will make more cautious and moderate judgements than individuals. This is only partly true; in reality teams will tend to polarise towards  the more prevailing or favoured view.  Thus, board members who are initially disposed towards risk-taking will favour a more risky approach than the average might imply. Similarly, board members who are initially disposed towards caution will favour more cautious decision-making. One antidote to this is to encourage board members to write down their own thoughts and arguments independently in advance of group discussion, identifying in each case the arguments  both ‘for’ and ‘against’ rather than indulge in less structured discussions that provide  a fertile ground for the conditions of group polarisation to flourish.      

Groupthink

Gentlemen, I take it we are all in complete agreement on the decision here… then I propose that we postpone further discussion of this matter until our next meeting to give ourselves time to develop disagreement and perhaps gain some understanding of what the decision is all about’.

This statement attributed to Alfred Sloan, a former Chairman of General Motors, was in response to a consensus of his board that had been achieved too rapidly and is one of the symptoms of Groupthink. This is an extreme form of Group polarisation and is a psychological drive for conformity where a reliance on consensual validation replaces individual board member’s critical and objective thinking.  

The primary symptoms of Groupthink are threefold. Firstly, a collective overestimation of the board’s abilities founded on illusions of invulnerability and an irrational belief in the inherent morality of the group; second, closed-mindedness that delivers inaccurate collective rationalisations and stereotypes of out-groups (e.g. competitors); and finally, pressures toward conformity that result in self-censorship; an illusion of unanimity; direct pressure on dissenters and self-appointed mind-guards whose role it is to ensure no disruption to the consensus of the group.

Conclusion

It must be part of the Chair’s role to create a climate that encourages enough cohesiveness to ensure the true benefits of team working are realised, but not so cohesive that it provides a fertile ground for the more unhelpful social processes to take root. 

A critical first step is to evaluate how the Board is functioning at the moment and where the pitfalls or snafus lie. This is best done independently lest it replicate any issues in its own construction! An independent assessment of the specific competencies of the individual board members and of how the board communicates and makes decisions as individuals and as a group will ensure alignment with the strategic objectives of the Board and help ensure due consideration is given to diversity and complementarity.


Be the first to comment.

Related Content

Could the current talent crisis be down to firms 'ghosting' applicants?
Grapevine Leaders | Executive Grapevine International Ltd

Rec trends | Could the current talent crisis be down to firms 'ghosting' applicants?

Feature
3 mins read
Boss faces ousting by 'activist investors' - here's why leaders should be worried
Grapevine Leaders | Executive Grapevine International Ltd

GlaxoSmithKline | Boss faces ousting by 'activist investors' - here's why leaders should be worried

News
5 mins read
Why Virgin executive experiences employee engagement as key to business success
Grapevine Leaders | Executive Grapevine International Ltd

'Less enagement, less energy' | Why Virgin executive experiences employee engagement as key to business success

Video
Watch Now
Work has changed forever. This is HR’s last chance. Choose change.
Grapevine Leaders | Executive Grapevine International Ltd

Work has changed forever. This is HR’s last chance. Choose change.

Webinar
Register Now
Driving growth and ROI to organisations with digital coaching
Grapevine Leaders | Executive Grapevine International Ltd

Driving growth and ROI to organisations with digital coaching

Learning Resource
Download Now

Most Read This Week