The 3 causes of dysfunctional boards – and what we can do about them

Monday, 09 November 2020

Rob Newman  photo
Rob Newman
Organisational Psychologist, Change Focus Group

    In a perfect world, we would see boards operate smoothly and harmoniously with no undercurrents or powerplays, no elephants in the room, with all voices being heard and valued.

    However, the greater complexity facing business today, tightening regulatory environments, and increased public visibility and scrutiny, are leading to heightened pressures in the boardroom. Under such demands, director behaviours, group dynamics - and the boardroom cultures these create - are defining factors when it comes to board effectiveness.

    When it comes to poor board decision-making and boardroom dysfunction, the root cause is often group psychology gone awry. Many of the company failures that have made headlines in recent years can be traced to poor board decision-making driven by dominant directors or executives, and colleagues who remained submissive onlookers – which is the crux of poor boardroom culture.

    What we've seen in the findings of reviews and royal commission's is that the executive and the board can get trapped in a dysfunctional social dynamic. This dynamic hinders good governance by constraining critical analysis, refocusing attention on the wrong priorities, ignoring actual risks, and limiting effective oversight of management.

    Dysfunctional behaviour in boardrooms is often difficult to understand and perceive. It can be elusive and not openly acknowledged or displayed. In fact, such behaviour is rarely overt and dramatic such as with raised voices, direct threats, personal defensiveness or sullen silence. Rather, it plays out more subtly, through furtive glances, vague innuendo, closed questioning, quiet acquiescence, intellectual gameplaying, awkward standoffs and silent withdrawals. Unfortunately, less observant directors will deny that anything is wrong, thereby accommodating and perpetuating the behaviour. More reflective directors will know exactly what this feels like and how it impacts their board’s effectiveness.

    The career path to directorships

    Boards are typically full of capable, experienced and well-intentioned people. Prior to taking on any director roles, board members would usually have spent years working their way up the executive ranks to C-suite roles. Unfortunately, during their executive days, not all directors would have been prepared sufficiently for directorship. Perhaps surprisingly to directors themselves, they can lack the skills, behaviours and expectations required of board members.

    During their time as executives, they had positional authority over personnel, had direct access to all key information, converted strategic decisions into concrete operational goals, pushed plans through to completion, and, in general, competed hard to achieve success. However, the role of a company director is quite different to that of an executive in a senior management team.

    In comparison to an executive, a director is an equal among board colleagues, has access to limited information about the business, must work collaboratively with peers to make every decision, and be held accountable for the results and impacts on the organisation despite being removed from the operation of the business. The nature of board roles and director behaviors are very different from those formed and used in the executive environment.

    What many directors would call their talents as an executive – competitiveness, the drive to succeed, being a charismatic persuasive communicator, or a diligent hard worker – may not show up so positively in the boardroom. Under pressure, the competitive driven executive can become the boardroom bully, the persuasive charismatic executive becomes an overpowering director personality, the diligent executive becomes the indecisive director who gets mired in the detail.

    Furthermore, the pressures of a boardroom can exacerbate these traits and behaviours, tipping them over the edge to dysfunction. Under pressure, a person’s executive talents will often become their director derailers. As most directors’ formative careers are as successful executives and leaders, it is important to recognize that many of the traits, skills and behaviours from those executive days are likely to be incompatible with those required in the boardroom. As a consequence, when directors over-rely on such traits and behaviours, it is not surprising that tension and derailment can creep into the boardroom.

    Directors under pressure

    In response to pressure, people will tend to behave in ways that have worked for them in the past. For some, this will involve listening more, seeking to understand alternative views, and co-operating with their fellow directors. For others, this can mean less-functional patterns including playing politics, letting loose their egos, or feeling threatened and withdrawing. Under pressure, directors can try to shape their contributions to gain tactical advantage or, conversely, constrain the views they put forward to limit their personal exposure. Either way, the consequences are less open boardroom discussions, reduced “real” collective agreement, and lower quality analysis. The inevitable results are sub-optimal board decisions.

    When we think about the boardroom environment, there are many sources for pressure. Directors work with successful people who they don’t know well, and there is the pressure not to appear foolish. Directors can feel that they lack unbiased and complete information; they only know what the executive team want them to know. Directors must make decisions when they don’t have the details, and the consequences of a bad decision are significant. Shareholders, stakeholders, the executive team, and even regulators and the wider community are watching. It is understandable that company directors might feel professionally and personally exposed.

    The boardroom itself is changing. Remote board meetings have increased since the pandemic. Directors may no longer see or sense their colleague’s reticence to contribute, or a peer’s controlling nature, or other forms of emotional tension experienced in face-to-face interactions, but they are still operating behind the scenes. In dysfunctional board meetings, the smooth civility on the surface often belies the turbulence that operates beneath.

    The 3 causes of dysfunction, driving ineffective board culture

    Ultimately, boardroom culture is the product of individual behaviours and beliefs that are repeated collectively over time as group dynamics. Culture and group dynamics affect the way a board communicates, analyses problems and makes decisions. From this we see that there are three primary ways in which boardroom dysfunction can manifest, and therefore, three levers to use in improving board effectiveness.

    • Bad behaviour of individual directors - Usually operating very subtly, the egos, the hubris, the game playing, and the imposter syndromes. Indirectly, it extends to board colleagues who, through their silence, embolden such behaviours.
    • Dysfunctional group dynamics - Unaddressed individual behaviours that trigger reciprocal patterns between directors, creating tension, miscommunication, and division, which then compromises effective decision making.
    • Ineffective board cultures – Unbalanced, weak or inappropriate values, beliefs and behaviours held by board members, embedded over time and through repetition, can perpetuate dysfunctional group behaviours that are largely outside the realm of consciousness. Board culture affects how directors’ work together, treat each other, and relate to management, and culture goes on to shape the way the board sets priorities, makes decisions, provides oversight, and manages risk.

    How to address individual director behaviour

    The wonderful thing about human groups is that they can be very good at managing the annoying behaviour of individual members. Creating the right behavioural tone, clarifying expected social rules, and surfacing inappropriate conduct are direct ways to address individual’s behaviour.

    For example, social rules like “everyone has a turn to speak” and “listen before you respond” and “don’t play the man, play the ball” will go a long way in promoting group effectiveness if they are reinforced. Feedback about a directors’ negative impact on others or the group can be very helpful, but often requires a level of psychological safety that is hard to achieve in the short time that boards are together. Activities that increase personal connection and familiarity between directors can help this.

    When the standard strategies don’t work, using skills associated with crucial conversations, combined with positive peer pressure, can be very powerful in curbing disruptive behaviour.

    Dealing with dysfunctional group level dynamics

    Left unaddressed, the difficult behaviour of individuals will trigger reciprocal reactions from colleagues, which over time creates a group pattern we refer to as boardroom dynamics. These patterns can be hard to see when you're a member of the board because they usually operate below the level of people’s awareness. Recognising them often involves seeking feedback from people outside the group, such as trusted executives, or even specialist advisors like an organisational psychologist, who can help raise the behaviour patterns to conscious awareness.

    Once recognised, addressing boardroom dynamics involves 3 steps – directors accepting that the dynamic exists and has negative consequences for the board, individual’s understanding how they contribute to or enable the dynamic, and commitment by the board-as-a-whole to managing the pattern.

    Focusing on boardroom culture

    Board culture is the accumulation of individual and group dynamics, coalescing as a collective pattern of thinking, communicating and reacting by a board. Board culture can be functional or dysfunctional, and there are various theories to understand this difference. Whichever the form, board culture is rarely visible to directors themselves. If a board wants to understand its’ culture, this is when observations are sought from an independent expert advisor. Many boards seek such feedback as part of their regular board reviews, examining the patterns in their meeting behaviour, communication and decision making, and reflecting on how these impact on their culture and performance.

    Keeping board culture healthy is the responsibility of each director, not just the chair. While the chair is vitally important for board effectiveness, they are not alone in this, and too many directors think board culture is the sole responsibility of the chair.

    Every director needs to speak up when they feel that the behaviour of others in the boardroom is not contributing to a successful collective result. Every director has a responsibility to provide feedback on their colleagues’ behaviour, and every director should try to create a climate where constructive criticism is safe and expected.

    Every director is responsible for the culture of the boards they sit on because regulators, shareholders and the community will definitely hold them to account for it.

    Rob Newman BA, PG Psych, MAPS is an organisational psychologist with Change Focus Group. Rob works on the AICD’s Boardroom Mastery™ course.

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