The collegiate make-up of boards and its emphasis on solidarity can create an awkward dynamic for questioning management and strategy. Margot Cairnes reports.
"The CEO has this one under control", concludes the chairman, shutting off a discussion on a topic about which you feel uneasy. You state your objections: – "Don't you trust the CEO?" asks the chairman. Fearing that you might be testing the envelope of team tolerance – but keenly aware that at the end of the day you are personally liable – you lob another key point. "That" remarks the chairman "is not a material issue." You give up. At least you tried. For boards to be accountable they need timely, relevant information from management which can be easily understood. Directors also need to be in a position and willing to exert influence which precludes domination by the CEO or chairman. Studies in both the US and UK show that all too often information is unsatisfactory, even deliberately misleading. This is of particular concern where directors have inadequate industry knowledge or narrow professional backgrounds. Moreover, the dynamic within boards often dissuades directors (and thus shareholders) from exerting necessary influence over management standards. While Australian boards may be different in structure, we closely follow the US and UK in the standard of board accountability.
Following recent corporate scandals, the focus immediately falls on compliance, risk management, transparency, audit independence and directors' liabilities which increasingly puts the emphasis on conformance rather than strategic performance. Directors with narrow professional backgrounds may be happy with this situation but most directors (while recognising their legal responsibilities) would prefer to spend more time debating and approving strategy than having their time monopolised by scrutinising the health of financial and control systems to ensure compliance with regulations and laws. In public, directors, while noting the misbehaviour of misfits blighted by arrogance and greed, extol the virtue of their boards and the character, integrity and work ethics of their colleagues. In private, most directors admit there is room for improvement. Put simply, boards are groups of people overseeing the work of other people (management) on behalf of a third group of people (shareholders). To perform this job well boards must contain people with a diverse mix of skills and practical experience who work together in an open environment.
Boards function to set strategic direction, appoint and oversee the CEO and ensure the integrity of financial results and public information about their organisation. Increasing numbers of writers question not what boards do but how they do it Boards, like all groups, are subject to group dynamics. All groups operate with unspoken rules of conduct called group norms. Norms either enhance or discourage open, honest communication, personal accountability and trust. Groups with dysfunctional norms can and do make very bad decisions. Irvin Janis studied groups which had presided over decisions leading to major military disasters such as the Bay of Pigs. He found in every case people who knew that the group was making the wrong decision and had information to prove it. In every case the information was not tabled or, when it was tabled, was sidelined. Individuals didn't fight for their information or their point of view. Janis labeled the dynamics operating in these groups – group-think. Group-think norms include an us-and-them mentality – a view that you are either with us or against us – and a strong belief that those not with us are in some way less intelligent, less moral, less worthy or less trustworthy.
Anyone voicing an opinion differing from the dominant us-group opinion risked group expulsion. This was usually done subtly, suggesting that opinions or facts weren't relevant, then leading to questions as to the individual's competence and eventually open threats. Group-think teams usually had a mind guard who took it upon themselves to ensure that those expressing views and information that might unsettle the dominant group ethos were encouraged to conform or to leave. "The most powerful narcotic in the world is the promise of belonging" wrote Kalle Lasn (Culture Jam: The Uncooling of America, Eagle Books, 1999). Group-think provides a vivid example of the lengths people will go to obtain group acceptance. In the cases studied by Janis intelligent, normally responsible, caring people were prepared to preside over catastrophic military disasters and horrendous loss of life, rather than stand up, speak out and be different. The more homogenous any group the more likely it is to fall subject to group-think.
Boards are particularly prone to group-think because they are elite groups with prized membership. Informal discussions with directors reveals how often they have kept quiet after having their opinion judged as "not commercial" or being accused of not being a team player. Other tactics that enhance group-think are restricting debate or changing the topic, leaving important issues off the agenda or "running out of time" for adequate debate. There is also the time-honoured management technique of producing data, board papers and reports using language and accounting practices that appear impenetrable and then insinuating that non-comprehension is due to lack of skill, intelligence or experience of the director. Group-think is averted by diversity of group membership, a conscious awareness of group dynamics, and the presence of a devil's advocate (an appointed iconoclast who is there to say the unsayable, ask the unaskable and do the undoable). Group-think is also averted by group dynamics that promote difference, diversity, honesty, questioning, conflict and dialogue.
Membership of functional groups is uncomfortable. Healthy groups constantly stretch us, confound our prejudices, challenge our judgments and reshape our beliefs. This of course is exactly what boards need but not necessarily what directors want. However the need for more regulation and more compliance would be reduced if all boards operated with transparency, open dialogue, challenging debate and a wide range of perspective. To ensure this chairmen and directors must review the internal dynamic of their own boards and create cultures of open communication, personal responsibility and diverse opinion. Such a culture would support clearer public accountability by senior management and boards. As strategic leaders it behoves directors to ensure that management and staff throughout organisations are learning and growing in ways that promote intelligent and original thought, healthy group participation and responsible action. These things can't be taught solely through reading books, or traditional classroom learning. They require additional forms of training and development that may challenge current boardroom thinking and practice.
If boards are to function optimally as leaders of strategy, overseers of management and keepers of financial integrity they must look at their own functioning. This means broadening the range of skills and practical common sense experience, learning new skills and insights around the human dimension of teams, personal motivation, behaviours and relationship. More challenging perhaps is that much of the learning required is personal in nature since it can be the very humanity of directors that obscures their capacity to question, rock the boat and challenge. In effectively functioning boards the chairman ensures that all directors have had a chance to have their concerns fully heard and answered by the CEO. To ensure the integrity of information, boards themselves have to be proactive in challenging both management and the dynamics in their own ranks.
* Leadership strategist, executive mentor, author and speaker Margot Cairnes is chairman of the Change Dynamic
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