Importance of Board Dynamics

Crucial CG Conversation #9

'Dynamics' can be described as the forces or properties which?stimulate?growth, development, or change within a system or process. Board dynamics are?the patterns of behavior that occur between board members in how they relate, interact, and communicate. Board dynamics can make or mar board performance.

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". . . Ideal boards, those with 'best practice' size, composition, and structure, with enough staff support, and with enough time to consider issues carefully, can still fail to provide good governance, simply because they fall victim to some problems inherent in all groups.

All groups trying to work together for the common good are subject to destructive group dynamics that cause blind spots, biases, and other decision-making pathologies. Recognizing these problems is the first necessary step. Only then can steps be taken to avoid the problems, or at least to minimize their consequences" ?

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Within boardrooms, individual biases seldom occur in isolation. When people are grouped, biases can be intensified and expanded to become group biases. The group dynamics can become more complex or, eventually, even ineffective. The Board Chair plays a critical role in ensuring that the Board has the proper dynamics to effectively sets and implement the company's direction and strategy. It is not sufficient for the Board to be diverse, It must pay attention to its dynamics.

Here are descriptions of psychological behaviors most frequently reported on boards that influence board dynamics.

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Illusion of invulnerability

when board members create excessive optimism and encourage taking extreme risks. It is often extremely difficult to spot. The moment directors feel impervious to criticism, that is the moment to take a step back and consider those criticisms seriously

Herd behavior

This occurs when a director believes that they have less information than the others. Therefore, they are influenced by the opinion of the majority and express the same opinion without giving the matter proper consideration.

Groupthink

The tendency to avoid conflict and reach consensus no matter what and may lead to the suppression of dissenting opinions and cause groups to lean toward conformity in perceptions and attitudes, even when those perceptions and attitudes are wrong.

Rationalizing

This prevents board members from reconsidering their beliefs and causes them to ignore warning signs. They get into the mode of justifying their behavior

Self – censorship

This occurs when board members do not feel safe amongst their peers. Therefore, even when they have doubts about a course of action, they tend to hide their fears or misgivings.

Unquestioned beliefs

Board members ignore possible moral problems and the consequences of individual and group (boardroom) actions. They make decisions and take actions without stopping to question what is driving the decision.

Stereotyping

This leads board members to ignore or even demonize 'outside/non-conformant' members. They become biased to these individuals and cast them in such a way as to negate their views and perspectives. ??

Illusion of unanimity

This occurs when directors tend to overestimate the extent to which their opinions, beliefs, preferences, values, and habits are normal and accepted by others (that is, that others also think the same way they do). This tends to lead to the perception of a consensus that does not exist.

In-group favoritism

This reveals a pattern of favoring members who belong to a certain clique. This can be seen in a board when a certain subgroup of directors (such as insiders or board members elected by a particular shareholder) tend to prefer proposals from their own group instead of analyzing all propositions without bias.

"Mind guards"

These mental walls or barriers erected by individuals act as self-appointed censors to hide problematic information (which they are self-conscious about) from the group.

Direct pressure

This is the peer pressure to conform, often placed on members who pose questions or challenge the status quo or the Board's collective ideas. These are often seen and treated as disloyal or traitorous

Self-cause bias

This is the tendency to attribute success to internal actors and blame failures on external factors or third parties. This bias can limit the director’s ability to see the real facts that are causing a problem

Illusion of unanimity

lead members to believe that everyone is in agreement and feels the same way.