A fascinating article by HR consultants Blackwood Group has identified some of the social processes that can undermine Boards’ decision-making.
The piece, on the Business Grapevine website, explores the way that social conventions and processes can negatively influence decisions.
Here we look at these processes and how you can prevent them affecting the decisions you make.
Board decisions are not as rational as you might think
It might be assumed – not least by the members themselves – that company boards make informed, measured and rational decisions.
We’ve looked before at how techniques like situational intelligence can be harnessed to improve the decision-making process.
But the truth is that groups of directors are as likely as any team to be subject to social processes that can undermine their effectiveness in making group decisions.
Here we look at these processes and – in the words of the article – how their ‘persuasive influence can be counteracted’.
‘Social loafing’ is a psychology term used to describe the phenomenon whereby a person exerts less effort to achieve a goal when they work in a group than when they work alone.
This reduction in performance comes in tandem with an increase in group size, and has two causes:
1. If an individual team member’s contribution is not specifically identifiable, they will reduce their effort and rely more on the efforts of others. This is called ‘motivation loss’.
2. There’s an increased chance that team members may not all pull in the right direction or put in effort simultaneously. This is called ‘co-ordination loss’ and can result in a team output less than the sum of its individual efforts.
It’s accepted that teams will tend to polarise towards the more prevailing or favoured view. This sees board members who are risk-averse, for instance, becoming more cautious in a group that favours caution.
Groupthink is ‘an extreme form of Group polarisation’. It describes a process where individuals look for validation by conforming to an over-arching group viewpoint. As a result, the critical and objective thinking of each individual member is reduced or even supplanted.
The article cites three main symptoms of Groupthink:
1. The group collectively over-estimates its abilities; its morality is irrationally believed to be high and its vulnerability is downplayed.
2. The group becomes more closed-minded, perpetuating inaccurate collective rationalisations and stereotypes of so-called ‘out-groups’ (for example, competitors)
3. There are unconscious pressures toward conformity, which can result in self-censorship, pressure on anyone who dissents, and a desire to avoid disruption to the consensus of the group.
How can boards avoid falling victim to these processes?
The Chair’s role is vital. They must foster the right environment – creating ‘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’.
Your board might also benefit from an external review – an audit by an independent person who can objectively review your practices. Longer-term, the ongoing presence of someone outside the ‘usual suspects’ of the board composition might also help. Read our blog on why you need a compliance expert on your board for more on the benefits of a fresh pair of eyes.
Understanding how the board communicates is also important. Make sure everyone has all the information necessary to make informed choices. Our blog on how to make sure your members are all reading from the same page has some tips on making the required information readily available to all board members.
Reading about the processes that can unconsciously scupper good decision-making can be thought-provoking. Understanding them is the first step towards a board that makes sound, objective choices.
Presenting information in a way that resonates is one way to help your directors to make better decisions. You can read the results here of an interesting survey on paper versus digital reading. Download a free copy.