A perennial challenge facing all boards is the curse of group-think where the board settles in to a comfortable groove, disruptive & innovative ideas/discussion discouraged, the board members happy to “show-up” and unless operational performance goes off the rails, quite content to go through the motions. With the vast majority of marketplaces now changing at a hyper velocity, a stale board that is not challenging itself and the executive team is doing a dis-service to itself and more importantly the shareholders & overall stakeholders.
Board evaluations have shown in many cases that management and non-executive board members can slide over time into a cosy equilibrium whereby the genuine vibrant constructive challenge to the executive team fades and non-executive directors often end up effectively rubber-stamping or cheerleading the executive team. This problem is particularly acute in the area of company strategy and overall direction whereby the executive team present the strategy to the board almost in a fait-accompli fashion rather than genuinely engaging the board members at an earlier stage in the process to maximise the collective expertise, insights and capabilities of all the board members. This problem is particularly prevalent in the case of boards who have a very dominant CEO who effectively discourages out-of-the-box thinking from board members and genuine robust challenge of key areas like overall company strategy.
Group-think can frequently be caused by a lack of diversity at the board whereby there are no board members who are prepared to genuinely challenge the status quo as well as put new disruptive thinking on the table. A chairman colleague of mine recently shared a very interesting experience he had on the board of a large organisation in Ireland. In an environment of increasing focus on gender diversity on boards, this particular board appointed their first female non-executive director. At her second board meeting, the female non-executive director challenged the CEO on a critical company strategy decision that he was pushing through the board. At the time, all the board members including my chairman colleague felt that the strategy made sense but after the new non-exec had articulated some fundamental flaws, the board and the CEO collectively decided to abandon the particular strategic move in the marketplace. The key factor here is that it didn’t matter whether the new director was male or female, what mattered was that she had a different fresh way of thinking, looking at the market, the company’s positioning and bringing a critical new perspective to a board that potentially had a lot of directors with very similar mind-sets and expertise.
Non-executive directors and in particular the Chairman have a critical role in helping a board avoid a group-think problem. While group-think at the board in many cases has affected a company’s progress in various ways, in extreme cases it has led to an organisation drifting onto the rocks and damaging/destroying shareholder value. A vibrant genuine policy of board member rotation/renewal has been shown to be a strong counter to the curse of group-think impacting on a board’s performance. As the saying goes, “variety is the spice of life” and in a board’s case, “variety of thinking” is certainly extremely healthy !