Saturday Essay: The Increasing Importance Of Boardroom Dynamics
Sue Lawrence, series editor of The Good Governance Guide to Boardroom Dynamics, considers how boardroom dynamics is a better predictor of governance performance than board structures, board demographics and director attributes
Photo by Christina @wocintechchat.com on Unsplash
Boardroom dynamics have an important role to play in organisational success, with plenty of anecdotal evidence of how ineffectual chairs, overbearing chief executives or board members who are lacking in challenge can impact negatively on the effectiveness of boards. It is a subject that conjures up various images, none of which have been studied in depth until now.
The Good Governance Guide to Boardroom Dynamics aims to act as an engaging, thought-provoking and useful text for any individuals who are interested in the subject of boardroom dynamics. It provides a comprehensive introduction to the breadth of this topic, with the relevant terms, theories and models used to think about board effectiveness all considered in detail.
The core message of the book is that the dynamics in play within the boardroom are influenced not only by those appointed to the board, but also by those individuals who work alongside the board, either within their designated role or as individuals aligned to one or more board member. The book introduces the concept of the ‘invisible leader’ as well as the ‘team coach’, recognising that a board can be effective not just through its own actions and interactions but also as a result of the effectiveness and influence of those around it.
Differing organisational structures and the ways that these differences impact on the effectiveness of the board are all covered. Equally, the personal behaviours and dynamics of the individual are presented, reflecting the impact of individual influence within the collective group that makes up a board. So why is all of this important?
There is growing recognition of the role that board dynamics plays in good governance. Recent corporate failures have led to the questioning of existing corporate governance practice. The emerging interest in a range of human factors, the shifts in approaches to leadership and the refocus on ethics more generally are laying the groundwork for a ‘psychological perspective’ to take its place as one of the ways to approach governance. The evolution of governance codes and academic research are already acknowledging this. Consequently, an overarching model that harmonises both the existing and emerging elements of governance, which incorporates board dynamics, is outlined in the book.
Board structures – namely board set-up, chair set-up, director set-up and board task considerations – are also of importance as they can affect board functioning and performance. Despite the importance of each of these individual structures, which are often necessary for compliance, they are not sufficient on their own to create the conditions for good governance, nor to predict board performance.
Board demographics – including director capacity, capability and connections – and director attributes can also affect board functioning. Issues such as external commitment, director independence, technical expertise and professional and social capital are not, in themselves, good predictors of effective governance – despite most board recruitment, scrutiny and commentary focusing on them. Although the evidence points to some of the behavioural attributes outlined in the ‘11 Cs’ model, created by author Jeremy Cross, which combines individual and behavioural perspectives of governance, being significantly more predictive of board functioning than structural factors, boards dynamics will always mediate how much individual directors can contribute to board effectiveness.
Board dynamics as the key predictor of successful board functioning
The book serves as an introduction to the psychology of boards and defines board dynamics in relation to this. It introduces the concept of the board as a potentially high-performing team and describes the balance a board needs to strike between the outcomes of cohesion and challenge, along with the potential conflict this may bring. It includes a section on what an effective board team process looks like to achieve these outcomes, and what happens when the process goes off track.
Current thinking sees the dynamics of board decision making less as a process underpinned by pure logical analysis, and more as a distinctly human activity that can be inherently, but also predictably, flawed. Consequently, boards should strive for evidence-based practice while acknowledging the predictable cognitive bias inherent in individual director and collective board decisions.
The book introduces a broader systemic perspective to the definition of board dynamics and discusses how all board stakeholders influence, and are influenced, as part of the board’s systemic dynamic. It describes what dynamics exist at each of these stakeholder levels, including concepts such as trusting relationships, conversational dialogue and conflict.
Culture and boardroom diversity are both important aspect of board dynamics. Culture has become an increasingly discussed topic in governance in recent years, hence the book’s focus on culture in general, and board culture more specifically, along with a discussion of how a board may most effectively influence its culture. The book explores the different types of diversity, with particular attention first being paid to the ‘surface’ diversity types of gender, race and ethnicity, and age; and secondly the less commonly considered ‘deep’ psychological diversity types of learning style, personality type and team role type. It looks at how this range of diversity types can affect performance, and how the board can individually and collectively develop and promote a greater diversity mindset.
Boards can utilise contextual and environmental design factors to influence an effective board dynamic. In the context of meetings, research and practice indicates that there are 21 design characteristics that can be separated into temporal, physical, procedural and attendee characteristics. It is important that boards understand each of these meeting design characteristics, how they affect meeting outcomes and how they can best be used to promote an effective meeting.
The role governance professionals play in positively influencing the board dynamic through an emphasis on the psychological, social and cultural aspects of the role
The book explores governance professionals as strategic leaders in the boardroom, showing how they might best influence board dynamics through their leadership style and broad influencing skills. It presents a variety of guises for the governance professional, such as a talent manager to the board, supporting the cycle of recruitment, induction, development, performance management and succession. This role is increasing; according to a 2018 study by Grant Thornton, a greater focus is being given to supporting board development: for example, up to 54% of those acting alongside the board are now involved in board recruitment.
Image by Gerd Altmann from Pixabay
Equally they provide vital support to the board in their role as a board consultant. They also have an important role to play in driving board culture, by supporting an effective board evaluation that goes beyond just ticking the box of governance compliance. There is an emerging role as a ‘cultural diplomat’, helping to negotiate the cultural differences in the boardroom, paying particular attention to country and organisational cultural differences.
Similarly they can show behavioural agility through their role as team coach to the board. There are various team coach roles that the governance professional may be called on to play, including one-to-one coaching, mentoring, systemic team coaching, facilitation, supervision, mediation and as a board counsellor.
It is important for governance professionals to maintain personal resilience as the role can be very demanding. Reflecting on the governance professional as a ‘corporate athlete’, the book explores how they can sustain their own performance and, in so doing, support the resilience of others in and around the boardroom.
The Good Governance Guide book series will take you through the key concepts and steps to help you successfully navigate each environment, arming you with expert theoretical understanding and practical advice to ensure that you, and your business, are as effective as possible.
Our book review can be viewed here: https://www.yorkshiretimes.co.uk/article/Book-Review-The-Good-Governance-Guide-To-Boardroom-Dynamics
Sue Lawrence is the series editor for the Good Governance Guide to series. Sue is an experienced independent director having been appointed to a wide variety of board, trustee and committee positions in the UK for over 15 years, including trading companies, operating subsidiaries, start-ups, trustee boards, funding boards, charities and employee owned trusts. Having been a successful divisional Managing Director in the professional and financial services sectors, she is now enjoying a portfolio career as an independent director and trustee for a diverse range of UK incorporated companies drawing on her past experience, as well as her professional training as a Chartered Director with the Institute of Directors.
In addition, she is the founder of Independent Directors and Trustees Limited, a collective of experienced directors and trustees who share their experience and knowledge with each other for personal development and the benefit of their clients. Primarily focused on the SME and employee ownership sectors, individuals are appointed to main, subsidiary, operating and trustee boards to deliver benefit through sharing this collective experience and knowledge, as well as through their personal contribution.