The trouble with boards (and what to do about it) – Pt2

In part 1 we looked at the idea of Proximate Diversity (actively managing the relationships inside and outside the board) and its importance in ensuring healthy decision-making. This essentially describes a Chair’s perspective on the relational dynamics of the board. The board secretary is more likely to see the differences in terms of information flow.

There are inherent asymmetries in the information available to the Executive Directors, the Representative Directors and the Independent Directors. Their differences in relational proximity (as discussed in part 1) will create imbalances in knowledge. Sometimes the very idea of Independence is distorted to mean that the Independent Non-Executive Directors must be kept at arm’s length from any information that might confuse them. Independence of thought is not achieved by distance or ignorance.

An effective board will consciously manage the proximity of all the board members not only to each other (as discussed in Part 1) but also to the issues being addressed. In a paper on ethical decision making (published in Academy of Management Review) Thomas Jones presented a four-step decision making model and argued that decision making is influenced by something he called Moral Intensity. The apparent significance of an issue (its Moral Intensity) is not only influenced by the absolute nature of the problem but also by the decision-makers’ proximity to the issue. In Jones’ model the effectiveness of the board deliberation on an issue can be improved by changing the board’s proximity to the issue.

Building on Jones’ model to include the relational dynamics in Part 1, a general model of decision making could be as follows.

 

decision process

 

This model emphasises that the effectiveness of decision making is strongly influenced by a group’s proximity to diversity and to the issue itself.

This brings us back to the fact that there is asymmetry in the proximity of different directors to the issues presented to a board. Unmanaged variation in issue proximity means that information can be used by one person or group to control the decision of the board.  Executives can control the board agenda through filtered information.  Discussion at the board can be effectively rubber-stamping if not everyone has the same information.  The solution to this is active attention (by the Chair of the board and the Chairs of committees) to achieving parity of information.

Whilst a board is learning to consciously manage Issue Proximity, a formal four-step process can be useful for every board item:

  • Disclose: Achieve information parity by ensuring all relevant knowledge is Common Knowledge to the board. This is where the board members practice the Director Humility mentioned in part 1. The different perspectives of the board members and absent stakeholders is actively sought. (In future post I will discuss disclosure overload.)
  • Deliberate: Use expertise to explore issues together. The diverse skills and the awareness of present and absent diversity is likely to enable careful processing of the issues. Allowing the directors to explore the pros and cons of an issue before framing the decision can often allow directors to take into consideration the Dissemination phase (i.e. explicitly allow Director Transparency to influence the decision).
  • Decide: Frame & make the decision(s). Much is written on the way that the framing of a decision influences the decision, so I won’t cover that here.
  • Disseminate: Agree actions resulting from the decision (including communication of the decision).

My experience is that when a board first attempts to use the four-step process, they slip prematurely to Deliberate and then to Decide. This illustrates the fact that discipline is needed. Some board members (often the Executive Directors) get frustrated that it slows down what seems to them to be an obvious decision. Again this is an indication that greater Director Humility is needed. Once a board becomes disciplined and smoothly adopts this approach, not only can decisions be made more effectively but it becomes apparent that all directors are being encouraged to exercise independence of thought.