Published: 03/06/2004, Volume II4, No. 5908 Page 30 31
What distinguishes bad boards from good ones? And how can yours become a great board? In the first of two articles, Jay Bevington and colleagues say that It is all a matter of good habits
Much has been said about the corporate meltdowns at Adelphia, Enron, Tyco and WorldCom. And yet close examination of the boards of these companies has revealed no broad pattern of incompetence or corruption.
In fact, they were able to tick most of the boxes of good corporate governance. If passing the usual tests does not necessarily produce a high-performing board, what does?
What distinguishes effective boards from non-effective ones is that they are robust social entities. If a board is to fulfill its potential it must work as a team, one whose members understand their corporate and individual roles, know how to ferret out the truth, are able to constructively challenge one another, and feel they trust and are trusted by their colleagues.
In his excellent paper What Makes Great Boards, leadership expert Professor Jeffrey Sonnenfeld discusses five habits of effective boards:
a culture of constructive challenge;
ensure individual accountability;
a climate of trust;
a fluid portfolio of roles;
regular evaluation of board performance.
Each of these can be difficult to achieve (see box below). This article will focus on the first two habits; next week's will discuss the remaining three.
A culture of constructive challenge
At the heart of any high-functioning board is constructive challenge.History is littered with examples of what happens when people fail to challenge one another appropriately and question their own beliefs.
Executives at US space station NASA dismissed the significance of a large piece of foam that had broken away from the Columbia shuttle's fuselage and collided with it on take-off in early 2003. The thought that the spacecraft could be seriously damaged by it had not occurred. In fact scientific analysts showed it was the equivalent of a 500 tonne safe hitting the wing at 75 mph.
The actual practice of questioning colleagues, especially during board meetings, is easier said than done.
Board members often do not feel comfortable challenging one another because they regard the questioning of their colleagues as disloyal and counterintuitive to 'getting along'. If we follow this line of reasoning, then a challenging board cannot be a cohesive board and vice versa. But this is simply not true.
Challenge and cohesion are not incompatible, but are essential ingredients of a high-performing board.
Such important elements cannot be legislated through committee rules and guidelines. Board members must demonstrate through their actions that they are able to balance naturally occurring tension between these two sets of behaviour.
The absence of constructive challenge in a cohesive group can lead to 'groupthink' - a term originally used to explain how seemingly capable and intelligent leadership groups are able to make catastrophic decisions.Groupthink can happen when:
the decision makers are a cohesive in-group, with members of the group experiencing high levels of social support and trust;
the group is isolated from what is going on around them. This tends to happen when members are quite similar, there is either too much or too little information, external communication is low and there are few disagreements;
something happens, either internally or externally, that is perceived as a significant threat to the group's survival, thereby promoting high levels of stress, avoidance and defensiveness.
Under these conditions errors can occur in the way boards perceive what is going on around them and how they behave (see box, page 31). The presence of three or more of these factors is enough to interfere with the board's ability to make effective decisions.
The Kennedy report on the Bristol Royal Infirmary baby deaths scandal, for example, described the hospital's 'club culture' at that time, which focused on excessive power and influence around a core group of like-minded senior managers. Likewise, senior research fellow at York University centre for health economics Russell Mannion and colleagues conducted a major study of organisational culture and performance in the NHS and found that low-performing trusts were often characterised by cliques of senior managers.
Ensure individual accountability
There is a great deal of research showing what happens in groups when responsibilities and accountabilities are opaque and vague.At 'emergency events', when there was only one person present people tended to help out 85 per cent of the time. But when five or more people were present, people would only lend a hand 31 per cent of the time.
Individual responsibility tends to dissolve in large groups. The idea that 'if I do not do it someone else will' can be commonplace in the boardroom. This certainly appears to have happened at disgraced US corporation Enron. The fact that many board members were financially sophisticated seemed to have encouraged others to defer to their expertise.
Diffusion of responsibility is closely linked to the 'social loafing effect'. This relates to the tendency of individuals to work less hard in groups when their individual contributions cannot be clearly identified and evaluated. Clearly then, board members may put less effort into achieving quality decisions in meetings, if they perceive that their contribution is hidden in the board's overall performance.
Dr Jay Bevington is associate director, Professor Michael Deighan is strategic board adviser, Paul Stanton is acting director and Suzanne Hinchliffe is associate director of the NHS Clinical Governance Support Team's board development team.
Reflections of an experienced board member: a typical public meeting
One by one members arrive and move slowly to their seats.The meeting, scheduled to start at 1pm, begins 10 minutes late as members open their sealed envelope of papers, pulling at the bulk of documents as the minutes of the previous meeting are ratified.
Today's agenda reaches a second A4 sheet.There is an interruption as one of the board members enters the room late.Within seconds of sitting down he is up again, making himself a cup of coffee.
Agenda item after agenda item pass by without challenge, except one.Despite nearly 40 minutes of discussion on operational detail, a resolution or way forward has not resulted. It is agreed that the issue should be revisited at a later date.Strategic issues remain untouched.
Throughout the meeting one board member repeatedly leaves the room to take mobile phone calls.And it has been 30 minutes since one of the executive directors left the room to take a call.
As the meeting drags on, board members shift uneasily from side to side.A notable absence of the word patient, their experience, or the safety and quality of care leave public members confused.The value of non-executive members' experience goes unrecognised, and the roles and responsibilities of executives remain unclear.
It is now 4.40pm.One by one, members start to drift away.
Poor decision making: contributory factors
The illusion of invulnerability: belief that the board cannot make a wrong decision.
Collective rationalising: explaining away new information so as to not question the validity of prior decisions.
Unquestioning belief in the board's inherent morality: a belief that members of the board could do no wrong.
Stereotyped views of key stakeholders: a lack of understanding or concern and a lack of respect for patients.
Reluctance to deviate from the apparent majority view: each director learns quickly which issues are not discussible.
Direct pressure on dissident board members: issues become personalised.
A shared illusion of unanimity: silence is taken as evidence that board members agree.
lThe emergence of self-appointed 'mind guards': people who 'protect' the board from 'bad news'.
Adapted from Bob Garratt's Thin on Top.
If a board is to be effective its members must understand their roles and share trust with their colleagues.
Members must be prepared to challenge colleagues, conventions and their own assumptions.
Individual responsibility dissolves in large groups.Successful boards avoid this phenomenon
Next week: the three remaining habits of effective boards.