The boardroom is where the buck stops in a business. It is where data and judgment meet and crystallize into decisions. Unless clear-eyed engagement is the norm, the boardroom can also become the place where poor quality debate can cement bad decisions. It is not the people at the boardroom table, but the dynamics of their disagreements and agreements that make the difference.
Smart boards use a range of tools and strategies to avoid and overcome the pitfalls of cognitive biases, groupthink, safe decisions and their other manifestations.
Tools of Governance
Mindful board construction is a powerful design tool to preempt the challenges of groupthink. A broad range of viewpoints may emerge if the room has assembled a variety of experiences, perspectives and styles. Combined with term limits (not a hard legal provision in most jurisdictions around the world) regular board refreshment and every succession round can provide a way for a board to enrich the points of view available in the room.
Active management of conflicts can be another effective way to reduce groupthink or prejudiced decision-making. For instance, asking for declaration of interests and conflicts at the start of every board or committee meeting makes overt the potential sources of preferences or biases. When decisions are made, conflicted directors can be asked to step out or otherwise refrain from participating in influencing the vote.
Good Boardroom Practices
The role of the chair is critical in creating the conditions for robust debate and good decisions. Creating a culture where disagreement is normalized can enable better decisions, in fact, it is key amongst these conditions. The conduct of board meetings is another key building block because that is how the value of the diversity of directors around the boardroom table is elicited.
Conversations with individual directors outside formal board meetings helps the chair hear things that may arise. If particularly strong minority views emerge in these conversations, the chair can help surface those to ensure social pressure or the need to belong does not keep them from being shared.
The chair can also model behaviors that are expected of the other directors. If the chair is seen to speak of past mistakes and lessons from them, experiences of handling uncertainty and dealing with complexity, it helps others feel more at ease speaking up. Structured decision frameworks and exercises can help too.
Clearly distinguishing between reversible and irreversible decisions is a good practice for clarity. While something being reversible does not mean that deliberations are not necessary, the board could recognize risk stakes better if they had a shared understanding of this distinction. Equally irreversible decisions can benefit from slowing down. “Cooling off” periods can be built in for such decisions to allow more reflection and to include more thinking styles in the discussion. Some directors are quicker thinking in real-time. Others may need to reflect at a slower pace. That diversity of styles can be immensely valuable in complex decisions. It also allows for new data or counterpoints to be included in the evaluation and deliberation process.
The premortem of a decision is also a useful tool. It may help the board imagine what failure might look like and what might cause such failure. The exercise can highlight cognitive errors or biases being baked into a decision and give the board a chance to make a different decision if they so choose. Few boards take the time to engage in retrospection, but it is another useful tool. For instance, the board could review actual outcomes ex post and compare them with expected outcomes at the time when the decision was made. The reflection may help surface biases in the group’s dynamic, and making that awareness a matter of conscious knowledge can help all to be more mindful.
Making thinking visible is a valuable practice too. When I interviewed chairs for my book Uncharted Spaces, one chair shared how, when an option is rejected, he asks his board to address “Why not?” to surface reasons for rejection. It always brings up potential heuristics that may have nudged a director to a certain opinion. Another tool for high-stakes decisions is to ask every director to create a “steelman,” which is a strong, effective opposition to their preference. It forces deeper thinking for each director and can also build better empathy between directors who may be otherwise in disagreement.
It goes without saying that it is almost too easy to see common biases in action. Authority bias, where people are deferring to someone deemed superior, is remarkably common. One director shared with me how their chair perceiving another director as being from a superior social class changed their board’s dynamic. Highly specialized experts often show overconfidence bias and their quick-off-the-block approach to laying down their viewpoint can create an anchoring bias around the table. The chair could invite experts or more senior directors to speak last so questions and perspectives from different experiences can be brought forward. Confirmation bias is, of course, very common. After all, who does not like the comfort of feeling they were right?
Governance is a contact sport. We get better from doing more and practicing more, followed by reflecting on our processes and lessons. The ability to avoid boardroom pitfalls of groupthink or “safe decisions” benefits from robust practices both in the deliberations and in reflection.