H owever, the greater complexity facing business today, tightening regulatory environments, and increased public visibility and scrutiny, are leading to heightened pressures in the boardroom. Under such demands, director behaviours, group dynamics - and the boardroom cultures these create - are defining factors when it comes to board effectiveness.
When it comes to poor board decision-making and boardroom dysfunction, the root cause is often group psychology gone awry. Many of the company failures that have made headlines in recent years can be traced to poor board decision-making driven by dominant directors or executives, and colleagues who remained submissive onlookers – which is the crux of poor boardroom culture.
What we've seen in the findings of reviews and royal commission's is that the executive and the board can get trapped in a dysfunctional social dynamic. This dynamic hinders good governance by constraining critical analysis, refocusing attention on the wrong priorities, ignoring actual risks, and limiting effective oversight of management.
Dysfunctional behaviour in boardrooms is often difficult to understand and perceive. It can be elusive and not openly acknowledged or displayed. In fact, such behaviour is rarely overt and dramatic such as with raised voices, direct threats, personal defensiveness or sullen silence. Rather, it plays out more subtly, through furtive glances, vague innuendo, closed questioning, quiet acquiescence, intellectual gameplaying, awkward standoffs and silent withdrawals. Unfortunately, less observant directors will deny that anything is wrong, thereby accommodating and perpetuating the behaviour. More reflective directors will know exactly what this feels like and how it impacts their board’s effectiveness.
Boards are typically full of capable, experienced and well-intentioned people. Prior to taking on any director roles, board members would usually have spent years working their way up the executive ranks to C-suite roles. Unfortunately, during their executive days, not all directors would have been prepared sufficiently for directorship. Perhaps surprisingly to directors themselves, they can lack the skills, behaviours and expectations required of board members.
During their time as executives, they had positional authority over personnel, had direct access to all key information, converted strategic decisions into concrete operational goals, pushed plans through to completion, and, in general, competed hard to achieve success. However, the role of a company director is quite different to that of an executive in a senior management team.
In comparison to an executive, a director is an equal among board colleagues, has access to limited information about the business, must work collaboratively with peers to make every decision, and be held accountable for the results and impacts on the organisation despite being removed from the operation of the business. The nature of board roles and director behaviors are very different from those formed and used in the executive environment.
What many directors would call their talents as an executive – competitiveness, the drive to succeed, being a charismatic persuasive communicator, or a diligent hard worker – may not show up so positively in the boardroom. Under pressure, the competitive driven executive can become the boardroom bully, the persuasive charismatic executive becomes an overpowering director personality, the diligent executive becomes the indecisive director who gets mired in the detail.
Furthermore, the pressures of a boardroom can exacerbate these traits and behaviours, tipping them over the edge to dysfunction. Under pressure, a person’s executive talents will often become their director derailers. As most directors’ formative careers are as successful executives and leaders, it is important to recognize that many of the traits, skills and behaviours from those executive days are likely to be incompatible with those required in the boardroom. As a consequence, when directors over-rely on such traits and behaviours, it is not surprising that tension and derailment can creep into the boardroom.
In response to pressure, people will tend to behave in ways that have worked for them in the past. For some, this will involve listening more, seeking to understand alternative views, and co-operating with their fellow directors. For others, this can mean less-functional patterns including playing politics, letting loose their egos, or feeling threatened and withdrawing. Under pressure, directors can try to shape their contributions to gain tactical advantage or, conversely, constrain the views they put forward to limit their personal exposure. Either way, the consequences are less open boardroom discussions, reduced “real” collective agreement, and lower quality analysis. The inevitable results are sub-optimal board decisions.
When we think about the boardroom environment, there are many sources for pressure. Directors work with successful people who they don’t know well, and there is the pressure not to appear foolish. Directors can feel that they lack unbiased and complete information; they only know what the executive team want them to know. Directors must make decisions when they don’t have the details, and the consequences of a bad decision are significant. Shareholders, stakeholders, the executive team, and even regulators and the wider community are watching. It is understandable that company directors might feel professionally and personally exposed.
The boardroom itself is changing. Remote board meetings have increased since the pandemic. Directors may no longer see or sense their colleague’s reticence to contribute, or a peer’s controlling nature, or other forms of emotional tension experienced in face-to-face interactions, but they are still operating behind the scenes. In dysfunctional board meetings, the smooth civility on the surface often belies the turbulence that operates beneath.
