Reading the Room

For new directors, taking their seat in the boardroom can be an intimidating. Existing hierarchies, alliances, and large personalities can make it difficult for your voice to be heard. I am not a social psychologist and not well versed in analysis of group dynamics. Undertaking such analysis is, however, an imperative for each director. It is easy if views are expressed too forcefully, for example, for the rest of the group to become defensive and take the opposing view, or even to express no view at all, which can lead to adoption of the default position. It is, therefore, mission critical for the individual director to develop the tools of influence and avoid becoming an outlier, as to be pigeon holed as an outlier is to be rendered ineffective. Your voice can not be heard, and once seen as an outlier, you may be relegated to the ineffective pile forever.

Preparing

Being heard is always easier said than done. On the simplest level, the groundwork ahead of a board meeting needs attention, by reading board and committee materials and preparing questions and comments. To bolster your confidence, you may want to consult evidence to support your views, drawing upon research reports, articles or surveys, so that you can deliver well founded commentary and be perceived as a serious contributor. Knowing your own values and being yourself also helps your voice be heard, as if you seem simply to be imitating others, you will command less respect. This does not require an aggressive approach, which will also reduce your impact, but it is about calmly and consistently expressing your values when you think you need to do so. This can require considerable skill if you are challenging established behaviors.

Owning Your Style

Presenting ideas or values that are perceived as challenges will often create resistance. Humans generally do not like having their views challenged, and when challenged, a knee jerk response can easily be triggered that results in a search for evidence to back up our own existing views rather than openness to new ideas or facts. This can be especially toxic in the small and cloistered world of the board in which directors are often not well acquainted otherwise and have no history of connective tissue to help them navigate.

In my experience, assertion does not work nearly as well as demonstration. If I tell you directors tend to conform to established behaviors, that has less credibility than if I trot out the state dinner analogy used above. Arguing in abstractions does not work as well as finding ways to lead your fellow directors and executives to form their own conclusions. One common way to achieve this is to trigger an “aha” moment with an analogy.

Finding Your Point of View—and Theirs

It can take some time and effort to understand the points of view of your fellow directors and the various stakeholders. Study their possible motivations as well as their styles. Work to identify their strengths and weaknesses as well as how they learn. Find a path of your own to offer unique value. One approach I have used in the past is to adopt the point of view of the customer when considering corporate decisions and possible impacts. If I ask myself how each step will be seen and felt by the customer, and how their purchasing and use may change as a result, I end up with a reasonable way of weighing questions and answers. I did this when I realized to my own horror that in serving a particular board I had fallen prey to the passive role: if there is anything I need to know, someone will tell me. Oops. Not necessarily so.

Much of the ability to understand your fellow board members as well as top management requires a commitment to building relationships beyond the board room. When I served my first board, I was much younger than any other director, the only female, and knew more about the company than any of the others. To develop my influence, I worked the corridors, innocently asking the others why they thought as they did, and carefully working in various facts and ideas to move their thinking. They were happy to help me, and in the boardroom, when I asked similar questions, I was quite gratified that often the seeds I had planted were reflected later as the views of these much older, and more influential, men. Board work calls on your whole person, all your ingenuity and skill, to develop ways of being effective in pursuing corporate goals.

Leading with Your Ears

Often board meetings lack a self-assured leader adept at drawing out the various opinions in the room. When this occurs, it can be difficult to get a word in edgewise. It can help if you simply choose to see the uncontrolled flow as an opportunity to gain insight. In such settings, people are often vying for the chance to speak, watching for their opening rather than listening to what others are saying. Being a relaxed and attentive listener with eyes and ears open and mouth closed can give you surprising power.

Addressing Biases

Management consultant and author Peter Drucker famously said that “culture eats strategy for breakfast.” That is particularly evident in the closed environment of board meetings, where egos and competing agendas, biases known and unknown, and various social games form a large part of the unwritten agenda. Power and money and careers are at stake. Before directors can commit to any strategy, culture must be examined, and particularly the intangible biases that may be in play.

As humans, we are all affected by cognitive biases. Our challenge is to be aware of them and try to minimize their negative effect. Even the most seasoned directors and executives have limited experience in recognizing various types of bias that may be at work. Optimistic bias makes us think good things are more likely to happen than bad, while pessimism leads to the opposite conclusion. Confirmation bias causes us to find ways to support our existing views, rather than disprove them. Overconfidence causes us to overestimate possible results. Hubris overwhelms us. Groupthink undermines our capacity for independent thought. Generally, we are less rational and more vulnerable to acting based on emotion than we want to believe.

People are prone to many well documented unconscious cognitive biases that exist to help us filter information in day-to-day decision-making. But these unintentional mental shortcuts can distort the outcomes when we are forced to make big, consequential decisions, infrequently, and under high uncertainty. This is precisely the type of decision we confront in the board room.

There are many well-documented biases, but these are among the most pernicious in the board room.

Overconfidence

Experts become more confident as they gather more data—even though the additional data might not make their conclusions any more accurate. Its mere existence, whether relevant to the decisions required or not, contributes to a familiar cycle. We have all seen people point to a pile of data and ignore contradictory information, becoming ever more confident in their position, which makes them even more likely to ignore contradictory information. Said otherwise, we convince ourselves that we have a winning strategy this year even though we continue doing pretty much what we’ve always done.

Confirmation Bias

People with shared experiences and goals often wind up telling themselves stories, generally favorable ones. One study found, for instance, that 80% of executives believe that their product stands out against the competition—but only 8% of customers agree. This human failing is especially perilous in the board room, where a small group of people who meet infrequently are often kept in a protected bubble, where ugly, messy reality is kept at bay.

Survival Bias

The strategy formulation process is particularly vulnerable to this, because we only see what production processes created and what existing customers, for example, bought. We do not see what was not produced, and not purchased. We can precisely measure the behavior of the customers we have, but what about the silent voices of the customers we do not have? We will never know the whole story. And yet we often forget about the ones we know nothing about.

Attribution Bias

We are all more than familiar with this. When a target is missed, the blame is often directed at a plausible but possibly not primary cause such as unseasonable weather or interrupted electrical or internet service. Cool headed analysis would be too dangerous as the people in the room might have screwed up. Thus, we focus on outside forces beyond our control. With failure dismissed as an externality, the management team closes ranks and decides to double down and re-establish the goal. “We lost a year, but we’re going to get back on track.” Equally difficult is attribution for wild success, which of course is never due to luck but instead to prowess, until it is time for it to be replicated. These are manifestations of what I call victim thinking. It is a way of saying “We are powerless,” which is hard to believe.

Attribution is further complicated by the way performance data are presented, as well as by the person doing the presenting. Executives are eager to protect themselves and their resources. We may as a result see sandbagging, where fear of missing the target may drive selection of easy targets impossible to miss. Or we have those who pursue shortcuts, running their area for short-term performance in the belief that they will have moved on before their milking becomes visible.

There is always the manipulator, who believes be or she knows much more about what his or her division can do than anyone else. The resulting plays are many, but a favorite is requesting resources that are not likely to be granted, and when requests are not fully met, pointing to poor resources as the culprit for underperformance. Finally, if the supervisor can not directly observe the quality of effort, results can be noisy signals. Were those poor results a noble failure? Were those great results dumb luck? It all depends on who is telling the tale.

Building a Championship Team

The most involved, diligent, value-adding boards may or may not follow every recommendation in the proverbial good-governance handbook. What distinguishes exemplary boards is that they are robust, effective social systems in which each member fully inhabits the role and the room. What are the elements that lead to such strong fabric?

Successful teams usually have chemistry that can not be quantified but can often be built through active cultivation, much as the coach of a championship team would seek to do. Each good quality begets the next. The leader respects each team member; team members develop mutual respect; their respect for one another enables them to develop trust; that trust enables them to listen to and to share difficult information; because they all have the same, reasonably complete information, they can challenge each other’s conclusions coherently because a spirited give-and-take becomes expected; they learn to adjust their own interpretations in response to intelligent questions. This cycle starts with a leader who intends to develop it, and makes the first extension of trust.

This fabric of respect, trust, and candor can be torn at any point. One of the most common breaks occurs when the CEO does not trust the board enough to share information, and waits, as an extreme example, until the night before the board meeting to dump on the directors a huge report that includes, buried in a thicket of subclauses and footnotes, a bucket of bad news. Yet this silly and dangerous pattern happens all the time.

If a board is healthy, the CEO provides sufficient information on time every time, warts and all, and trusts the board not to meddle in day-to-day operations. He or she also gives board members free access to people who can answer their questions, removing the need for back channels. It is impossible for a board to monitor performance and oversee a company if complete, timely information is not available. And it is the direct responsibility of the board and each of its members to insist that it receive adequate information. The degree to which this often does not happen is astonishing.

The CEO, the chairman, and other board members can take steps to create a climate of respect, trust, and candor. First and most important, CEOs can build trust by sharing difficult information openly. Or the chairman can break down subgroups by splitting up political allies when assigning members to activities such as site visits, external meetings, and research projects. It’s also useful to poll individual board members occasionally: an anonymous survey can uncover whether factions are forming or if members are uncomfortable with an autocratic CEO or chairman. Other revelations may include board members’ distrust of outside auditors, internal company reports, or management’s competence. In today’s, such polls are quick and easy to administer.

Dissent is Not Disloyalty

Every member of the board needs to believe that dissent is healthy and not evidence of disloyalty, and demonstrate through their actions that they understand the difference. The capacity to challenge one another’s assumptions and beliefs is an imperative for a strong board. Respect and trust do not imply endless affability or absence of disagreement; in fact, I will go so far as to say they can not take root in a climate of dysfunctional politeness.

Trust and respect grow among board members strong enough to engage effectively with differing points of view and handle challenging questions. One reason I enjoy working with boards of troubled companies is that focus on the goal of recovery strips away falsity. Often, true character is revealed, and those who join forces to combat the difficulty form strong bonds that often enable them to leap tall buildings together.

Building a Portfolio of Roles

Effective boards require their members to play a variety of roles, in some cases dipping deep into the details of a particular business, in others playing devil’s advocate, in still others serving as project overseer. Similarly, in some cases, the board and only the board has the clear need to act or decide, such as appointment of the CEO or final action regarding a transaction.

In other cases, the board serves as advisors and consultants or mentors to management. In others, the board and its members are directly able to help the company move forward based on personal knowledge or contacts, and in all cases the board is charged with protecting and building its own healthy fabric and the structure and health of the enterprise. Playing different roles gives directors a wider view of the business and of the alternatives available to it. Director’s roles and tasks shift and change depending on the corporation’s circumstances and stage of development.