Personal values are important
It’s tempting for boards to turn to the finances to inform decisions because “you can’t argue with the numbers.” Just because we can’t measure personal values, that doesn’t mean we should discount them. When information is easily quantifiable, people find it easier and faster to process. We are also more likely to pay attention to familiar topics and spend less time discussing issues we know less about or are harder to grasp.
Yet, issues that are difficult to quantify and may require unfamiliar conversations are where the board’s judgment is needed most. In cases where acting ethically may include admitting liability or setting a precedent, it’s appropriate for directors to weigh in with opinions couched in terms of community and organizational values – even if they are not couched in the measurable, familiar language of financials or risk. But, to give these conversations the rigor and evidence base they need, boards should be discussing why these values are important to inform the decision and give directors time to consider their role in the decision.
Overcoming the aura of hubris
Because of a board’s standing and purpose, directors may hold the board up as a bastion of expert and fair decision-making. Demonstrably, this may not always be the case. Directors need to be open to this possibility and be aware of the “role demand effect.” This is the notion that because board decision-making is supposed to be more objective than any other, directors feel obliged to suppress their personal opinions or devalue or steer away from commentary on social dynamics.
Rarely do we hear of directors disclosing or asking each other about their personal values or potential biases. Yet, understanding the context for people’s views is critical to assess whether to give their opinions credence. Boards should be mindful that those least confident about traversing this area are likely to rigidly dismiss attempts to incorporate the personal values of individual directors into a discussion.
Developing robust, representative views
Directors interviewed in our research consider the role of the Chair to be critical in ensuring each board member contributes and the quality of decisions is enhanced. But it’s not sufficient to rely on the Chair to steer boards toward a robust and balanced opinion. Many boards need to change their modus operandi by:
1. Preparing to have value-laden discussions
Sophisticated boards are now preparing to have more conversations around personal values. Discussions where directors find it challenging to categorically say “yes” or “no” need to be lifted up out of the technical. This is not just about considering the board’s range of perspectives but considering them equally, which requires directors to be conversant in having value-laden discussions. This means improving directors’ self-awareness by practicing having these conversations so they are comfortable expressing and owning values.
2. Developing trust
Without trust, directors will continue having polite but superficial conversations where personal views go unchallenged. Directors should be aware of the ethical stances, preferred decision-making styles and roles around the table – their own and those of other people. Once directors acknowledge and understand these contributing factors, the board will be better equipped to make rapid decisions under stress.
3. Recognize personal subjectivity and bias
Even highly experienced directors may be unable to moderate the role that bias and stereotyping play in their decision-making. Acting to reduce decision-making bias requires self-awareness and openness to admitting to the role that subjectivity plays. Our interviews highlighted a range of self-awareness and preparedness to admit to extensive subjectivity in decision-making at board level.
4. Talk about the elephants in the room
Boardrooms are full of unspoken thoughts that could be usefully aired to improve decision-making rigor. Directors in our interviews noted that the strength with which a view is expressed in the boardroom can be disproportionate (both over-expression and under-expression) to the individual’s knowledge of a certain subject. They are also aware of the influence of “decision-making baggage” – a director’s willingness to stand their ground can be influenced by their previous success or failure at championing certain positions. Boards should be comfortable calling out these and other potential influences, including whether a director’s perceived political views or other positions are coloring their stance on the issues under discussions.
5. Draw from multiple sources beyond confirmation data
The increased availability of data is assisting decision-making. Most boards understand the importance of drawing on multiple sources of data and calibrating opinions from a diversity of voices. However, people suffer from confirmation bias – the instinct to stop looking as soon as someone or something supports our argument. Best practice requires that when our opinion is confirmed, we seek out at least two additional sources of data, perspective or experience. Boards must also remain conscious of the interpersonal relations that can impact and even impair decisions, regardless of the quality of supporting information.
Board diversity alone does not guarantee a board will be effective in making informed, ethical decisions. Directors must also employ good decision-making techniques that take account of personal biases and group dynamics that can work to negatively impact the quality of group decision-making.
Ultimately, it is the rigor in the process of inquiry that matters.1 To improve, boards should practice having the different, more nuanced and emotionally intelligent conversations needed to fulfill the broad fiduciary obligations that companies are facing in these unprecedented times.