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How Do Boards Make Decisions?

  • 30th Sep'22

The last line of defense for organizational survival is the board. Regardless of whether the threat or opportunity for competitive advantage might arise from significant advancements in technology, cybersecurity, establishing a compliance discipline, or introducing sensitive stewardship that establishes a forward-thinking, dynamic culture, they anticipate where the next big challenges will come from and adapt accordingly, or prepare well-thought-out solutions.

That is the theory, at least. Today's reality is that stewardship is usually overshadowed by compliance obligations, making many boards appear overly formal, aloof, or utterly out of touch. This flawless façade of logic frequently conceals an unproductive boardroom culture, which occasionally results in hard-to-understand decision-making processes.

Boardrooms are emotional settings where strategic decisions are made. Unresolved, these feelings may operate as sources of power and prestige that divert attention from resolving issues that are already known to exist and prevent board members from collaborating effectively.

Our continuous study of boardroom dynamics has repeatedly shown that conflict and tension are a natural element of doing business there. However, when seen from the perspective of board directors who are under significant pressure to make wise strategic and operational decisions, the appearance of these emotions is reasonable.


A Boardroom struggle is inevitably emotional

High feelings will prevent the board from being open to new information and from making appropriate predictions about the present and the future. The board's desire to exchange information and stay involved in the decisions it must make is compromised when unpleasant emotions are present.

This is frequently demonstrated by directors who only acknowledge other people's opinions. The result is a "paralyzed" board, where the directors are fully aware of the problems at hand but feel reluctant to offer solutions or even bring up uncomfortable concerns out of concern for possible consequences.

The worst-case scenario for a board is knowing what to do and how to accomplish it, but doing nothing. The innumerable scandals, corporate failures, and aggressive M&As that have gone wrong have frequently done so as a result of the board being emotionally weakened and unable to handle important issues.

Emotions that are not constructive in the boardroom have immediate and long-term effects. A board's ultimate purpose is to foster trust among its members, and the chair is directly responsible for achieving this goal by engaging in constructive negotiation and managing emotions.

It is essential to foster a sense of comfort among board members. The chair, who serves as the board's leader, must deal with any troubling feelings that are now present and appeal to each director's sense of accountability.

Do you really want to contribute to the demise of this organization, or do we do something about the negatives, and the passivity that is plaguing us, the chair must add their evidence-based perspective on how unproductive boardroom dynamics undermine the development of the organization by posing the following question:


What can Boards do to show respect to their colleagues?

The board of directors will be faced with a difficult decision when they realize the consequences of their behavior: do they continue and further harm the company, or do they accept responsibility? The next discussion can center on how to foster enough comfort for substantive debate to occur.

  • The tone of the board will soften to make room for important inquiries like: How do we create safe spaces?

  • How should we treat the members of our board with respect?

  • How can we enhance others' efforts without detracting from them?

  • How can we guarantee favorable boardroom dynamics?

The final query resulting from all of these difficulties is: "What is necessary from the chair to reach a meaningful and balanced view?"

After laying the foundation for a revitalized and positive dynamic, the chair can resolve any misalignment already present by showing respect and admiration for each board member. The chair is acknowledged as the primary factor influencing effective boardroom interactions by encouraging the following talks because they have fostered an environment where everyone feels comfortable contributing. This also reuslts in a diverse boardroom environement.


Final Thought: Trust is undermined by unpredictability

One director said, "We make half-hearted decisions. Who actually agrees or disagrees with a decision determines what happens to it. We are therefore unreliable and should not be trusted.

Misalignment between directors is a common occurrence that should be welcomed because of the variety of difficulties that boards face. The fundamental issue is letting things go unmanaged. The temperature in the boardroom quickly rises as a result of this inaction. The chair's contribution will be put to the test as they are worked through. Having a positive engagement mindset is essential for building great relationships.

Smart chairs focus on the underlying emotions at play while paying great attention to compliance. Members of a board who are fully comfortable processing their feelings will properly perform their stewardship duties.



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