So, how do you move the performance dial of your board? First of all, let’s recognize that boards are social systems—their own unique “teams.” Why is this important? According to a study by Solange Charas, “The impact of [a] board functioning as a team is an eight times greater predictor of corporate performance than individual director demographics.”
The first step in creating any great team is getting the talent right. In the boardroom, this means a candidate should have highly developed business skills that match the organization’s needs and help drive its vision and business model. To avoid group-think and to stimulate meaningful discussions, look for potential directors with diverse ways of thinking and a wide range of career experiences.
In typical boards, the commitment to excellence usually stops at selecting highly qualified individual directors. For superior board effectiveness, however, the devil is in the dynamics—how well the board members interact and work together.
According to a New York University study, this includes the ability to “…effectively deal with differences; generate a trusting environment; create a meaningful context for discussions, deliberations, and decision-making; handle conflict and tension effectively; and enact effective leadership and non-leadership roles within the team.”
A culture built on candor, trust, collaboration and mutual respect sets the framework for positive dynamics among the directors. An atmosphere of honest and open communication enhances the directors’ ability to ask management the tough questions, to challenge assumptions and to truly leverage the value of the entire board to the organization. This is a key finding, since 88 percent of the respondents in a recent RHR International study indicated that the quality of dialogue and debate within the boardroom is a major differentiator between average and great boards.
It is important to keep in mind that board dynamics are always complex. The odds of harmonious interaction happening spontaneously are slim. Therefore, careful orchestration of the dynamics is central to the development and maintenance of a great board. Group dynamics are influenced by a host of factors, many of a social-psychological nature. Tying all these elements together requires strong leadership—an effective, non-executive chair or a lead director who pays close attention to the working relationships.
Study respondents agreed, often commenting on the influence of effective relationships on facilitating strong levels of communication between the directors and the CEO. In addition to giving feedback and acting as an honest broker between the board and the CEO, an effective lead director can ensure that everyone is on the same page and aligned with the corporation’s goals and strategies.
Finally, remember that maintaining productive board dynamics is a journey, not a destination. A good feedback process helps develop the effectiveness of every individual director and the dynamics of the group as a whole. Based on the feedback, the composition of the board may change. The new dynamics will then require monitoring and aligning by the lead director. The loop is continuous.
Unfortunately, respondents to the RHR survey indicate that only 4 percent of U.S. corporate boards have adequate feedback mechanisms in place. The journey continues.