One of the key components of successful corporate governance is the existence and operation of an effective boardroom. Boardroom practices, principles, methodologies, interactions and dynamics all contribute towards the decision making process within an organisation’s management system and it is therefore essential that companies analyse how their particular boardroom functions if they are to maximise its effectiveness. Identifying boardroom issues that militate against efficient, progressive and dynamic management and finding the most efficacious means of resolving them will be an integral part of any operation to improve the performance of the boardroom.
In this two-part examination, we look firstly at some of the issues that are likely to impact negatively upon the effectiveness of a boardroom, whilst in the second part we suggest how these issues might be resolved through the adoption of a series of key strategies that are designed to create and maintain effective boardroom performance.
Problems in the Boardroom
The boardroom is clearly a complex decision-making arena, involving input from a variety of individual contributors to the process, who often hold a wide range of divergent views. Furthermore, individual board members may not necessarily possess complimentary personal characteristics and traits, which will often underline any differences of opinion and, in some cases, even engender mistrust. It is unsurprising that this scenario can result in a boardroom that struggles to find a unified foundation, finds it difficult to reach concordant decisions, and, consequently, fails to effectively manage the business. In this type of boardroom:
- Uncertainty, anxiety, suspicion and mistrust are the norm
- Ambiguity, vagueness and equivocation are allowed to dominate proceedings
- There is marked lack of evidence on which the board members can base their decisions
- Assessments, opinions, judgments and conclusions are divided
- Personal allegiances are continually tested
- Integrity, honesty and principles are habitually challenged
- Options are customarily equivocal and ambiguous
- The atmosphere encourages the proliferation of conflicts of interest
Manifestly, where the overriding role of the board is to lead the organisation in its pursuit of its corporate goals it is necessary that it reaches clear, reasoned, consensual and conclusive management decisions. Ancillary angst on the part of board members who feel aggrieved about a particular decision should be avoided, as this may well adversely impact on implementation. The key to achieving unity and alleviating disharmony is through engendering in the individual board members an acceptance of the need, in certain circumstances, to compromise their own views where they differ from those of the majority. The recognition and acceptance of the need to compromise is fundamental in any scenario where conflict is a regular feature and this is particularly relevant to the boardroom. Of course, compromise does not denote the blind acceptance of the decisions of others. Rather, it means subordinating what may be deeply held convictions to the overall good of the organisation on the basis of an honest and dispassionate appraisal of the relevant evidence, which has been provided freely, openly and without bias.
Identifying boardroom issues that impact adversely on effective performance and, through the introduction of a decision-making climate that acknowledges the efficacy of compromise, endeavouring to eliminate them are clearly key constituents in any strategic attempt to enhance the effectiveness of the boardroom.
In our second article on this topic, we will look at what practical measures might be taken to enhance the prospects of achieving this and to create a boardroom:
- Where decisions are made from the point of view of a unified corporate purpose
- Which has evenly balanced power relationships amongst its members
- Which has effective board leadership
Part 2 of this article can be found here.