Dynamics at Boardroom Level

A Tavistock Primer for Leaders, Coaches and Consultants

Leslie Brissett, Mannie Sher, Tazi Lorraine Smith, Leslie Brissett, Mannie Sher, Tazi Lorraine Smith

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000170993
• Edition: 1
• Topic: Business
• Subtopic: Organisational Behaviour
• Index: Business

How can boards and members of boards reach their full potential? The Tavistock Institute of Human Relations (TIHR) has been at the forefront of thinking about organizations since its inception in 1947. Today, as then, the corporate world is undergoing increasing pressure to demonstrate a sustainable, generative and meaningful impact on society and employees whilst delivering improved services and products. These tensions and others are explored in this important new book, Dynamics at Boardroom Level: A Tavistock Primer for Leaders, Coaches and Consultants.

In this book, the reader gets a useful framework of theory and practice that broadens vision and deepens thinking about what is happening in boardrooms. The book opens the door to the reader to a new world of board dynamics, edited by those who really understand the deeper workings of the complex human system and its work at board level. This edited volume brings together the insights and contemporary case studies from participants on the Tavistock Institute Dynamics @ Board Level programme that draws on the thinking of Tavistock scholars and practitioners and their work on the dynamics of task, role, authority and power.

Edited by programme co-directors Dr Mannie Sher and Dr Leslie Brissett and their fellow Tavistock Associate Tazi LorraineSmith, and with contributions fromsenior leadership practitioners and board evaluators from the government, international consultancy firms, FTSE 100 and global UN institutions, this book speaks directly to issues of our time. It represents essential reading forleaders of organizations and businesses, as well as leadership coaches and mental health professionals.

Part I
Introduction

Dynamics

The programme Dynamics @ Board Level focuses on ‘dynamics’ so it is not surprising that a number of authors have focused on the importance of this topic. It is all too easy to seek and find solutions to boardroom functioning in leadership studies, governance regulations or financial oversight; it is more difficult to examine in detail the interactions between roles and people in those roles, and the wellspring for action that comes out of hopes and fears and competition of the board members.

In Chapter 1, Ashley Harshak weighs up the role of the board in ensuring good governance and how a group dynamics perspective can contribute to the debate on good governance. He examines how group dynamics has been integrated into mainstream application of board effectiveness by means of thorough board evaluation. Harshak describes group dynamics as a set of behavioural and psychological processes that occur within a group or between groups – quoting Cartwright and Zander – the “nature of groups, the laws of their development, and their interrelations with individuals, other groups and their institutional environments”.

Joe Binnion, in Chapter 2, writes about the need for practical guidance to boards through training, consultancy and the measurement of effectiveness in order to provide insight into the relational dynamics at play. He sets out the case for the relational dynamics of boards and the risk of focusing too much on the ‘technical’ aspects of board operation. Binnion proposes an early stage balanced framework for board development with some practical implications. Bringing unconscious dynamics to conscious understanding of the board may be the first step in liberating board members and enabling improved board performance.

Vincent Dominé, in Chapter 3, outlines how in the past very little was expected of corporate boards of directors. In theory, board directors had ultimate control of their organizations, but in practice they were chosen by and subservient to management. The board was commonly viewed as a ceremonial add-on to the company and was not considered important to a company’s success. Times changed and the general trend towards lean and effective organizations has put pressure on boards to prove their value. Institutional investors now play a greater role in the marketplace and are holding boards accountable. Moreover, robust boards are seen as a way to avoid high-profile and enormously costly corporate scandals. Dominé reasons that boards of directors today have the responsibility and opportunity to be high-performing teams that can be a critical part of company success.

In Chapter 4, Beatriz Boza notes that usually corporate boards are composed of the most qualified, diverse and business-savvy directors, yet they end up underper-forming. Enron had a top notch board and so did Lehman Brothers, Northern Rock and Halifax Bank of Scotland. Boza asks why this happens. Applying Wilfred Bion’s theory of group dynamics, Boza explains that when boards work to make a company successful, they can get stuck in particular internal dynamics, which are usually dismissed or overlooked. Thus, despite the board being very busy and being convinced that it is performing its task, the possibility of engaging in effective board work is set aside, roles are relinquished and the sight of reality is lost. Understanding such internal dynamics and learning to manage them may provide the necessary vitality boards need in order to deliver their mandate in an ever changing and challenging world.

1
Group dynamics and enhancing board effectiveness

Ashley Harshak

“The root causes of most company failures lie in the boardroom”.

(Whitehead, 2013)

What is meant by board effectiveness?

In the UK there have been major reports and recommendations for changes in governance with a focus on boards to ensure there would be no repeat of the governance issues that occurred during the crisis (Walker Review, 2009; Board Effectiveness, 2011; UK Corporate Governance Code, 2012).

Group dynamics is regarded as a set of behavioural and psychological processes that occur within a group or between groups. It refers to the “nature of groups, the laws of their development, and their interrelations with individuals, other groups and their institutional environments” (Cartwright & Zander, 1968, p. 19).

Despite the need for greater board effectiveness, it is hard to find an agreed definition of what board effectiveness means. The 1992 Cadbury Report on “The Financial Aspects of Corporate Governance” defined board effectiveness as:

a board made up of a combination of executive directors, with their intimate knowledge of the business, and of outside, non-executive directors, who can bring a broader view to the company’s activities, under a chairman who accepts the duties and responsibilities which the post entails.

(p. 20)

Over time, what is meant by an effective board has moved from a narrow description of who is on the board to one that lays out its important characteristics. In 2011, the Financial Reporting Council (FRC), the body responsible for the UK’s corporate governance code, stated that: “An effective board develops and promotes its collective vision of the company’s purpose, its culture, its values and the behaviours it wishes to promote in conducting business” (Board Effectiveness, 2011, p. 2; Committee on the Financial Aspects of Corporate Governance, (December 1992). It lists a set of non-exhaustive characteristics, such as providing direction, demonstrating ethical leadership, creating a performance culture, making well-informed decisions and so forth.

Nevertheless, there is no consistency around these characteristics. In 2012, the FRC updated the UK Corporate Governance Code and in its section on effectiveness, it states that to be effective, “[t]he board and its committees should have the appropriate balance of skills, experience, independence and knowledge of the company to enable them to discharge their respective duties and responsibilities effectively” (p. 6). In contrast, other definitions emphasize the importance of clarity of roles (both of the individual and the board), process management, company strategy alignment, and team dynamics, in addition to composition (Dutra, 2012).

This lack of a common definition, or even common attributes does not make the task of enhancing boards’ effectiveness easier. In this light, it is interesting to compare the differences between the UK corporate, the central government department and the voluntary sector codes. Of the three, the voluntary sector code states that “an effective board will provide good governance and leadership by working effectively both as individuals and as a team” (The Code Steering Group, 2010, p. 10). The central government code, however, shows no recognition for the role group dynamics plays on boards.

The relevance of group dynamics for board evaluations

In contrast to the divergence of views on effective boards, there is broad consensus around the need for board evaluation. Although there are differences around what should be included in the evaluation and whether this needs to be undertaken by an external evaluator, the UK Corporate Governance Code, 2010, requires all FTSE 350 company boards to undergo an evaluation process at least once every three years, undertaken by an independent external evaluator.

Since 2010, there has been progress as boards have tried to adapt to incorporate governance changes and put in place mechanisms to evaluate board performance. On the whole, the view of board chairs and company secretaries is that evaluations are worthwhile (Muir, 2012). The key areas included in evaluations tend to cover board processes, committee performance, communication, culture and behaviour, risk management, non-executive director (NED) performance, performance of the chair, diversity and succession.

Group dynamics is often seen as one of the numerous aspects for board examination; the National Audit Office’s Board Evaluation Questionnaire lists 49 questions that are part of its ‘best practice’ list and only two of them relate to board (group) dynamics and behaviours (National Audit Office, 2009). In other instances board behaviour is barely mentioned (Heidrick & Struggles, 2014).

Nevertheless, the importance of group dynamics has been one of the key learnings for chairs, “[a]s most companies have improved their governance, the focus for evaluations appears to be moving towards behavioural issues and how behaviour influences overall performance. While chairs recognize the importance of behaviour, few have found an easy way of dealing with the issue” (Muir, 2012, p. 6).

What further contributions can group dynamics play in board effectiveness and evaluation?

From the discussion so far, it is clear that thinking about boards and their effectiveness is continuing to evolve and develop. To date, although aspects of group dynamics have been integrated into practice there is still considerably more that can be applied, specifically in terms of articulating what an effective board might look like and how to evaluate it. Some of the areas where group dynamics thinking and practice can be applied include the meaning of a group, the purpose of the group and its behaviours, roles and skills.

What is a group?

Wilfred Bion, the British psychoanalyst and thinker on group dynamics, in his ground-breaking book Experiences in Groups (Bion, 2004) laid out the importance of considering both the individual and the group as a unit of study. This perspective emphasized that individuals cannot be understood, or changed, outside the context of the groups in which they live. “An aggregate cluster of persons becomes a group when interaction between members occurs, when members’ awareness of their common relationship develops, and when a common group task emerges … when an aggregate becomes a group, the group behaves as a system – an entity or organism that is in some respects greater than the sum of its parts” (Banet & Hayden, 1977, p. 156).

This way of thinking has found its way into many fields, including team effectiveness. Katzenbach and Smith (1999) define high performing teams in ways that are applicable to boards: “A team is a small number of people with complementary skills who are committed to a common purpose, performance goals, and approach for which they hold themselves mutually accountable” (p. 45). Although this definition does refer to key aspects such as skills, purpose, and performance goals, and despite reference to holding themselves mutually accountable for outcomes, it does not do full justice to the relevance of group dynamics.

Katzenbach’s and Smith’s definition is a useful starting point for a practical definition of board effectiveness. It implies that a board that incorporates a group dynamics perspective would demonstrate behaviours that would enable them to work productively towards their agreed purposes and achieve their performance goals, whilst holding themselves mutually accountable. This approach is a significant advance on more commonly used definitions of board effectiveness that either describe the makeup of a board or focus on results.

Group behaviours

As noted, board chairs acknowledge that behaviour is an important aspect of board performance, which is coming under increased scrutiny, and is an area that they find difficult to deal with probably because of lack of training. It is enlightening to refer to the work of Kurt Lewin, who first used the term group dynamics in the 1940s. Lewin, (1947) through his ideas on Field Theory, identified an important dynamic in group behaviour, viz., an individual’s level of conduct may differ from the level of the group’s accepted conduct by a permitted amount. This idea acknowledges that accepted group standards and behaviours may either enable or constrain individual behaviours. For instance, in the case of the Royal Bank of Scotland board’s decision to acquire ABN Amro, the board’s directors did not demand detailed due diligence, or question the necessity of this acquisition despite it going against their own strategy, which they had reaffirmed prior to the acquisition (Financial Services Authority, 2011).

Applying Lewin’s ideas in order to optimise company performance would imply that boards recognize and tolerate individual variation, which would facilitate open challenges of behaviour, increased diversity and openness. This would demand that boards define, clarify and encourage behaviours that are acceptable and desired in practice.

Lewin demonstrated the effectiveness of his idea that group pressures to conform – as compared to individual commitment to change – can be used powerfully to facilitate and drive behavioural change. In one important study a group of mothers were shown the benefits of giving their children orange juice for nutritional purposes and under group pressure 100% of them conformed. In contrast, where mothers were provided with individual instructions and left to their own devices, only 40% conformed (De Board, 1978). This has important implications for boards, showing the importance of working collectively to change and challenge their behaviours rather than through one-to-one discussions, say between the chair and individual directors.

Group purpose

Group behaviours and ways to understand, influence and shape them are skills that have to be deployed simultaneously as the board is engaged with the business content of its meetings. In this area, Bion offers helpful insights. He understands that there is an explicit purpose of the group – the conscious reason for its existence, and that the group is also subject to unconscious forces acting upon it. Bion argues that in every group, two groups are present at the same time; one he calls the “work group” and the other the “basic assumption group”. The work group is that aspect of the group which has to do with the real conscious work of the business of the group that each member has joined and to fulfil its purpose. According to Rioch, “The group constantly tests its conclusions in a scientific spirit. It seeks for knowledge, learns from experience and constantly questions how it may achieve of its goal” (Rioch, 1970, p. 58). For this to be the case, the board needs to be clear what its purpose is and how it is going to operate to fulfil that purpose.

Bion argues that all groups, while engaged in their business, i.e., while being the “w...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Contents
• List of tables and figures
• Foreword
• About the contributors
• Homage: Edward Craft of Wedlake Bell LLP
• Introduction to Dynamics @ Board Level
• PART I Introduction: Dynamics
• PART II Process, growth and performance
• PART III Introduction: States of mind
• PART IV Case illustrations
• References
• Index