New research helps you to maximise board effectiveness

Graph-01Risk management and consulting firm Aon has published research into the effectiveness of boards. The Better Boards report has some interesting insights into what delivers – and what prevents – good decision-making.

The report is based on research with pension scheme trustees specifically, but the learnings can be applied equally to boards in any sector.

So what does it tell us?

How behavioural science can help with decisions

The research investigated the cognitive biases that can affect group decision-making by posing a series of questions and problems to board effectiveness.

It was conducted on both pension scheme trustees (the board members) and the general public, to identify whether a ‘social desirability bias’ was present – in other words, whether the board members gave the answers they thought they were ‘expected’ to give.

The findings highlight some interesting points and questions you might want to ask your directors.

Do you all understand the same thing by the terms you use? 

The research shows that when asked for a definition of a phrase – ‘long term’, for instance – there can be a number of different interpretations. ‘Long-term’ meant anywhere between two years and 30 years among the research subjects.

How would this affect your board? While a concept like ‘long term’ will differ from one organisation to another, you need to make sure that all your directors have the same understanding. One member working to a two-year timeframe and another to a ten-year one may be talking at cross-purposes.

Do you prioritise the priorities?

While 85% of those surveyed have a long-term strategy in place, 10% of those reported that long-term matters are often deferred on meeting agendas – running the risk that important strategic issues are ignored.

The behavioural tendencies that underpin this are explored in the report. ‘Planning fallacy’ sees people underestimate how long tasks will take to complete, while ‘present bias’ means that we disproportionately prefer rewards that come sooner and costs that come later.

Understanding these tendencies helps you to plan agendas that account for them:

  • Your meeting agendas should make discussion of long-term strategy non-negotiable
  • Create a time buffer that enables you to discuss the future, even when your meeting has a packed schedule
  • Information that’s presented in an easily-digestible way helps your directors to navigate the issues under discussion, making your meetings more efficient

Make sure all voices are heard

Survey participants were asked how willing they were to speak up in groups. Trustees overall were more likely to speak up than the general public – a good sign – even if they were not being encouraged to voice an opinion, or were in disagreement with the consensus.

However, in practice, being the dissenting voice can be daunting. And yet a good board needs a healthy level of debate in order to reach the best decisions, as we explored in How much debate do you really want on your board.

The research states that ‘A wise chair would do well to seek dissenting opinions. When people are uncertain, they look to others for what to do. Social validation that opinions are welcome and sought is a powerful tool for reaching good group decisions’.

This is something else we have explored previously, looking at how you can stop social processes undermining your board decisions.

Your chair should be encouraging a range of views in order to encourage everyone to share their opinion and ensure the board reaches rounded decisions.

Devil's advocates can help

The research showed that more than one dissenting voice will have more of an influence than a single one. If members are encouraged to break off in pairs to discuss issues, and feed back their thoughts, all members of the group can consider their arguments and draw an informed conclusion.

Beware the status quo

‘Status quo bias’ encourages people to stick with the current position.

The research says that ‘we tend to be tempted to follow whatever choice someone has laid out…We assume that because it pre-existed, there must be a reason for it’.

But this isn’t always the case, and you should be vigilant about questioning the current approach and how it might be improved.

Too much choice can paralyse

Too many choices can overwhelm people and prevent them making a decision. Breaking complex tasks into smaller ones can help – if exploring potential solutions can be separated from making the ultimate decision, it can deliver better results. 

You can help prepare your directors to make decisions by ensuring they get the information they need prior to meetings and making the meetings themselves as efficient as possible.

The full research makes interesting reading, and can be downloaded from the Aon website.

If you want to read more about how presenting information in the right way can help to deliver better decision making, you can download our FAQs on Board portals – their implications and advantages. The whitepaper is free to download here.

Nothing in this document should be treated as an authoritative statement of the law. Action should not be taken as a result of this document alone. We make no warranty and accept no responsibility for consequences arising from relying on this document.

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