VOICE AND SILENCE: MOBILISING BOARD CONTRIBUTION

In the wake of corporate scandals involving the destruction of shareholder value and revelations of unethical practices, investors can rightfully ask “where was the board in all of this?”. Corporate governance codes and other government and institutional pressures have urged greater involvement and scrutiny of management by boards. Regulators have responded with a mix of formal and structural prescriptions. However, these in of themselves will not deliver the strong governance expected of boards. A behavioural view of how board norms determine why and how directors give voice to their concerns or stay silent holds the key to effective stewardship and oversight of our organisations

Formal corporate governance mechanisms such as codes and regulatory frameworks alone will not guarantee accountable and effective boards. This is because governance does not occur in a social vacuum, a reality that often gets overlooked. The shared history of director interactions on a given board (characterised by behavioural norms, routines and expectations), has a self-regulating nature and fundamentally affects how accountability is actually practised during board meeting deliberations. Structural and regulatory prescriptions ignore the role that social norms for directors' behavior play in when and how a director decides to use their voice or remain silent during board meeting deliberation.  

When the processes of accountability are working well, director interactions are characterised by openness, robust engagement, challenging but respectful debate with mutual trust at its heart. When these processes are not working as they should and the balance of power sits with a few, decisions can become compromised because deviant views can be easily controlled and conflict potentially suppressed by a form of social control invisible even to those in the boardroom. Social control can lead to opinion conformity, revisions of confidence and self-censoring of doubt or a divergent view in order to fit in. It can also result in those holding the balance of power in the room engaging in micro-behaviours that create a subtle pressure to conform. At the other extreme it may result in an swift dismissal of a viewpoint or closing down a line of questioning perceived to not conform to the group view. Many NEDs will acknowledge having witnessed such behaviour at some stage during their board life. The material cost to the organisation of such behavioural effects is that the collective capacity and capability of NEDs is not fully engaged and the potential of the board as a strategic group is not fully realised.  

Conceptually, silence is the failure to voice. Voice is a choice (deliberate or otherwise) to not remain silent.  This choice to remain silent is nested within a complex web of power, influence and accountability. Director allegiances and affiliations (driven by past experience, similarity in background and past ties) has been shown, often subconsciously, to drive the need for social approval. How directors navigate this web and make choices about the contribution they make within the boardroom has a bearing on the board’s effectiveness in exercising its duties.

Pre-conditions for silence and voice

The starting condition for voice or silence is that a director either is aware of a scenario for which they have an idea, concern, or perspective that might be relevant or important to share or convey to the board group. Second a director must be motivated by a desire to make a difference or exercise an aspect of their director duties. High levels of motivation thrive in prosocial climates. They do not thrive in instrumental climates that encourage self-interest and a focus on consequences for the self. Finally, the opportunity to speak up must also exist in order to make a contribution.

Some of the reasons for a director’s reluctance to use their voice are more explicit than others as described below.

Determinants for silence and voice

Director’s propensity to trust or mistrust

As human beings we all have differing propensities to place our trust in what we are told. This propensity to trust or adopt a healthy skepticism is developed through one’s life experiences and exposure. Some directors will be more prepared to rely on the information and explanations they are receiving from management. They are less likely to place importance on doing independent soundings or exposing themselves to  experts or advisors with alternative views in order to carefully calibrate their own understanding. The propensity to trust, both at the individual director level and the collective board level influences the tone and vigour of boardroom challenge.  This propensity to trust determines how boards will choose to robustly challenge assumptions underpinning a proposal that management tables, voice concerns about the prevailing logic and seek to interrogate alternative solutions and realities that may have been considered and rejected by management.

The boards that work most effectively together are conscious of their respective propensities to trust/mistrust and will work together to develop strategies to ensure they are alert to the possibility of ‘management capture’

Director’s psychological safety calculus and fault-lines

At its core, a director may weigh up the likelihood that challenging an authoritative opinion may result in their peers judging their contribution as having little or no relevance or consequence or at worse of being ostracized. Safety is often felt in numbers. That it is say that being a minority of one (such as being the lone voice in raising a concern that no one else appears to rate as a legitimate concern), can be challenging. Challenging because it could be perceived by others as cutting across the social cohesion expected of the board as a governing group.

This is where fault-lines matter. Fault-lines, although not always visible, do exist on most boards. For example, where some directors are open to taking more risk than others, some directors have long tenure and have built strong relationships vs those that may be new to the board or new to directing, directors who have sector experience and expertise while others do not and so on. Psychological safety can exist despite these fault-lines if the culture of the board, in particular the chair and committee chairs, intentionally encourage active exchanges of insights and healthy contention across these fault-lines.  

Psychological safety as dynamic and adaptive. For example, it morphs when a directors’ tenure on the board ends and a new director joins. As a new director gains more experience and settles into the group they may find their voice, in turn altering the dynamic. But equally, in order to fit into the social norms of the board, their contribution may be tempered accordingly as they adopt new ways of complying with ‘how things are done around here’. A director is more likely to engage in voice as their perception of safety increases and more likely to remain silent as their perception of safety decreases. It is therefore useful for a chair to take a sounding of the board dynamic whenever board composition changes have occurred.

Deference and misplaced respect

Deference is the willingness to yield to another’s preferences or opinions as a sign of respect or reverence. It is conveyed by agreeing or consenting to the desires and preferences of others, using unassertive language and being polite. Deference is a form of politeness. However, whereas politeness is concerned with phrasing things in such a way as to take into consideration the feelings of others, deference is more specifically a way to show appeasement and yielding one’s position to that of others.

Deference is tied to the theories or power and identity and often preceded by a tacit acknowledgement of one’s place in the power hierarchy.  Deference is most usually evident when there is a power imbalance and when there are notable differences in the governing and commercial experience between directors. The role of the chair is therefore critical in identifying such imbalances early and making intentional interventions so that the less experienced or the non-experts are given the space to give voice to their viewpoints.

Confidence and the lack of personal agency

Irrespective of whether the voice target has a history of being receptive to input or not, directors with high levels of personal agency and confidence will endeavour to apply influence when they believe they have something worthwhile to contribute in the deliberations. Directors with a lower level of agency are more likely to engage in self-discounting the importance of their input. They may also reach the point of feeling their efforts are futile more quickly. This leads to acquiescence.  Acquiescence is a deep form of silence in which a director has essentially given up hope of getting their views heard and feels completely powerless to make a difference. The critical role of a board to monitor must be motivated to surmount the general norm of acquiescence.

The most skilled directors have both humility and courage in equal measure: the humility to know they may not hold the monopoly of the truth and the courage and confidence to stand alone on matters of principle. 

Actionable Strategies

There are several strategies boards can explore to ensure the delicate balance between voice and silence is nurtured and sustained.  These include

·      Creating room for collective reflection, ensuring that the agenda is never over-loaded and deliberations are well paced

·      Intentionally inviting the voice of the non-expert even when not obvious of the value they might add

·      Using ‘board buddies’ drawn from across identified fault-lines in order to avoid being captured by a single ‘dominant logic’

·      Emphasising candidates’  behavioural attributes in director selection processes - given the same emphasis as candidate experience and expertise

·      Chair initiating quarterly one on ones to check-in on how each director is experiencing the dynamic (supplementing the closed sessions at conclusion of board meetings)

·      Chair initiating intentional interventions to neutralise power relationships e.g. according “the weakest” the privilege to be listened to, ensuring “the strongest” finds it necessary to explain their case to others

·      While a round robin may feel contrived, when a decision is required, conducting a round robin to enable every voice to feel heard and there is time for the group to reflect on the “down-stream” consequences of the decision that has just been taken

Contact info@boardqadvisory.com for a dsicussion on how BoardQ could assist with mobilising board contribution and influence

BEYOND METRICS: BOARD OVERSIGHT OF COMPANY CULTURE

The 2019 Justice Hayne led Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in Australia (the largest of its kind in the OECD) has put the spotlight on company culture, in particular, the role boards play in its oversight. A generalised awareness of  culture that goes beyond what are proximate strategies such as reviewing culture related metrics, is no longer good enough. Neither is defaulting to the use of remuneration as a primary tool for shaping culture and behaviours. Despite the challenges associated with measurability of culture, there are a number of ways boards can turn generalised awareness into skills required to better steward company culture. This is now a priority for boards.

 When companies say they measure culture, they may be viewing culture too narrowly. An unfiltered view of culture is difficult to achieve because it is the cumulative total of unwritten rules that drive thousands of decisions employees make day to day. Company culture is multi-layered and complex in that there is a tangled relationship between personal and company values. Current metrics fall short of assessing the internalisation of a company’s espoused values.

 Most boards and their People Committees regularly review a range of metrics which include:

• Customer experience survey results and net promoter scores

• Recurring patterns of customer complaints and the speed and diligence in how they are resolved

• Unexplainable spikes in revenue, profits driven by sales incentives

• Defection of key customers, accounts or contracts

• Use of escalation and whistleblowing processes and key themes

• Employee engagement survey results (including sub-culture distinctions); pulse surveys at regular intervals on discrete issues

• Correlation between performance of the unit and the unit’s appraisal outcomes

• Turnover trends in critical roles (in particular those that monitor risk and other assurance functions)

• Attrition of talent (including the lack of attrition where there should be)

• Diversity reflected in key appointments (beyond just gender)

• Glassdoor and other social media data

While reviewing metrics may be comforting, they are proximate measures and will not tell a board everything it needs to know about the culture of the company. Metrics can mask deeper underlying issues as was evidenced in cases of poor culture where boards had diligently reviewed such metrics. Most boards also supplement the review of metrics by instituting a rhythm of feedback loops such as visitations, planned and unplanned conversations and board-sponsored special investigations. This too can provide proximate, anecdotal glimpses of culture. A more systemic approach is called for that goes back to the fundamentals of how culture forms in the first place.

A rethink of the approach and associated board skill needs to extend to how strategy conversations are approached and how governance rhythms and habits can be strengthened through rethinking committee charter scope and nature of deliberations. In addition, boards need to ensure an alertness to the boards own ‘ways of working’ and the implicit signals it sends to the broader organisation.  

Strategy, risk and culture are not as connected as they should be. Revelations from the Royal Commission point to the inattention to cultural/behavioural consequences of strategic options a company decides to pursue. A bad culture is sometimes the consequence of badly thought through strategic choices. Therefore by evaluating strategic options using a ‘culture lens’ to decide those it adopts or rejects, boards become more skilled at pre-empting cultural issues. Other decision habits the board can role model and sponsor as good management practice is also critical to ensure a culture of constructive challenge is actively fostered. 

There is also significant scope to strengthen the governance rhythms within the company, ensuring that the culture related intent of these are better structured and communicated. A more multi-disciplinary, issue-driven approach to internal audits, strengthening the voice of group functions to provide more definitive board assurance and a rethink of how committee charters might incorporate more thorough deliberations on the cultural assumptions of decisions they take, are some of the ways in which boards can strengthen their governance rhythms; as are efforts to ensure that codes of conduct better distinguish between ‘must do’ and aspiration, and that there is better company antenna to judge reasonable public expectations and how these are evolving.

Last but not least, the board’s own culture can strengthen or weaken the impact of its oversight. New research shows that how boards choose to manage director dilemmas, implicit in the exercise of their non-executive roles, sets the tone, as does the resulting working culture. The more work the board does on itself, its openness to new ways of working to address the enablers and impediments of a healthy board dynamic and associated skills, the more effective it will be in conveying cultural imperatives to the broader organisation.

In summary, when companies say they measure culture, they may be viewing culture far too narrowly. To properly oversee the culture of the organisation, a board has to first own its own culture and become alert to the implicit signals it sends the wider organisation it governs about what it values and what matters. Coupled with efforts to strengthen its own dynamics, a board has at its disposal a range of less obvious strategies it can deploy to strengthen it’s oversight of company culture. It starts with a more observant and alert board, skilled at recognising the cultural consequences of strategic options it considers and adopting a more clear-eyed view of management’s ways of working and what it reveals about the gap between espoused and practiced values.  

Dr. Meena Thuraisingham is author of “Identity, Power and Influence in the Boardroom” (Routledge, 2019). A psychologist by profession, Meena has recently undertaken a unique doctoral level study viewing board effectiveness through the lens of social psychology and group dynamics. Meena is founder and principal of advisory company BoardQ and a non-executive director of The George Institute for Global Health. She recently delivered a keynote on this subject at the London Business School at KPMG, UK and at a Herbert Smith Freehills organised event for non-executive directors in Sydney and Melbourne.

The human cost of workforce casualisation and the question of 'decent work'

The Pandemic has brought into clear focus the human cost of large scale casualisation of the workforce. Businesses everywhere, large and small, need to wake up to these human costs in a post Covid-19 world.

There is no denying that the gig economy has had its benefits: it has offered individuals the flexibility to make extra money to make ends meet; it has offered employers a way of keeping fixed costs down, although employees will not enjoy the same certainty about how they will cover their own fixed costs. Consumers are benefiting also in having more control over how they consume services.

Casuals – many with ‘zero-hours contracts’ (which some countries with more progressive social policy have outlawed) - are at the beck and call of app driven distribution of work, not knowing from one day to the next what their income might be. Even where casuals have remained working with the same employer for months even years, they enjoy no benefits other than the agreed hourly shift rate.

Insecure and precarious employment of this kind ultimately impacts businesses as has been exposed by the Pandemic. Casuals who have no basic protections have felt they have no choice, even when unwell, to go to work to keep the lights on and pay the rent, a key reason for rapid community transmission of Covid-19. The anxiety they feel from knocking back a shift one too many times for reasons of feeling unwell  has real consequences. They risk not being called at all. In the midst of rapidly rising unemployment, this is a very real consequence for many.

Band-aid solutions such as 2 weeks of pandemic leave may temporarily address anxieties that casuals feel about staying home. But there is a need for more systemic change - change that is rooted in a key question about the sort of society we want. In 2015 the ILO defined decent work as opportunities for work that are productive and deliver a fair income, security in the workplace, social protection for families, better prospects for personal development and social integration.

Business and Government must come together to put considerations about profitable endeavour alongside considerations of humanity and societal well-being and engage constructively on how access to decent work opportunities can become a right for all. Government, business and community leaders must partner to reframe and structurally solve for the pandemic triggered workforce dislocation that is already underway for older, younger, and female workers. A more inclusive economy will also demand that the assessment of work, which until now has only accounted for its financial value, take into account the social value of work.

BoardQ, July 2020

EMBEDDING A CULTURE OF ACCOUNTABILITY – THE MISSING PIECE

EMBEDDING A CULTURE OF ACCOUNTABILITY – THE MISSING PIECE

Australia’s Banking Royal Commission shows the significant damage wrought when accountability is treated as a box-ticking exercise. Until we acknowledge the complex social nature of accountability, history is doomed to repeat.

 We often think of accountability as a set of outcomes or goals – a set of expectations that are enshrined in formal sources of accountability such as employment contracts, performance contracts, KPIs and reward systems depicting what should be done, by whom and how. While formalising accountability in this way is important, it is insufficient in that it ignores the reality that accountability occurs in a social vacuum. Our research reveals that the social context in which accountability is exercised is pervasive. It determines how accountability is actually practised and the choices individuals make to exercise the accountability they are assigned.[1] In consulting with organisations we also often see gaps between formal expectations and actual behaviour or ways of working. We put this down to the over-reliance on formal sources of accountability and the failure to focus on team routines, norms and behaviours where the practice of accountability is truly revealed. 

In any given group, the practice of accountability has a social dimension shaped by informal expectations, and influences what is perceived to be true, right and valuable. This is a consequence of a shared history of interactions, accompanied by unique routines and norms that emerge and persist, operating largely invisibly. This unique dynamic, “how things are done around here”,  becomes the informal standard against which each individual assesses how they are doing, reassessing their value to and place in the group and adapting their behaviour accordingly. Accountability seen in this way is a self-regulating process in which members of a team are continually reassessing and adapting their behaviour. The extent to which group norms, routines and behaviour diverges from formally prescribed expectations is driven by what individuals perceive as valued in the group, their own needs for acceptance and approval from the group and the power dynamic they each have to fit into. This is evidenced in numerous organisations who have experienced breaches of accountability despite implementing formal frameworks.

There is also a ‘political’ dimension to consider in that ownership and accountability have to be viewed together. Accountability is rooted in the processes of ownership. This is because individuals within a group are unlikely to show accountable behaviour in solving a given issue if they do not feel or believe they own the issue. If the leader adopts a “not my problem” or “it’s their problem, not ours” position, as is common in silo’d cultures, accountability is unlikely to thrive within the group.  Furthermore, a leader is unlikely to own a problem if they believe the consequences of ownership will be detrimental to their personal and professional position or success or the team’s prospects. In a culture that is psychologically safe i.e. where people feel safe to own up to mistakes, missteps and failure, teams are more likely to role model ownership behaviour and thus exercise accountability. Therefore, any effort to embed accountability in a group must first consider the degree to which real ownership is demonstrated.  

 In summary, despite the complexities associated with how accountability is created and practised, companies have continued to over-rely on more formal and structural prescriptions in an effort to improve accountability. Simply issuing formal policy guidelines, frameworks, KPIs or dictates does not go far enough. A more nuanced understanding of the human dimension of accountability is required as is a more systematic analysis of routines, norms and behaviours in a given group. It is time to rethink what it takes to embed accountability in an organisation.

 Identity, power and influence in the boardroom (Thuraisingham, 2019, Routledge UK),  attempts to demystify the informal aspects of accountability and suggests strategies for how the gap between formal expectations and actual behaviour can be addressed.

[1] Thuraisingham, 2018

IN OUR GRASP, THE REIMAGINING OF A DIFFERENT FUTURE…..

This is a seminal moment for us all: for us, our families, our community and our businesses. While not everyone will be infected with Covid, everyone will be affected in varying degrees by the unfolding crisis. However tragic and painful this current crisis has become for many, the lockdown (now in varying intensities across the globe) has thrown up some real opportunity and possibilities for how we might live more meaningful lives. For businesses, who lost the trust of the communities they served as a consequence of the global financial crisis, this is an opportunity to rebuild that trust deficit by being part of the solution. For some governments who have failed to recognise financial inclusion as key to social cohesion, this crisis also offers opportunity. It is a much needed antidote for rising division and tribalism. For individuals, it offers an opportunity to ask deeper questions of ourselves, respond to the Socrates’ challenge “an unexamined life is not worth living”, and live a truer life.

 This is not the time to ‘snap back’ to how we were before but to fully realise the opportunities the crisis offers. It will require reimagining the very assumptions on which our economies are based.

Valuing our interdependencies

Every day in large part we take relationships for granted in both the personal or work domains.  The crisis has brought in full view how our lowest paid are doing some of the most valuable jobs. The value that essential workers add, illuminated by the ravages of the lockdown, is under-rewarded. Rather than exploiting power differentials between owners of capital and the people who work that capital, it may be time to acknowledge and value the interdependencies that contribute to a sound working economy. This may involve addressing the exploitation evident in gig worker conditions, rethinking the unconscionable spread of zero hour contracts, modern slavery used in producing five dollar tee shirts and the systemic under-valuing of foreign workers who pick our produce, clean our hospitals or man our 24/7 convenience stores. It may also be a time to experiment with new and different ideas such as UBI and MMT. This is not a Marxist plea but a call to stand back and properly value the very dependencies on which a functioning society thrives.

 Rethinking the nature of work

Amidst the largest forced experiment in flexible working, we realise we no longer need bricks and mortar to do our best work. Banks, energy companies and retail behemoths are being run by leaders working out of their kitchens. Call centre workers around the world, essential to keeping the lights on, are now working from home using Virtual Call Centre technology. Some CEOs are turbocharging their previously sluggish communication channels by hosting weekly town halls for hundreds of employees simply to stay in touch. Through such forums, these companies are seeing levels of engagement go through the roof, producing a wellspring of ideas about change and business resilience from the people closest to the real work. By rethinking the nature of work and ways of working, we can also reduce the harmful consequences of our footprint on the fragile environment. A world without roads or train platforms jammed with commuters, the birdsong now audible in our city parks, bluer skies and cleaner rivers and canals may be something we don't want to lose or snap out of, when the pandemic recedes. 

 Stress testing the power of purpose

Some companies are beginning to realise that in the midst of this, their purpose and values are no longer optional, nice to have conversations. Instead, under immense financial stress, they are using their purpose and values as the moral compass for making tough choices and managing impossible dilemmas. Such companies are standing up and being counted: paying suppliers earlier than usual, extending credit or insurance cover to people who would not have qualified previously, extending health premium holidays, contributing more to charity groups supporting  thousands that are jobless and homeless and so on. There is no better time than now to stress test your values and purpose and use it to determine how the organisation is living up to the terms of its social licence. Vague purpose statements or values won’t cut it.  You will want to look back and be proud of the values you had publicly espoused as a company, the brand you strengthened and the trust you restored during this challenging time.  Your shareholders will be handsomely rewarded.

 The humanising of companies

As  team leaders manage their teams remotely, witnessing the unscheduled and inconvenient interruptions from kids, dogs and other dependents calling on team members’ attention, gives a special humanness to working relationships. Even the sobering realisation that not everyone can call home a generous multi-room apartment, or find the space to take a quiet call gives more humanness to the workforce and working relationships. In a sense, while we are now more remote, we are more connected, relating to each other in more intimate ways. Team leaders are having to practice more patience, more empathy, more generosity and more humility and we will be better managers for it.  A humanising of companies is underway. This shift has the power to truly differentiate companies through sustaining extraordinary levels of workforce commitment and dedication well beyond this current crisis.

 The importance of mental health and well being

This crisis has amplified mental health as an issue. This is an opportunity for governments and corporations everywhere to accelerate mental health investment. For many of us even without a prior history of mental health, fears for the health of our ageing parents, our children, our grandparents, close friends and of course our livelihoods can take a disabling hold on our well-being. The loneliness that some of us will feel as a consequence of the lockdown only serves to show that our emotional well-being is as critical as our physical well-being. Governments need to invest as much in mental health as they do in physical health and ensure where investments are made that the policy intent-impact gap is quickly closed.

 Hope for a better tomorrow

The lockdown and its consequences provides us a timely pause.  As we face into an existential threat to what glues our economies together - physical, social and moral capital - it presents us with a profound choice. An opportunity to put aside old playbooks and old prescriptions and imagine what a different world could look like. Let’s seize this crisis and be remembered as the generation that helped make the world a gentler, kinder, more inclusive world. 

Written by Meena Thuraisingham, Principal, BoardQ, April 2020