Two recent publications have important implications for how Boards make decisions. One is an academic treatise on how information is shared in teams. A Board is a kind of team, working together to (among other things) make major decisions. The practice of having a team make the big decisions is based on the idea that teams will, generally, make better decisions than individuals. This is founded in turn on various assumptions:
- Good decision making depends in part on taking into proper account relevant information;
- Teams collectively possess more relevant information than individuals; and
- Teams share and make use of that information in their deliberations.
The authors of Information Sharing and Team Performance: A Meta-Analysis focused on this third issue. They did a comprehensive review of existing studies on how teams share information, making a number of interesting findings. If we extrapolate those findings to Boards, we can infer:
- That sharing of information in Board meetings will indeed improve Board decisions.
- However, Boards will generally not share information as effectively as they could.
- In particular, Boards will tend to spend their time talking about what everybody already knows, rather than sharing important information that only a few people know.
- In fact, the more there is a need for information sharing, the less information sharing will actually happen.
- The more time the Board spends talk, the more they just rehearse what they already know.
- Boards will share better if they think they are solving some kind of factual issue as opposed to making a judgement requiring consensus.
- Boards share information better if they use a structured discussion process, rather than just indulging in the usual kind of spontaneous conversation.
In short, there should be scope for Boards to improve their decisions by changing the way they conduct their discussions so as to promote better sharing of critical information.
As it happens, a recent piece from McKinsey makes much the same point. In “Using the crisis to create better boards” in the October 2009 issue of McKinsey Quarterly, the authors zero in on information sharing using structured techniques:
“Chairmen can expose their boards to new sources of information – such as new performance benchmarks, new customer demands, or new financial perspectives – in many ways. One involves tapping into the rich experience of nonexecutive and executive directors who also hold external appointments. Each board member can be asked to share one fresh idea as part of a discussion about the company’s future…”
The idea of going around the table asking everyone to contribute an idea is hardly very profound or original, and it is curious that leading management consultants, in the pages of the journal of one of the top shelf consulting firms, would be encouraging Boards of top organizations to make use of such a simple technique. The fact that such a suggestion is seriously being made actually suggests that the issue of poor information sharing, discussed in abstract terms in the academic meta-analysis, is in fact a very real problem at the highest levels.
Later in their piece, the authors get a little more specific about some of the information that needs to be shared and how to do it:
Chairmen ought to help their boards…by requesting that all significant proposals come with a “red team” report presenting contrary arguments…the chairman would merely request that the board hear arguments for and against any important proposal. The CEO would therefore have to think deeply before submitting the proposal, undecided board members could insist on a fuller discussion, and a rival paradigm might see the light of day.
This suggestion is very much in line with our proposal that organisations improve Board deliberations, and hence decision making, by adopting decision mapping. Decision maps, by their nature, include “the arguments for and against any important proposal,” though they include such arguments in a wider framework encompassing the overall structure of the decision.
The McKinsey authors seem to be suggesting – and we would agree – that Boards don’t need more information thrown at them, in the form of door-stopping Board reports or dense PowerPoints. Rather, they should look to benefit by more effectively sharing with each other the critical information and insights which they may already have, and understanding what difference that information makes to the issue.