The importance of tone at the top in times of uncertainty
Whether a business achieves sustainable success for the benefit of its stakeholders and wider society is critically influenced both by the board’s decisions and, also very importantly, by how board members act in the boardroom.
Boardroom behaviour has a crucial impact on corporate culture since how the executive and non-executive directors treat each other reverberates across the organisation.
Four types of board culture
We have identified four different types of board culture based on a 2×2 matrix that considers the degree of support and challenge respectively that exists in the boardroom. Ideally, there will be an ‘engaged’ board with high levels of both, but alas the three other options are also found in practice and in their different ways each will hold the business back from achieving its full potential: the ‘cosy’ board with high support and low challenge; the ‘us and them’ board with low support and high challenge; and, the ‘semi-detached’ board offering neither challenge nor support.
1. The ‘engaged’ board
There will be strong degrees of openness and trust between board members on an ‘engaged’ board with high-quality information made available to the board and its committees in a timely fashion. There will be no issues ‘off agenda’ and challenging situations will be discussed at an early stage of arising with the collective intelligence of the board being brought to bear in determining the best way forward. Board meetings will be well-structured with time allocated for discussion and clear decisions taken after. In addition to dealing with regular board issues, time will be set aside for an annual ‘away day’ to provide an opportunity to review progress towards achieving the longer-term strategy and to consider other issues requiring significant time for reflection and discussion. The board also needs to know when it would be helpful to have external advice to assist in making decisions possibly, for instance, on issues related to cyber security or wider aspects of technology.
Succession planning will also be high on the agenda of an effective board and in choosing new colleagues the nominations committee will be conscious of the importance of ensuring diversity- of thought as well as of composition- and of appointing new board members who are both good in their functional roles and in contributing to the effectiveness of the board as a team, having regard to the complexities of the board as a whole team and within there being executive and non-executive directors with their teams within a team.
2. The ‘cosy board’
By contrast, a ‘cosy’ board is unlikely to want to face up to the difficulties of dealing with tough issues which is likely to lead to an element of drift.
3. The ‘us and them’ board
On the ‘us and them’ board there is a blame culture in the boardroom and the executive team is likely to be reluctant to discuss problems before they have to do so.
4. The ‘semi-detached’ board
The ‘semi-detached’ board, in effect just going through the motions of fulfilling its responsibilities, will display the weaknesses of both the ‘cosy’ and the ‘us and them’ boards and is thus likely to be a particular source of concern.
Running an effective board might be simply expressed as being about getting the right team in place and ensuring it works effectively, the main complicating factor being that people are involved.
How does your board fare?
To what degree do the statements below reflect the behaviour of your board?
We are an ‘engaged’ board balancing strong support with strong challenge of the executive team
We have high quality board papers and well-structured meetings enabling us to focus on the big issues.
We are a diverse board with round pegs in round holes in individual roles and we work well as a team.
We get to the tough issues early, consider how we can best respond to them and then move forward effectively.