Psychology in the Boardroom: Part 1

By: Paul C. Winum

This is the first of a three-part series examining the topic of how social-psychological forces impact the performance of boards and CEOs. The topic will be addressed at the June 2017 Stanford University Directors’ College in a panel titled “CEO and Board  Psychology.”

What makes a board great?

As part of RHR International’s recent governance research program, we asked this question to directors who collectively serve on more than 125 boards. Ultimately, the answer to the question—the proof of the pudding, as it were—is the value a board contributes to enable the organization it governs to succeed in its goals and in the execution of its mission.

But what are the factors that determine whether a board truly delivers on its value proposition? As we explored that question, one of the strongest themes that emerged from directors’ responses was boardroom culture. The best boards had a culture characterized by several attributes: collegiality, mutual respect, diverse viewpoints, constructive debate, and the ability to tolerate and effectively resolve conflict.

Later this month, Stanford University’s highly regarded Directors’ College will include a plenary session titled “CEO and Board Psychology.” The panelists at this event will engage the directors in attendance in a discussion of the factors that enable and inhibit a performance-enhancing culture in the boardroom. As one of the panelists at that session, I will present the position that boards are social systems and subject to the same social-psychological dynamics as any small group. Let me explain.

Social psychologists have studied group dynamics for nearly a century now. In the 1940s, when RHR first applied the art and science of the field of psychology to organizational leadership challenges, Kurt Lewin’s force field analysis work began the first of many decades of experiments on small groups, studying the factors that influence the performance of groups on a variety of tasks. 

Lewin’s work was followed by a host of prominent researchers who studied how a variety of group phenomena can help or undermine effective problem solving and performance. Social conformity—the desire to fit in, which can lead to groupthink, and the “bystander effect,” where individual responsibility is abdicated to others assumed to be responsible—is a powerful force that unquestionably operates in corporate boardrooms. 

If you look at the composition of the boards of some of the leading financial services companies a decade ago, the directors were a veritable who’s who of the most respected and capable business leaders. Yet the way that some of these boards failed the organizations and shareholders they were charged with protecting raises the question, “How was the whole so much less than the sum of the parts?” I believe the answer to that in part lies in the social-psychological dynamics that operated in those boardrooms.

The session at the Stanford Directors’ College discusses these dynamics as they apply to board and CEO performance. In part two of this series, I will share highlights from that session. Stay tuned!

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