Board diversity from a psychological perspective

Take-Away Line

Revisions to governance codes and supporting advice to boards have taken to heart the notion of ‘behavioural governance’, to support boards offer the independence of mind and rigour that effective organisational leadership needs. But they have so far failed to address questions of psychological diversity, the range of behavioural preferences that each board member brings. Understanding the psychological preferences of boards could make a significant difference to governance performance. A tool such as C-Me is an ideal way to helping boards reflect safely on who’s in the board room as well as questions of succession. And it does this in a highly engaging way. Indeed, C-Me alongside BoardsCount™ would be a delightful and low cost way for boards to examine psychological diversity and governance performance.

Austerity and Cheerfulness

In tough times, we need reasons to be cheerful. In tough times, the tendency is to cut the nice-to things and focus on the core. Diversity is one of these things: sure, diverse boards and diverse management teams bring added business value, because they bring diverse perspectives to a challenge, but it’s all too easy to let these things slip out of mind when we’re too focused on the business of the business. But why should this be an ‘or’ and not an ‘and’? Can’t we focus on the core AND make sure we attend to questions of diversity? This article points out a vital aspect of top team diversity that is often not considered and shows you how to make sure you deliver it. We might call this aspect of diversity psychological diversity.

Right across Europe, the policies of austerity are still in full force, with, in the case of the UK, local authorities in a perilous state and the UK government’s public finances at the bottom of the global league table. The impact of these policies is felt every day by the most vulnerable and by the better off too, in terms of challenged health services, schools under stress and a transport infrastructure that’s just not coping. Such stories are so much part of the new normal of life in many countries, not least this one, that it’s easy to forget that things were and could be different, and that these policies emanate from the global banking crash and the decision of governments to bail out the banks with public money.

The Governance Codes Miss a Trick

The banking crash did great damage to the economy, but damage was also done to the reputation of the financial sector, caused by poorly governed banks. Some argue that the banks haven’t learn ed the lessons, but in one respect work was done in depth: governance. The 2009 Walker report focused on the question in depth (with the later Vickers report and the more recent Parliamentary Commission on Banking Standards adding their dimensions from a broader perspective). For Walker, the focus was on behaviour, and key among his findings was the danger of ‘group think’ among board members, the tendency for one dominant view to hold sway too quickly in a discussion, effectively closing off alternative views and, thereby, potentially inhibiting a board from taking a balanced view on a strategic question, in the best long-term interests of the, in this case, bank. What’s needed, he argued, was a more robust approach not only to the selection of Non-Executive Directors (NEDs), but also to board behaviour and to reviewing board performance to ensure that these rather intangible, but critical, elements have the right level of attention. So, we need more diverse boards, more on their game and behaving in ways that give the board an air of greater independence of mind, and we need them to be reviewing their performance more robustly.

These ideas were all written about the banking sector, but were later adopted into the Corporate Governance Code and revisions to the National Housing Federation’s Governance Code for housing associations and the Governance Code for the Civil Society Sector in England and Wales.

However, let’s take Civil Society Code for a moment. In Section 6, it makes clear that diversity is important and says many good things, but makes no direct reference to psychological diversity. Meanwhile, in Section 5, it makes clear that a positive board culture and good behaviours are vital, but makes no explicit reference as to how who we are, as a person (i.e. board member or NED), may influence how we behave, and that this could in turn impact on the outcome of decisions, especially if the board is made up of people who are in some sense psychologically similar. It seems the thinking identifies the right problem but fails to see through to providing the right solution.

Psychological Diversity

Of course, we all still need to look for a board that is diverse in terms of skills and experience to ensure that a range of professional perspectives can be heard at the top, and diverse too in terms of community perspectives, not least gender, somehow reflecting the demography of the community that is served by the organisation. But would that be enough? Certainly not! We need to ensure too that our boards are psychologically diverse in a way that makes for a team whose members think differently, process information in a range of ways and face into challenges in different ways too. But how do we do that? How indeed does a board even talk about behaviour in a constructive way?

And remember, we are talking about behaviour here. Behaviour is of course influenced by deeper notions of personality and values, but what we want to see – and therefore talk about – is behaviour. Don’t know about you, but I find it difficult to talk about someone’s behaviour, particularly if it’s behaviour that in some way comes across as negative. We need some tools to help us.

I was at a Charity Commission consultation a few months ago to look at this very challenge: how to we support boards deliver on ‘behavioural governance’ and foster diverse and constructive behaviours. We know behavioural governance is a critical piece in the jigsaw of organisational success (and failure), but how to we get into that and how to we support boards get into that in a way that is constructive and does no harm?

Organisations use a plethora of tools to support learning about self in the work context and learning too about how teams operate. Think of Myers Briggs, the Enneagram and so on. But boards rarely take that opportunity. One problem here is that they may feel that they have so little time, that to spend some of it on themselves (‘navel gazing’), even if they feel the money is worth investing, is too self-indulgent. But this is of course, a self-defeating approach longer term.

During the day just mentioned, we were introduced to a tool called C-Me, a delightfully accessible approach to enabling teams to reflect on behaviour in a simple way. I was so impressed I signed up to be accredited with them to deploy to tool with board clients.

What C-Me does is help a board (or any team) reflect on each member’s behaviour, so they can learn about how they come across in a very non-threatening way, while also learning about each other and about the make-up of the whole team. Like many of such tools, it’s based on the theories of CG Jung, whose work has featured in this blog on several occasions, but it’s the presentation of the tool that impressed me: just right to enable a discussion and to enable learning in a short period of time, at low cost and in an engaging way.

For myself, for example, I learnt that I’m a cautious decision maker and may be frustrated by people in the team who want to rush ahead into things. Point is that a team, particularly a senior team like a board, needs folk who are enterprising and people who need facts to make decisions. Too action oriented and things would not be thought through; too process concerned and nothing much would get done. You need them both.

As a team, those of us present at that day, were strong in terms of being considerate and respecting each other and not bad in terms of being creative and positive, but we were utterly absent in confidence and action orientation and we were very weak too in terms of focusing on the details, problem solving. Imagine then if we were an actual board: we would enjoy each other’s company, we would have lots of new ideas, we would care about our clients, but we’d struggle to understand the detail, we’d fail to drive performance and we’d be poor at taking a structured approach to our board work. Hopeless! If this were a real board, we’d fail in our task, and we’d fail without even really knowing why, because we would not have examined our psychological diversity and taken steps to ensure that we had some folk who could drive things forward, get to grips with the detail and set a good pace.

Situations like this one are a common feature of boards up and down the land in my experience, leading to the inevitable conclusion that organisational performance is being compromised by boards that are behaviourally too homogeneous, or perhaps conflicted because they don’t quite understand the richness that their diversity brings.

What’s to be done?

So, when it comes to board diversity, an important question, in addition to ‘who do we have here?’ is the normative one: ‘who do we need?’ By asking – and by answering – this question, diversity acquires a third dimension: skills and experience; community perspectives (gender, disability, ethnicity, etc); and psychological preference (aka behaviour). To have a heterogeneous board, we need to consider all three of these dimensions and our board succession plan needs too to reflect on this. I will certainly be incorporating this dimension into my work and BoardsCount™ governance assessment tools and board succession support.

The governance codes I have referred to in this article all encourage the use of board reviews to assess governance performance. Boards are at the top of their organisations and, when you’re at the top, you don’t easily now how well you’re doing. So, you have to get feedback and learn to reflect constructively on that feedback. You have to learn how to adapt in the light of your experience. BoardsCount™ is designed with just this in mind. It’s a nice low-cost way of reviewing board performance. But it doesn’t catch the element of diversity considered in this piece. BoardsCount™ with C-Me would be a killer way of doing this together. Now, there’s a thought and it doesn’t cost the earth either. I would say that this is a reason to be cheerful in tough times: tackling diversity, tackling board performance, in a cost-effective way, even when times are tough, to support your organisation really drive its mission forward.

Questions

What do you think are the behavioural preferences of the members of your board or top team?
To what extent do you think your board has reflected on performance and considered the behavioural element?
What do you need to do next to support board performance assessment and board succession planning in the light of behavioural diversity?