Improving boardroom interactions at your startup
PwC’s Annual Corporate Directors Survey has revealed that:
– about 50% directors believe that at least one fellow director on their board should be replaced;
– 36% of directors have difficulty voicing a dissenting view on at least one topic in the boardroom.
To paraphrase from the report – “Each director brings his or her own habits, preferences, past experiences, and individual biases. These all impact the board’s culture and decision-making. Boards can’t achieve a truly strong board culture without taking these dynamics into account.”
4 common boardroom biases which affect the boards:
- Authority bias – Some boards overvalue opinions of long-tenured or senior (and often male) #directors & are reluctant to question their judgement due to their stature & experience. Relying too much on one director’s experience & dismissing what others have to say, or abdicating responsibility assuming that someone else on the #Board knows better will lead to sub-optimal decisions.
- Groupthink – Consensus-building is necessary in a group, but the desire to maintain collegiality amongst directors may lead stifled dissent. Different views should be welcome in the boardroom, opinions of experts should be sought to bring more external inputs to aid in decision-making.
- Status quo bias – Traditionally, most companies value a set of established norms and diversion from such norms is not encouraged. But initiatives involving significant change requires a radical shift in thinking, embracing of new strategies & ideas. Accepting or rationalising sub-par performance from the management may be the worst outcome of a board unwilling to move from status quo.
- Confirmation bias – Directors tend to subconsciously look for & overvalue data which confirms their own beliefs & undervalue data which disputes it. This can lead to overconfidence in the outcome that directors are hoping for. Building #diversity in the board can help with objective decision making by allowing robust discussions & debates.
Companies & directors can use these insights to improve board dynamics, have more effective interactions & improved outcomes from board decisions. Read more here: https://www.pwc.com/us/en/services/governance-insights-center/library/unpacking-board-culture.html