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Diversity in Decision Making at the Board

February 16, 2022

Posted in: WATSON Views

Dear Reader,

This is a model which I developed over 30 years ago to help me make and implement decisions successfully. It is based on experience and has been refined over my many years in leadership roles and board positions. Although I have shared the model frequently in speeches, this is the first time I am sharing it in printed form. I hope you find it useful.

Please note, I am using the word diversity as meaning the state of differences and/or variety. This is not an article on the practice of including or involving people from a range of different social or ethnic backgrounds or of colour, gender, etc.

Dee Marcoux

 


 

Part 1: What Decisions?

The purpose of a board is to make decisions in the best interests of the corporation as a going concern unless in auction.

In the process of making decisions, a board must exercise:

1.     The duty of care: to make prudent decisions that have a high likelihood of success.

2.     The duty of loyalty: to make decisions in the best interests of the company.

 

Decisions about what?

1.     The board itself such as selecting the chair and directors, preparing for board succession;

2.     Setting the tone by establishing the ethics policy and code of conduct;

3.     Choosing a CEO, approving executive compensation, CEO succession, levels of authority;

4.     Approving strategy and plans to implement;

5.     Approving financials, choosing auditors;

6.     Approving communications with shareholders;

7.     Methods for monitoring and supervising all of the above.

 

Part 2: The Process for Making the Decisions

The Board’s work then is to discuss and debate decisions and come to a conclusion. The chairperson’s job is to manage that process. That is, to ensure all voices are heard and understood, that points are properly debated and clarified, and then to sum up the discussion so that one voice is formed.

Based on my observations, there are four steps in this decision-making process and for each of these steps there are two distinctly different approaches.

 


STEPS APPROACH A APPROACH B
1. Energy to make the decision Thinks out loud Thinks to oneself
2. Information to make the decision Big picture focus Details are important
3. Making the decision Makes sense: it’s rational Gut feel; it feels right
4. Implementing and monitoring the decision Path and milestones are important Goals are everything

It is important to note that with four steps and two elements per step there are 16 variations that are exhibited by individuals. Beware of putting anybody into a box or a set of boxes. These differences can be a great source of friction; alternatively, they can be a great source of learning and lead to better decisions.

You cannot tell by looking at an individual what approach they take: often even the person is not aware that they have a bias let alone that there is another valid approach. What gives people away is their language and behaviour. There is no right or wrong way to make a decision and it’s best to engage in a full debate that embraces the differences to ensure there is a good balance. What is important is to never be dismissive of an approach.

 

Part 3: Let’s Examine the Four Steps


STEP APPROACH A APPROACH B
1. Energy to make the decision Thinks out loud Thinks to oneself

Do not let those that love Board dinners and like to talk as they think crowd out those members that like to think and then speak, like downtime to recharge and like information in advance. On the whole, our society tends to be extroverted. Just beware that you may be inadvertently dismissive of the minority by setting Board agendas that fit better with one style versus another. An example of this would be setting agendas that involve making decisions over drinks and dinner, especially after a long day. If you are chair, another way to ensure all voices are heard is to choose who speaks first and vary the choice. Also, establish a norm that questions are to be about learning not about testing. Questions to learn are more productive and promote better dialogue.

 


STEP APPROACH A APPROACH B
2. Information to make the decision Big picture focus Details are important

 

There are the big picture Board members and there are those for whom details make the picture. Big picture thinkers tend to be dismissive of those who like more information. Detail oriented thinkers need to examine the components. For me, I know my bias is big picture, so I go out of my way to ensure the right balance. If some directors need more information, then it’s important to accommodate them while not creating more work and more presentations for management. It can be handled through committees to get more detail or by encouraging the director to work directly with management. I like to think of information as a jigsaw puzzle: some need to see the pieces to form the picture, some are satisfied with the illustration. To make a good decision you need the right balance, so accommodate the needs without creating friction.


STEP APPROACH A APPROACH B
3. Making the decision Makes sense: it’s rational Gut feel; it feels right

 

Our lives are just a series of decisions, and here too there are two distinctly different ways to make them. The makes-sense decision makers tend to dominate businesses; what feels right doesn’t cut it in many professions such as mine. As a junior engineer when I worked for Esso, I was sent on a course called “Rational Decision Making” and it was something of a rite of passage. Because I like to challenge things, I asked the instructor if there was a course on irrational decision making, one that might help us de-program a little and listen to the gut as well. Given the culture at Esso, I was deemed a troublemaker and sent to the back of the class. It made me think though: were ways of decision making other than rational valid? Maybe not for designing a reactor, yet perhaps if trouble shooting a problem there was a place for the gut? I had heard process operators talk about a sense of something not right, that something was out of tune, something they could not define rationally. I started to realize that some things just do not feel right and learned to be attentive. Opening my mind beyond the rational ultimately led me to the place in a board room when you just sense that something is not right and to trust that sense. Trust goes beyond rational.

The language we use matters. Be wary of being dismissive if any board member suggests that something doesn’t feel right. It’s a red flag that must not be ignored just because there is no logical or provable reason for the discomfort of a Board member.

 


STEP APPROACH A APPROACH B
4. Implementing and monitoring the decision Path and milestones are important Goals are everything

 

Fluency in All Four Steps of Decision Making: Although management implements the decision, the Board also approves its implementation and monitors the outcomes. If a decision is to be monitored, the plan needs goals and a path for achieving the goals. For some the milestones become the goals, for others the goal is the prime driver and if a better path is found, then the current plan can be abandoned, and a new path forged. Abandoning a plan should be done in such a way that allows employees to shift paths and buy-in to the new direction, otherwise you’re likely to reduce the likelihood of success. Many will misinterpret that management does not stay the course so communication here is critical. Changing paths can be perceived as changing the decision and therefore the new path must also make sense and feel right. Since boards have oversight and monitoring duties, it is important then that they approve the new plan, even if the goal has not changed. This a lesson I learned from an employee who was honest enough to give me critical feedback.

I have found that being fluent in both languages of decision making has allowed me to tap into the best of all thinking and the ability to bridge, so that the decision made passes all the tests. No person’s input was dismissed, there were no disagreements based on misunderstanding and the decision made makes sense and feels right. All areas of decision-making need both approaches, even the financials.

The most effective boards are likewise chaired by someone aware: one who ensures all voices are heard, respected, and understood so that in the end, the decision made is agreed to by all and that it has a high likelihood of being implemented successfully.

If you are on a board that is missing a style, recruit to fill the gap, or bring that voice to the table yourself. Educate your board if necessary. It never hurts to strengthen the quality of the debate.

 

Differences are Both Valid and Valuable: All decisions made need to be implemented and to implement a decision successfully it must be communicated in such a way that employees become committed. You do not know what type of person is listening to your communications. That is ultimately why you need to speak in both languages. For some, they need to hear the plan makes sense. For others, they need to hear the plan is the right thing to do or the plan feels right to them. You lose nothing by speaking to both ends of the spectrum, and by doing so, you are increasing the probability of success.

 

Dee Marcoux, May 2021

All Rights Reserved.

 

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