Having reviewed the operations of thousands of organisations in more than 34 countries, our ongoing research indicates that organisational stewardship of boards has dropped to staggeringly low levels and only 18% of corporations worldwide possess a strong sense of mission.
In addition, 66% of board members and senior executives say they dare not raise or address critical issues that are too complex or controversial, despite knowing that such inaction could endanger their organisation’s survival.
Much of our work on boardroom dynamics looks at how disparate groups of individuals can come together and work effectively as a team. There are undoubtedly significant tensions in the boardroom. For example, 75% of chairman-CEO relationships are dysfunctional in some way; as are those between CEO and chief financial officer (CFO), as well as the executive and non-executive members of the board.
The reasons behind this tension are varied. Some is an inevitable result of boardrooms being filled with intelligent high-achievers. They can, and often do, reach different conclusions and may be unwilling to let go of what they consider to be a clearly developed and logically founded perspective.
Further, top managers can hold diverse views on what constitutes competitive advantage. Almost one-third of organisations worldwide find they cannot agree on this. Some 34% of board teams indicate that they have no shared view on mission, vision or strategy, while 66% admit awareness of known difficult and critical issues, which they feel too uncomfortable to openly address.
Boards often become politicised as individual views are entrenched and teams try to work out their differences. In these circumstances, some board members avoid highlighting uncomfortable subjects for fear of exacerbating already tense situations, leading to a culture of paralysis.
When conflict does occur, it can fundamentally alter the dynamics of a board in ways that can prove difficult to recover from. Differences of opinion on organisational purpose can split the board but, if governance apparatus fails over such a fundamental issue then the organisation will find itself in serious trouble.
It is clear that ignoring difficult issues can have a catastrophic effect, so it is important to identify warning signs and understand how tension and conflict can be properly managed.
Conflict and tension in the boardroom is not only inevitable, it plays an essential part in effective boards. There is a clear distinction between tension and conflict. Tension is disagreement, which is often uncomfortable but can be resolved by healthy debate. Conflict is aggressive tension that escalates to extreme and unresolvable levels. While tension is seen as a positive and necessary force for any effective board, conflict is disruptive and detrimental.
Boardroom conflict manifests itself in a number of different ways: passive aggression, emotional responses, repetition, overtly interrogative questioning and physical behaviours such as leaving the room, slamming doors and even resigning. Tension shows itself as robust debate, open exchange of information, discussion of difficult issues, diverse perspectives, questioning and engagement.
Conflict and tension are most likely to emerge during decision-making, or be linked to people, personality and historical issues such as changes in board structure. Sometimes, conflict is linked to the organisation’s strategic advantage and differences with its peers. In other cases it can relate to people and their recruitment, promotions or remuneration. These issues are always sensitive and are typically open to subjective and strongly held opinions.
Other “people” issues include defensiveness on the part of the CEO; a lack of understanding of the role and intent of non-executive directors; and the rise of the “psychopathic” CFO who is focused entirely on numbers-based evidence and whose view on any boardroom issue is defined exclusively on this basis.
While a good board exhibits “managed” tension, a dysfunctional one allows unresolved tension to fester and escalate into conflict. Triggers can include underperformance and the manner in which board members address one another. Tipping points are almost always the result of a situation becoming emotionally charged.
Direct, interrogative and aggressive styles of questioning are often recognised as triggers for conflict. Similarly, concerns which are not listened to, or go unheard, plant the seeds of future conflict. It is important to deal with potential conflicts rapidly to avoid an irreparable breakdown of trust and loss of respect.
Techniques to deal with tension and conflict
Disagreements should be openly discussed. Robust debate, open dialogue and tackling uncomfortable issues head-on directly benefits boards’ decision-making and actions.
In general, strategy and decision issues are more appropriately resolved inside the boardroom. Techniques for managing tension and minimising conflict include:
• explicitly acknowledging concerns during board meetings;
• face-to-face conversations; and
• depersonalising tension by reminding board members of their “higher purpose”.
Conflict, on the other hand, is most effectively resolved in informal meetings outside the boardroom. It is not bad strategy, or governance, that is responsible for some of today’s organisational failures. It is a failure of stewardship. Board members and executives allow bad situations to spiral out of control because of the discomfort they face in raising an uncomfortable issue.
Ultimately the best decisions are reached when there is a transparent exchange of information, sometimes conflicting concerns are fully aired, and multiple perspectives are offered. What is often needed is someone who can draw together all of the disparate strengths of board members to facilitate effective teamwork.
The chairman encompasses humanity, humility, high intelligence, an understanding of agendas, negotiation and resilience. It is therefore no surprise to discover that they are best suited to help resolve tension and conflict in the boardroom. Their role is to set firmly established boundaries about what needs to be formally discussed in the boardroom and what should to be dealt with outside.
It is also the chairman and company secretary’s job to ensure that everyone around the boardroom table has a voice. They need to listen and observe, recognise tension during meetings, and observe and assess the body language and expressions of board members.
Of real concern is the functioning and contribution of the departmental board. The majority of our recent research into the functioning of the civil service—The Kakabadse Report—found that interviewees felt that departmental boards added little or no value. A key reason behind this is that the chairman in this case—the secretary of state—is distinctively inaccessible. Numerous non-executive directors disclosed that they have hardly met their chairman.
Even when the secretary of state turned up, rather than leading the governance and oversight of policy delivery, the board focused on examining a particular political perspective that troubled the secretary of state that day.
Chairmen need to become accustomed to challenge and receiving feedback. Corporate failures and changing leadership models mean that effective board governance is presenting a massive challenge.
Active listening is a vital and under-appreciated skill in getting to the root of any problems, and a key role of the company secretary is helping people to clearly articulate what their issue really is.
Similarly, the importance of depersonalising exchanges and taking the emotion out of the situation cannot be overstated. Chairmen play a critical role in conflict resolution, helping individuals to align with the board’s common purpose, and providing a sense of perspective that the goals of the company are greater than the needs of any individual members.
Dealing with personalities who have a very firm view that what they are doing is right is not always easy, but company secretaries have a duty to be firm and say: “Not everyone is with you on this”.
A board is like an orchestra. Each individual member acts as a soloist, but also works collectively with others as an ensemble capable of making decisions in the best interests of the organisation.
All board members bring their own expertise, roles, responsibilities, goals and agendas. They may even take pride in their own levels of independence and objectivity. Despite this, they must ultimately work as part of a wider team that is responsible for the organisation’s long-term interests.
For a board to move forward as one body in the best interests of the organisation, personal differences and opinions need to be managed effectively by the chairman. Boardrooms would be far less effective places without a degree of constructive tension. It is only by understanding and embracing this process that the best possible decisions can be reached.
Andrew Kakabadse is professor of governance and leadership at Henley Business School, where he also serves as chairman of the Henley Directors’ Forum.