Warren Buffet says, “The best way to affect the behavior of board members is to embarrass them.” While this statement may have some truth, there are better ways to advance change for competitive advantage in the boardroom.

To have the board aid in creating competitive advantage is an important mindset. Think of it this way. In a pre-IPO company, a board may decide that the best board candidate is an executive that has taken a company public. The candidate's knowledge and experience in the investment banking world and contacts on Wall Street will add value at the top of the house. But once the company is moving forward, this board member may not have the same value. Now, maybe the strategic plan for the company is to grow the business in China. The board may then decide the best candidate is an executive with extensive knowledge and experience in China. This does not mean that there is a lack of competency in the director that was recruited to help with the IPO. Rather, it is an alignment of knowledge and experience based on strategy and risk. The overall philosophy is that knowledge and experience does not go into perpetuity. Even the best-managed companies aren't exempt from the inevitable clash between whirlwind change and corporate inertia. With the pace of change accelerating, boards need to be flexible and agile. They must be able to understand the task that management has in the 21st century - to be able to quickly adjust to market developments and be wise in reallocating resources to new opportunities.

Creating a 21st century board means making significant transitions towards more future-focused leadership behaviors and practices. Rethinking both how new directors are recruited and successfully retained can provide a progressive focus to a director search. Targeting candidates whose backgrounds speak to these areas will ultimately bring a honed perspective for competitive advantage. Here are a few areas to consider when thinking about your next board member:

Growth: Does the candidate have a track record in growth situations?

Innovation: Does the candidate have experience with innovative cultures?

Ambidexterity: Does the candidate have foresight into new markets while appreciating legacy positions?

Here are a few biases that directors can fail to recognize in a boardroom decision-making process. As your board moves forward on investment decisions, consider how each of these may be playing a silent but potent role.

Anchoring: Looking at past and present successes and not giving proper weight to adjustments in strategy when new information is presented.

Bandwagon Thinking: Other directors think this is a wise decision, so it must be worthwhile.

Confirmation Bias: The assumptions surrounding the decision are overwhelmingly positive without taking equal time to explore the possible negative outcomes.

Need for Closure: The need to draw a conclusion, or escape feelings of uncertainty, hurries the decision-making process, even when the environment is evolving.

Sunk Costs: The time and resources already invested are believed to be so great that a healthy debate on alternatives is dismissed.

I am often asked to provide insights and ideas to this question. Here are a few ideas:

1. Conduct a review of the board’s risk management skills and relevant industry experience. If deficiencies exist, schedule industry or risk-management training.

2. List all the key assumptions implicit in the company’s strategy and revisit them on a set schedule.

3. Appoint one director to the role of “devil’s advocate” during board discussions on strategy, constructively challenging assumptions, plans, forecasts, and more. Assign a different director to this role each time strategy is on the agenda.

A great resource for director candidates is an ebook: The Art of Constructive Challenge (Amazon, Barnes, iBookstore $9.99).

One of the downfalls I see in boardrooms is what Daniel Goldman calls “unanimous illusion.”  Goldman defines this as a behavior that, once a group adopts a belief, individual members are likely to believe it is true. All the more reason for directors to ask questions during board meetings on a broad range of topics of critical importance to their oversight role. This questioning can drive explicit conversations. It takes courage to unveil painful truths. The board that balances a sense of unity with an openness to all relevant information can help to avoid group think. Remember - the collective mind is as vulnerable to self-deceit as the individual mind. Questions directors might ask when reviewing their decision making process:

1.   Do we have an individual assigned to play the Devil's Advocate?

2.   To what degree do we ask probing questions from a place of insight?

3.   Are we following a leader on the board with a very impressive background AND whose experience matches the decision at hand?

There is a time when emotions run high in the boardroom. You “know” you are “right.” You “know” you are the one with the “truest” position. You are also on the road to gridlock. To be more effective, the goal is to alter your emotional tone, listen, and not attack. Some call this emotional intelligence; some call it truth-seeking habits; and others just plain old respect. Here are a few things to keep in mind:

· Know when you have stopped listening. Then begin writing down others’ comments and ask questions.

· Know when your negative radar outweighs the positive. Write down comments that have common ground with your position rather than points of disagreement.


Know when you are trying too hard. Back down and reflect on how what you just said sounds to those at the table.

Quoting Peter Senge, “Commitment to the truth does not mean seeking the “Truth,” the absolute final word or ultimate cause.  Rather, it means a relentless willingness to root out the ways we limit or deceive ourselves from seeing what is, and to continually challenge our theories of why things are the way they are. It means continually broadening our awareness, just as the great athlete with extraordinary peripheral vision keeps trying to ‘see more of the playing field.”

Every board member, like every other person, has hidden biases. They might include weighing older director voices more than those of younger members, or vice versa. Board leadership, such as board or committee chair, has an important role to identify whether unconscious bias has crept into their own thought processes and the board’s deliberations. Everyone has blind spots and can unwittingly favor certain types of people. Giving preference is a fact of life. To be more effective, board leadership can take a participant-observer stance by periodically pausing and taking note of the context. Here are a few tips to reduce implicit bias:

·         Summarize the perspectives heard so far and ask for perspectives that have not been heard yet. Ask, “Does anyone feels that their points have not been presented comprehensively?”

·         To make sure that there is not under or overstated issue, ask, “Is there consensus on a balanced perspective before we move on?”

·         On discussions that have stakeholders ask, “Are there other groups who should be involved in this discussion that we haven’t engaged yet?”

T. S. Eliot writes, "Between the idea and the reality-- Between the motion and the act-- Falls the Shadow." Being aware of hidden biases is an excellent way for board leaders to cast light into the shadow.

Does Your Board Have a Bell-Jar Ecosystem?

The progressive boardroom moves the needle away from operating in a vacuum with targeted board recruitment for the 21st century. While turbulence is not new, its nature and degree present an ever-increasing need for executive-level acumen to capitalize on opportunities and mitigate risks in the ever-more-sophisticated business environment. According to Spencer Stuart approximately one-third of the 2014 S&P 500 board appointments had no previous public company board experience. While adding first-time directors with no board experience is a step away from tradition, the advantages can far outweigh the risks.  As Einstein stated, “The measure of intelligence is the ability to change.” In a disruptive era, a progressive board prepares for and anticipates critical incidents outside of the steady state and recruits board candidates from that framework.

Drivers of Change

• Knowledge: universally available and rapidly obsolete
• Uncertainty: increased uncertainty and risk
• Business environment: more global and diverse
  

For public companies, a few critical incident areas that can define a director search framework are:

• Strategy and Performance: changes (disruptive → crisis) that require a company to revise strategy
• Transactions: (self-initiated → takeovers) that fundamentally change a business
• Reputational Risks: (major accidents → activist investor actions) that require a stand-out response
  

Those that have been tested in the fires of disruption and transition show a capability for value creation in today’s world. These are “turbulent times,” and competing and succeeding in this environment requires directors to focus on what really matters and show a track record of due diligence.

If your board is considering the addition of a first-time director, here are few things to keep in mind:

·         Obtain solid references from executive-level professionals who have worked with the candidate on a day-to-day basis and have intimate knowledge of their leadership competencies.

·         Look for a honed ability to absorb, analyze and process a great deal of complex information to identify pertinent questions.

·         Identify the skill and savvy to balance a sense of unity with openness to all relevant information that may risk a fracas from time to time.