The Dynamics Of Board Processes Board Processes Commerce Essay

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In general, board process refers to the ways directors interact and behave as they aim to fulfill their duties Finkelstein Mooney, 2003. According to Zahra and Pearce (1989) board process refers mainly to the decision-making activities of the board. Anderson and Anthony (1988) noted that board process pertains to the healthy and sometimes rigorous discussion on corporate issues and problems so that decisions can be reached and supported. Dulewicz, MacMillan and Herbert (1995) denotes board process as the organizing and running of board which need to be performed so that the objectives of the board can be achieved.

Ong and Wan (2001) identified four process variables, based largely on existing research on group and TMT studies. [1] They are effort norms, conflict, presence/use of knowledge/skills and cohesiveness.

Board processes which have been identified as affecting board performance include (1) effort norms; (2) conflict; (3) presence/use of knowledge and skills and (4) cohesiveness. Shaw and Power (1998) argued that for a group to perform successfully, the team must be a cohesive unit with the necessary knowledge and skills to manage conflict that happens so as to establish acceptable norms for problem-solving and decision-making.

Effort norms

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According to Wageman (1995), effort norms are the shared beliefs of groups for the performance of a task. Effort, on its own, is an outcome of motivation and represents the vigor of individual's behavior or total cognitive behavior that one gives to the target task (Kanfer, 1992). Norms identify ways to channel this effort for the group task (Goodman, 1986). In essence, norms represent a set of expected behaviors. Secondly, these expectations are held and accepted by group members. Thirdly, group members will enforce the performance of the expected behaviors.

Some boards do not meet frequently and limit themselves to a formalized assessment (i.e. rubber stamp) of top management proposals. In other boards, directors actively participate in discussions, make the best use of their skills to perform board activities, make themselves available for the execution of specific tasks, and so on. [2] 

Effort norms can be seen whether board members (1) perform careful evaluation of information prior to meetings and (2) conduct frequent research for companies [3] , (3) the amount of effort board members put into the work and (4) the degree of positive attitude towards work load. [4] 

Lorsch and MacIver (1989) noted that directors who put in sufficient time for their duties and sought out relevant information perform better. It is because the most cited problem which directors face is lack of time to carry out their duties (Lorsch, 1997).

However, other researchers argued that time is not the only manifestation of effort. Jensen (1993) noted that time spent on meetings are not unnecessarily useful as CEOs almost always set the agenda. Herman (1981) and Mace (1986) also cited empirical evidence that there are boards which go through the motions of attending meetings and registering votes, without careful consideration of issues facing the board. In a recent study involving 307 U.S. firms from 1990 to 1994, Vafeas (1999) found that the annual number of board meetings is inversely related to firm value. This conclusion supports the proposition that monitoring of managers (equivalent to more meetings) becomes more intense after periods of poor performance.

Conflict

Jehn and Mannix (2001) argued that there are three types of conflicts that occur in a group which will affect group performance. They are (1) cognitive conflict; (2) affective conflict and (3) process conflict. Cognitive conflict pertains to the discord relating to the performance of tasks due to different viewpoints, ideas and opinions. Dutton and Jackson (1987) reasoned that the disagreement arose because issues facing boards are generally complex and ambiguous. However, cognitive conflict is by no means bad. Amason (1996) heeded that critical analysis and discussion during meetings promote the performance of a director's control role. In such situations, CEOs/top managers may be required to take a double-look at company's strategies through modification or improvement. More importantly, the presence of cognitive conflict among directors serves as a reminder to management about the power of the board, that is, boards will not be simply "rubber stampers".

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Too much of cognitive conflict can be dysfunctional. Nemeth and Staw (1989) cautioned the arousal of negative emotions and Jehn (1995) noted lower level of satisfaction. When that occur, conflict becomes personal in nature - and hence the term affective conflict. Such conflict involves personal issues such as annoyance, frustration, and irritation.

Recent studies have identified a third unique type of conflict, known as process conflict. Process conflict is the awareness of controversies about aspects of how task accomplishment will proceed. More specifically, process conflict pertains to issues of duty and resource delegation, such as who should do what and how much responsibility different people should get. For instance, when group members disagree about whose responsibility it is to complete a specific duty, they are experiencing process conflict. [5] 

Empirical evidence on conflict covered in Jehn and Mannix' (2001)'s research showed that moderate level of cognitive conflict has been beneficial to group performance on certain types of tasks. [6] Teams benefit from differences of opinion about the work being done and about ideas. [7] Cognitive conflict improves decision quality because the synthesis that emerges from the conflict is generally superior to the individual perspectives themselves. [8] 

As for affective conflict, studies have shown that it is detrimental to individual and group performance, member satisfaction, and the likelihood a group will work together in the future. [9] Research findings indicate that the anxiety produced by interpersonal animosity may inhibit cognitive functioning [10] and also distract team members from task, causing them to work less effectively and produce suboptimal products. [11] 

In contrast, there are few empirical studies on process conflict. In one of them, Jehn (1992) found that process conflict was associated with a lower level of group morale and decreased productivity. This is because when a group quarrels about who does what, members are dissatisfied with the uncertainty and have a stronger want of leaving the group. Moreover, Jehn (1997) found that process conflicts meddle with task content quality and often make members deal with irrelevant discussions. In a more recent study, Jehn, Northcraft and Neale (1999) found that group members who continue to debate about task assignments were unable to do their work effectively.

Presence and use of knowledge and skills

For boards to perform effectively, Ancona and Caldwell (1988) argued that directors must possess functional knowledge and skills with external networks for information gathering and problem solving. Nonaka (1994) added that it is also necessary for directors to have firm-specific knowledge and skills so as to make informed decisions. In a survey involving 339 chairmen, CEOs and other directors of U.K. companies, Dulewicz, MacMillan and Herbert (1995) identified 37 skills required of directors. The researchers further divided the required competencies into 6 groups. Carlson (1998) added that directors could benefit from each other's knowledge and experience. It aids in reducing mistrust that might initially exist when individuals do not know each other well or have not worked together.

Cohesiveness

On the fourth dimension of board processes, Summers, Coffelt and Horton (1988) labeled cohesiveness as the extent to which directors are attracted to each other and motivated to stay with the board. Weick (1979) noted that as boards met only periodically due to the part-time status, the relationship among directors is one of partial inclusion. Furthermore, Park (1995) argued the part-time involvement of directors is a cause for ineffective board performance. Cohesiveness thus encompasses the affective relationship of directors and represents their ability to stay and work together.

O'Reilly, Caldwell and Barnett (1989) argued that the impact of cohesiveness on strategic decisions has two aspects: generation and implementation. Generation is negatively associated with social integration and consensus in groups. Such groups value cooperation, are more cohesive and more motivated to maintain cordial relations. Consequently, this leads to higher pressure for conformity, limiting the quality of both alternative generation and evaluation of decisions. They put forth the notion that the effectiveness of strategic decision roles is positively related to social integration and consensus. Within such groups, there exists high level of cooperation, frequent communication and group identification, all of which will enhance the implementation of decisions. [12] Furthermore, consensus can create more feelings of satisfaction with the decision-making process, giving rise to greater decision acceptance and commitment. [13] 

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Goodstein, Gautam and Boeker (1994) argued that increased size can significantly reduce cohesiveness among board members. Large boards may encounter more hindrances for a consensus on decisions. Shaw (1981) for example reasoned that directors might experience lower levels of motivation and satisfaction with the lack of participation characterizing large work-groups. Gladstein (1984) added that larger teams may be more difficult to coordinate due to the large number of potential interactions among members.

Creating a Collaborative Board Climate

Roberts, McNulty and Stiles (2005) argued that board structure and composition characteristics at best condition, rather than determine board effectiveness. Instead they suggested that the behavioral dynamics of the board, coupled with the group and interpersonal relationships between "outside" directors and executive team members have a far more reaching impact on the board's ability to perform its tasks. Tyler and Blader (2000; 2003), building on the insights from procedural justice and the relational model of authority (Tyler & Lind, 1992), developed the group engagement model to provide a better understanding of the antecedents of cooperation in groups. We integrate these insights in order to gain better insight into how the board's climate conditions the effectiveness of the strategic decision-making processes.

Top Management Team (TMT) and Board Collaboration

Studies have identified a natural tension that exists between the board and the corporation's TMT centered on finding the balance between the board's control function and the necessity for collaboration with the TMT in performing its service tasks (Demb & Neubauer, 1992; Sundaramurthy & Lewis, 2003). Using vigilance and discipline, the board in its control role can curb limitations. On the other hand, a collaborative approach may generate greater organizational motivation through cooperation and empowerment. While the fear is in embracing one approach at the expense of the other, resulting in a downward spiral in performance, the key is the ability to embrace both approaches to drive organizational adaptation and learning (Sundaramurthy & Lewis, 2003).

Based upon interviews conducted with 40 UK directors Roberts, McNulty and Stiles (2005) identified into three couplets, the behaviors and attitudes necessary for outside directors to combine the elements of control and collaboration in an effort to create accountability in the boardroom. These couplets were defined as "engaged but non-executive", "challenging but supportive", and "independent but involved." Based upon a foundation of trust and openness established between the outside directors and the TMT, Roberts, McNulty and Stiles explained the dynamic this way:

"Our research interviews pointed to the potential…for a positive dynamic of relationships between executives and non-executives based on executive perceptions of the relevance and value of non-executive contributions. This encourages executives into a greater openness and trust, which in turn builds non-executive knowledge and confidence. By contrast, a negative dynamic is possible, in which executives come to resent or be frustrated by non-executive contributions that they perceive to be either ill-informed or inappropriate. This in turn can contribute to a dynamic of deteriorating board relationships, characterized by withholding of information and mistrust." (2005, p. S12)

Intra-Boardroom Respect

Cronin (2010) asserts that "respect is always about feeling valued or important rather than marginalized or dismissed" and "At some level this feeling relates to one's basic human dignity (Margolis, 2001; Rawls; 1971), yet it can also relate to one's self standing in the peer group (Smith and Tyler, 1997)" (2010, p. 6). Essentially, respect is about the esteem or "sense of worth or excellence" that an individual feels.

The role of respect in board level strategic decision making has several important purposes. First of all as the problems that board members face become more abstract, with no clear answers, respect will allow board members to have the requisite faith to use the ideas of others in the face of uncertainty. The linkage between high levels of performance in complex interactive tasks and interpersonal attraction among members of a group has been established in previous studies (Williams & O'Reilly, 1998). With increased board independence, board members may be e.g. more geographically diverse and therefore do not share strong social ties with other directors, nor do they have the requisite face time needed to develop high levels of trust, making this an even greater challenge. Secondly, as board members continue to represent more diverse backgrounds and skill levels, respect will be necessary to bridge the gaps of understanding. Finally, since cognitive conflict is a necessary part of the decision-making process, respect should serve to diminish the negative feelings that can arise during debate and discussion (Allred, 1999, Cronin, 2010). The mechanisms through which respect will do this are by first of all ensuring appropriate behaviors towards each member of the group, but also by granting to those who you respect the "right" to challenge you, thereby minimizing affective conflict that could unleash dysfunctional conflict spirals (Lovelace, Shapiro, and Weingart, 2001, Cronin, 2010).

The group engagement model developed by Tyler & Blader, (2003) is to understand what shapes the relationships that people form with their groups. The group engagement model argues that the primary reason people engage themselves within groups is to create and maintain their identities. Specifically, by receiving favorable feedback from the group, the group member's feelings of self-worth and wellbeing are enhanced resulting in a higher likelihood that they will be internally motivated to engage in higher levels of cooperation as well as discretionary behaviors. Prior studies have confirmed the linkage between identity and cooperation (Milton & Westphal, 2005).

The group engagement model distinguishes identity judgments into three aspects: pride, respect and identification. Pride is derived from the individual's evaluation of the group's status. Respect on the other hand, is an individual's assessment of their status within the group. This assessment can be derived by the committee positions and chair roles held by members. Additionally, the way members engage with each other in seeking out information and opinions can also play a role in the evaluation of one's respect by the group. The social norms of engagement and communications that are utilized by members of the board will help to shape the individual's perceived levels of respect. Finally identification derives from both respect and pride, and is a reflection of the degree to which group members merge their sense of self and their judgments of their own self-worth with their assessments of the characteristics and status of the group (Tyler & Blader, 2000).

Board Involvement

The Independent Board Model [14] 

Theoretical support for the importance of board monitoring as a form of involvement is rooted in agency theory (Jensen & Meckling, 1976). According to this perspective, the function of boards is to reduce agency costs resulting from the delegation of strategic decision making, or "decision management," to top executives by exercising "decision control," which involves monitoring managerial decision making and performance (Fama & Jensen, 1983: 303). In doing so, boards rely crucially upon outside directors, who are considered less likely than insiders to "collude with managers to expropriate residual claimants" (Fama & Jensen, 1983; 315). The formal independence possessed by outsiders is assumed to permit more objective evaluation. Several studies have examined the influence of board independence on director involvement in strategic decision making. Johnson, Hoskisson, and Hitt (1993) and Judge and Zeithaml (1992) provided evidence that including more outside directors on a board increased board involvement (cf. Pearce & Zahra, 1991).

The Collaborative Board Model [15] 

Pfeffer and Salancik's (1978; 170) influential discussion of the different possible functions performed by outside directors distinguished between a board's role as an administrative body and its role in linking an organization with its environment. They further identified two distinct functions within the broader administrative role; the provision of expert advice and counsel and the exercise of oversight and control. Several other scholars have also suggested that boards can extend their involvement beyond monitoring to the provision of ongoing advice and counsel on strategic issues (e.g., Baysinger & Butler, 1985; Gomez-Mejia & Wiseman, 1997; Johnson, Daily, & EUstrand, 1996; Whisler, 1984; Zahra & Pearce, 1989), Bacon and Brown (1975: 18) and Lorsch (1989) described how directors may serve as a sounding board for management in addition to exercising control, and Alderfer (1986) suggested that the best CEO-board relationships included ongoing collaboration in the decision-making process (cf. Spencer, 1983). Baysinger and Butler (1985) suggested that outside directors serve primarily to exercise control and that inside directors are the main source of advice on strategic issues. Daily and Dalton (1994) argued, however, that outside directors can provide access to valuable information-about, for instance, how to secure needed resources from the environment-in addition to exercising control (cf. Judge & Zeithaml, 1992; Pearce & Zahra, 1991; Pfeffer & Salancik, 1978). The collaboration board model suggested that boards may provide advice and counsel as well as engage in control and that social ties may increase the prominence of advisory interactions as a form of involvement. Social ties with outside directors should enhance the tendency of top managers to solicit their advice on strategic issues while also increasing the outside directors' tendency to offer such advice.

Strategic Thinking and Strategic Leadership

Other researches have focused on strategic thinking (Garrett, 1996) and strategic leadership (Davies, 1999). According to Garrett (1996), strategic thinking is related to long-term organizational effectiveness and involves strategic analysis, strategy formulation and corporate direction. Davies (1999) describes strategic leadership of board as a balance of strategic skills and experience relative to the needs of the firm, with a shared strategic direction and commitment to pursue it, and strong processes to ensure strategic management. Van der Walt and Ingley (2001) suggest that the top responsibilities of a board include setting policy/vision, monitoring performance, financial matters, and supporting the firm to achieve superior performance. Kemp's study (2006) of Australian boards finds that directors have a clear role in strategy formulation, strategic decision-making and strategic control. These studies indicate the importance of deeper involvement of board in strategy formulation and implementation.

While it is clear that boards have a crucial responsibility towards strategy, every board does not participate equally in strategic decision making. Some boards are considered 'passive' while others are considered 'active', based on their involvement in strategic decision making process (Golden & Zajac, 2001). Hendry and Kiel (2004) observe, "… literature demonstrates a swing from passive school of the 1970s and 1980s to the active school prevalent over the last ten years" (p. 509). Proponents of the active school suggest several roles for the boards. Wheelen and Hunger (2004) summarized the basic tasks of boards as follows:

Monitor: A board should keep itself abreast of developments, both inside and outside the corporation. In addition to using the information in its decision-making, it can also bring to management's attention developments it might have overlooked.

Evaluate and influence: A board can examine management's proposals, decisions, and actions; agree or disagree with them; give advice and offer suggestions; and outline alternatives. More active boards do this in addition to monitoring management activities.

Initiate and determine: A board can delineate a corporation's mission and specify strategic options to its management. Only the most active boards take on this task in addition to previous two. Wheelen and Hunger (2004) proposed the board of directors' involvement as a continuum in strategic management process from low to high. Figure 1 shows the possible degree of the board's involvement from being a passive observant to active participant.

Figure 1: BODs' Involvement in Strategic Management

(Source: Wheelen and Hunger (2004, p. 28)

Literature on boards suggests that boards' involvement in strategy ranges from being very low (Mace, 1971) to high (Garrett, 1996; Davies, 1999). However, in the recent years, there has been a clear shift towards a more active role of boards in strategy (Hendry & Kiel, 2004). Support for active role for boards in strategy comes from the principles of corporate governance proposed by OECD (1999). OECD (1999) guidelines state that, "The corporate governance framework should ensure the strategic guidance of the company" (p. 9). John Smale, the former Chairman of the board of General Motors, observes, "The board is responsible for the successful perpetuation of the corporation. That responsibility cannot be relegated to management" (Harvard Business Review, 2000, p. 188). Boards' main role is to govern the firm; board members are solely responsible for the firm's affairs, and this responsibility cannot be delegated (Vint et al., 1998). Therefore, the primary responsibility of the directors is owed to value creation in the firm, while due consideration is given for the interests of shareholders and other parties, including employees, customers, suppliers and the society.

Recognizing Negative Board Dynamics

Social Cohesion and Groupthink

One of the required board dynamics is to achieve social cohesion. Social cohesion refers to the total field of forces that bind a group of individuals together and keep members wanting to feel the sense of belongingness. Strong social cohesion allows board to function smoothly, increase motivation and helps the group cope with internal conflict and politicking.

However, strong social cohesion is likely to increase the tension of conformity in a group. Members often feel the pressure to agree with the majority's view point. Groupthink is a form of excessive conformity that inhibits individual realistic appraisal of alternatives. Poor decision-making results when groups fall into groupthink. Such conformity will affect board process when there are norms that prevent dissension, leaving some information and ideas that could be significant to decision making, for instance.

Dissension and Internal Conflicts

A modest amount of dissent can be beneficial in board discussions. Dissent allows the group to engage in creative thinking in problem solving, re-evaluation on its course of actions and can force new information presented onto the table that otherwise might not become available to the group. Dissent can also prevent group members from sticking to their habitual routines in decision making and problem solving to produce effective solutions especially when circumstances are more obscure and challenging.

However, too much dissent can undermine group cohesion and create internal conflicts. These conflicts may stem from differences in values or interpersonal styles of each individual. Thus, it is important to find an appropriate balance and the right manner through control and discipline to encourage constructive dissent in a friendly atmosphere.

Psychological Safety, Social Loafing and Habitual Routines

Group psychological safety is a shared belief that the group is a safe place for risk taking, sharing unpopular ideas and admitting errors. When group psychological safety is present, members are likely to speak up, give ideas, ask questions and admit mistakes which encourage a more open communication within a group. This would beneficial in decision making and problem solving process as it prevents conformity pressure and groupthink.

However, too much safety can lead to social-loafing. Social loafing refers to the tendency of certain members of a group to get by with less effort than what they would have put when working alone. When a member contends that his or her effort is not being taken in or noticed, he or she will tend to loaf. It is then important that the sense of psychological safety and accountability are rooted in group members so that they believe that their input is valuable, recognizable and evaluated.

When aspects of the group process have become extensively routine overtime, boards are most likely to fall into habitual routines that neglect reassessment of appropriateness of a routine. Boards will proceed mindlessly and effortlessly through a particular routine. This is true where dissension and psychological safety are low.

Diversity and Group Polarization

Diversity is a significant facet in board dynamism. Diversity can help to improve board decision making and providing the board with more varied knowledge and information. Diversity helps the board to avoid group polarization. Group polarization is a phenomenon wherein the decisions and opinions of people in a group setting become more extreme than their actual, privately held beliefs. It is most likely to occur when dissension and group psychological safe are low and when the board is not diverse.

However, diversity can also give a detrimental effect when conformity is harder to achieve and when there is less shared information among the group members. Shared information bias can occur when group members spend the most time discussing and considering information that that is shared by most of the group members leaving the "unshared" views and opinions of a few members in the group neglected. Harmful consequences related to poor decision making can arise when the group must have access to unshared information in order to make a well-informed decision.

Board Leadership and Politicking

Board leaders, either chairmen or lead independent directors lead board's activities by determining the board meeting norms and culture, set the agendas and frame the issues appropriately. They are expected to regulate and control dissent and conformity. However, when leaders become too powerful and too stringent in their leadership, they can alienate other members' views and upset the balance of power in a "group of equals". When social cohesion, collectivist feelings and psychological safety is weak, negative power tactics is most likely to occur. The negative power tactics is likely to cause pluralistic ignorance. Pluralistic ignorance occurs where the majority of individuals in a group assume that most of their others are different in some way, whilst the truth is that they are more similar than they realize. They thus will conform with supposed norms. When most people do this, the supposed norm becomes the norm. Thus, it is important that leaders are prudent not to exploit their power in an effort to have their opinions prevail. Although convictions can be strong, the board must be managed collectively.

Board Effectiveness' Goals

To understand board process and effectiveness Finkelstein and Mooney (2003) conducted thirty-two structured interviews with directors who spoke about their board experiences, yielding insights on what really makes boards work or not work. These directors emphasized the multitude of ways in which they interact and behave as they fulfill their duties. Out of these discussions came a clear picture of board processes and how to execute on them. Board effectiveness requires that five interrelated process goals be realized: (1) Engage in constructive conflict: (2) Avoid destructive conflict; (3) Work together as a team; (4) Know the appropriate level of strategic involvement; (5) Address decisions comprehensively.

Engage in Constructive Conflict (Especially with the CEO)

Constructive conflict occurs when directors hold and debate diverse views among themselves and with the CEO. Such exchanges help the board better understand issues surrounding the decision context and synthesize multiple points of view into a decision that is often superior to any individual perspective. In other words, as is true with other groups, constructive conflict improves decision-making in a board and is an important determinant of effectiveness.

Unfortunately, many interviewees noted that not all directors stand up to dominant CEOs. When there are insiders on such a board, few will openly challenge their boss. A lack of constructive conflict, however, might not always have to do with the CEO. Even if directors are able to prepare for meetings, these directors claimed that board meetings are "jam packed" and "overscheduled," providing little opportunity for debate. In summary, although most directors agreed that challenging each other and the CEO is important, boards don't always do it.

Avoid Destructive Conflict

Constructive conflict can pit one director's views against another's, and while open discussion has clear value, sometimes such task-oriented, constructive debates are taken more personally. For example, board members who are not used to being confronted as an ordinary course of business might feel threatened when other directors challenge their ideas. When personal and emotional considerations gain prominence, constructive conflict spirals into destructive conflict [16] , degrading group decision-making and interfering with the board's ability to perform its key roles.

Although twenty-five (78 per cent) of the directors interviewed stressed the importance of keeping conflict constructive, personal friction and tension in the boardroom-destructive conflict-does occur.

Destructive conflict can emerge not only when there are issues of corporate control but in the everyday activities of boards. Directors can have strong views, and when they are not balanced with a degree of tolerance and open-mindedness, they can disrupt how the board works together.

Finally, there is an inherent tension between reducing destructive conflict on a board at the same time that constructive conflict is being promoted. Destructive conflict personalizes a dispute by making it less about solving an overarching group problem and more about the individuals involved. Despite their lofty positions, board members are people, and they are subject to the same biases and behaviors that all of us are. In the end, however, the combination of constructive conflict without destructive conflict is a priority for successful board process, and boards that cannot master these dual goals simultaneously will suffer.

Work Together as a Team

A central component of board process is teamwork, which came up in twenty-seven (84 per cent) of the interviews. Since board members, like top management teams, are confronted with complex and ambiguous strategic decisions, they too are required to work together by sharing information, resources, and decisions.''^ Boards that are unable to work in partnership not only end up less able to rein in powerful CEOs; they are also less effective at providing the advice and counsel at which more collaborative boards excel.

Unfortunately, boards often do not act like teams. Developing strong team norms is difficult because boards spend little time together and, hence, have few opportunities to unite as a group. Most directors in the interview said they attend about four to six meetings a year, with directors flying in the night before and meeting the following day. Although spending more time together might seem like a good solution, it's not-many of the directors stressed that their boards already require too much time from them. The challenge, rather, is making the most of the time boards have to develop team norms naturally.

Another factor that might hinder a board's ability to be a strong team, according to the interviews, is the relative distribution of influence among board members. Power that is based on expertise is considerably more legitimate, and few boards should disregard relevant expertise when it is there. At the same time, though, boards need to learn how to avoid doing so at the expense of other board members' valuable contributions. This is particularly true with new directors. When new directors step in "cold," the odds are, as one interviewee told us, that they will "stay quiet for a few board meetings. Some regrettably stay quiet for a long, long time."

The bottom line on board teamwork is to avoid having a small number of dominant directors take over deliberations. Not only does this deprive the CEO of feedback and advice from less central directors, but such boards can also degenerate into fiefdoms that are unwilling to share expertise and information across boundaries.

Know the Appropriate Level of Strategic Involvement

All boards vote on major strategic decisions. However, what one board deems as "major" may be very different from another board. Further, some boards may get involved with more issues and decisions than just major strategic decisions. In short, the strategic issues with which the board is involved will vary, often in ways that affect not only how boards work as a group but to how boards perform.

Every one of the directors interviewed brought up this point, noting the increasing importance of strategic involvement as the expectations of boards change. The CEO of a financial services company claimed that "today's directors have to go further than just monitoring the CEO-they have to become deeply involved in understanding what the company is doing. There is just too much liability for directors that don't pay any attention to what's actually going on." Indeed, many of the board members stressed that boards should not be overly involved in the firm. Directors noted that this tendency is a particular concern when the CEO is newly appointed. CEOs need time to establish their vision and priorities, and excessive board pressure could lead to a revolving door at the top.

The proverbial leash, on the other hand, must be tightened when the corporate outlook turns downward. This is especially true because CEOs under attack tend to circle the wagons and cut back on new or varied sources of information [17] .The biggest challenge for boards is to identify those early warning signs that something might be amiss and then act on them. The experience of boards in companies such as Enron, K-Mart, and WorldCom suggests that the burden of proof may well have shifted toward ever-closer board involvement.

Address Decisions Comprehensively

Finally, all of the interviewed directors emphasized that if a board deems a matter important and strategic enough to require their involvement, they must make the effort to address that decision comprehensively. The problem is, however, that boards often tackle problems in a less than comprehensive manner-they often address decisions with little depth, avoid seeking help from experts, and limit their exploration of decision alternatives [18] .

How comprehensive boards are in delving into a decision depends on numerous considerations but especially the financial condition of the company and the potential risks that might emerge. When the margin for error is small because of financial difficulties, greater scrutiny is called for. This is one of the reasons that the Mattel board was so criticized after they allowed then CEO Jill Barad to continue missing earnings targets quarter after quarter. And this is also one of the primary reasons that the Enron board is going down as a textbook example of what not to do-board approval for a myriad of off-balance-sheet partnerships and other arrangements was apparently given with only the most cursory of investigations.

As such incidents have received notoriety, board members appear to be moving toward a deeper appreciation for the value of decision comprehensiveness - so much so that some executives shy away from directorships because they feel it's too difficult to add value. In sum, addressing decisions comprehensively, like the other four key goals that have been identified, is really at the heart of what it takes to make successful corporate governance happen.

Best-practice recommendations for excellent board process

Given that the five process goals presented in the previous section are so critical to board effectiveness, Finkelstein and Mooney (2003) spent a great share of their interviews probing the directors on these points. Most of the recommendations that emerged from this analysis were helpful in advancing more than one process goal and, in some cases, addressed all five goals.

Selection: Get the Right People

Boards are only as good as the people who sit on them, and several directors pointed out that the selection process should not be dominated by the CEO. [19] Rather, the incumbent board members should be actively involved in selecting new board members. This involvement has the salutary effect of enhancing their support for the new people, creating an incentive for sitting board members to integrate newcomers into the larger group. Involving all directors also avoids exclusionary feelings that can create tension.

When working together to select new directors, the directors repeatedly stressed the importance of opting for directors with strategically relevant experience. For example, one experienced director said that "if you want to understand housewives, then you'd better have somebody who understands housewives sitting on the board; if you're going to depend on innovation, then you'd better have some free-thinking and imaginative people in there."

Directors valued strategically relevant experience not only because such members are more likely to engage in constructive conflict by offering informed but differing points of view but also because they are more likely to improve decision comprehensiveness by adding richness to discussions.

Board members also stressed the importance of evaluating the communication style of potential directors. Can they explain themselves well? Are they good listeners? As one director suggested, it is important that a new director be "somebody who is a good listener and has the patience to hear somebody else out." Although one would expect communication skills to go along with valuable work experience, it isn't always the case. As one experienced director explained, "You can be the smartest person, but if you don't speak out frankly, it's worthless. You've got to be effective in communicating, in a way that people will listen to and not just turn off."

The personality of new directors is an additional important consideration. Sitting directors should evaluate whether the new director "clicks" with the board and has the right attitude, the integrity to represent shareholders effectively, and the courage to speak up to the CEO and management.

Indeed, one of the directors commented that boards should choose directors that are "very optimistic and positive but not afraid to ask serious questions" and "forceful and outspoken, and not at all hesitant to voice their point of view on any subject." As one experienced director summarized, "There is nothing worse than a board member who comes in and sits there and doesn't say anything."

Finally, board members noted that potential directors must have the time to serve. With the average executive now sitting on four boards, almost a quarter of the companies in the Korn/Ferry International survey (2001) actually place limits on the number of other board seats their directors can take on. Without adequate time, directors will be unlikely to attend all board meetings or be as involved in decision-making as they might otherwise be, limiting their ability to contribute to constructive debate, decision comprehensiveness, and team dynamics on the board.

Structure: Put a Meaningful Structure in Place

A board's structure is also an important element in promoting effective process. It is becoming fairly common today for boards to appoint an executive committee that meets more often than the full board and has responsibility for certain decisions.

While this practice has potential advantages (speed of decision-making, for example), it can also create a two-tier system that elevates the executive committee to a higher authority. Over time, the other directors might start to see themselves as less central. Such tension can lead to destructive conflict and make it harder for the board as a whole to work together. So, boards should assess their committee structure to ensure that it does not result in unnecessary divisions among directors.

The directors in the interview also suggested that a structure be put in place to help directors communicate between board meetings. Whether the entire board meets via conference call between formal board meetings, or individual directors initiate their own calls to the CEO, ongoing communication is critical. By leaving the door open for communication beyond the small number of board meetings held each year, directors can do a better job of monitoring management, and managers will have more timely feedback from outsiders.

Appointing an outside lead director can help improve board functioning. An outside lead director who is truly independent of the CEO could help mitigate a CEO's control by being more involved in planning the board agenda and facilitating board meetings so that the right strategic issues are considered and critically evaluated.

Another important practice that should be built into the structure of the board is to regularly evaluate the board and CEO using clear performance metrics. Stanley Gault, (retired CEO of Rubbermaid) provides this blueprint:

This evaluation process should be managed by an outside independent organization, and every committee of the board should undergo an annual evaluation of its performance. . . . If the performance or conduct of any board member(s) is deemed to be of concern to the other members, the chairman and at least one other board member should arrange to meet with the involved individual(s) to discuss the issues or concerns that have been identified and how the individual(s) proposes to address them. If the issues are not resolved satisfactorily in a reasonable time, the individual(s) should resign from the board or the board should not recommend the individuals) to stand for re-election as a board member.

Finally, boards should set term limits to keep the board fresh. Directors that serve together for years on end may be less inclined to question management critically. As one director put it, directors can get "pretty tight with management" over time. Directors who serve for a long period of time might also not have the right expertise to comprehensively address the firm's current strategic issues.

Staging: Set the Stage for Effective Board Meetings

Once the right directors have been selected and a meaningful structure is put in place, directors need to set the stage for effective board meetings. In particular, the directors interviewed repeatedly noted how important it was that boards establish criteria for the strategic decisions which the board will address.

How can directors assess what is appropriate? Russell Lewis, CEO of the New York Times, put it bluntly: "The board's primary responsibility is to make sure the management team knows what the hell it's doing," The CEO of a major fashion company said, "I think the board should approve the strategies of the company-I don't mean that in any passive reactive way--it should be engaged in the process, and I think it ought to hold the CEO and the management accountable for results.

In addition to overseeing strategy, the other areas directors agreed were non-negotiable were performance shortfalls and CEO succession. As one experienced director put it, "The most important role a board has is naming the chief executive officer, and that is wholly and solely the board's function, prerogative, and responsibility to shareholders."

Several directors emphasized that the extent of board involvement on an issue depends on its potential downside. Boards must decide what triggers that will force a closer look at the CEO and his or her activities. Whether it involves the board agreeing on a particular investment threshold that automatically triggers the board's attention, as one director noted, or some other method, the right time to have this debate is before something goes wrong. Setting decision criteria helps boards be more comprehensive when they need to be, while reducing the likelihood that any director will be an "internal busybody."

Agreeing to the triggers for comprehensive action is not the only prep work for boards. Directors need to clarify expectations and rules of behavior for such matters as attendance at board meetings, confidentiality of discussions, and involvement in discussions. These rules will help directors understand and, in turn, meet the expectations of their fellow directors, promote collective action, [20] and aid new directors in getting up to speed more quickly.

Directors should also consider what other steps can be taken to help new directors get assimilated on board. How many companies spend the time to ease the passage of a new director into an already established group? How often are specialized orientation programs created to help a new director gain not only a deeper understanding of the company's direction but also insight into board functioning and dynamics? For example, one director noted that the CEO of the company flew to see her and spent half a day discussing the firm's financials.

In another case, a director mentioned that a couple of senior directors sat down with him separately for a few hours before the first board meeting to give him a sense of what to expect. But overall there were few such testimonials; many of our directors agreed that when they were starting out on their boards, they could have benefited from more help from standing directors.

Adequately preparing for board meetings also sets the stage for stronger interactions. Directors' busy schedules get in the way of finding the time to prepare. And directors were quick to state how frustrating it was to receive discussion materials just before the meeting, without adequate time to review them. Thus, directors should demand adequate time to prepare for meetings.

Time is one thing, but quality of materials is another. As one director put it, "Information packets which directors receive should have sufficient detail to make them useful, and directors should request additional information if needed." If the materials are not adequate, directors should speak up to ensure that the materials they receive are meaningful. One director, for example, said that he has often called to request clarification of an agenda item or to request additional readings on an issue before the board meeting.

Preparation can only go so far when board meetings are as jam-packed as directors insisted they are. Directors must work with the Chair to ensure that meetings are not overscheduled and that time is left for directors to discuss issues and become familiar with one another. Not only would this allow directors greater opportunity to process the information they are hearing, but having more time to interact would also help cut down on destructive conflict.

Given the time constraints of board meetings, directors should look for other opportunities to learn more about the CEO and management as well as the company as a whole. One way is to periodically hold meetings "in the field," as Home Depot does with board members visiting dozens of stores a year. One of our board members stressed how helpful such a practice can be: "Have board meetings in manufacturing plants, in sales offices, in distribution centers . . . any place but the boardroom, to be in contact with the real world as opposed to the ivory tower, which everybody has a tendency to be corrupted by when you sit in those rooms."

Steering: Steer Board Meetings to Improve Board Process

It is during board meetings that much of the work of boards is accomplished, and it is here that the processes of group interaction play out in such a substantive way. Consistent with their key roles, directors must keep a close eye on management and have the "guts" to disagree with them. The need for courage is even more important when the CEO is especially powerful or dominant. [21] The best time to challenge a CEO, however, is not when the only option is dismissal. Before that happens there are always a series of actions, or inactions, to which boards are privy. Several directors who were also CEOs acknowledged that their boards often disagreed with them.

Despite the importance which directors attributed to having boards with the "guts" to disagree with management, they almost uniformly acknowledged that more is needed. And one of the biggest areas where directors find themselves at a disadvantage relative to the CEO is their knowledge of the company. Outside directors can never truly understand a company's business in the way that insiders do, but this gap is wider than it need be in many firms. Many of the directors interviewed tackled this challenge by recommending that boards talk to the people who are directly involved in decisions. A director of a food products company said that consulting individuals in the firm or even people outside the firm like suppliers or customers can enrich the board's decision-making. He said, "We are given access to those who have come up with and done the work, which I think is superior because it's not filtered."

In a similar vein, it is increasingly common for boards to solicit help from outside experts to enrich decision-making. One director posited, for example, regularly brings in experts to help boards understand a decision they need to vote on. Other boards expect to hear from lawyers and investment bankers, when needed.

Even informed directors can face resistance from headstrong CEOs. One idea that kept coming up in the interviews that can help in this regard was to dedicate some time for directors to meet without the CEO, one director pointed out how convening in executive session without the CEO present is particularly helpful in dealing with powerful CEOs because directors get an opportunity to freely voice concerns about the CEO's performance, or anything else.

Another approach to encouraging constructive conflict, addressing decisions comprehensively, and avoiding groupthink to promote devil's advocacy on the hoard. According one director, "Devil's advocates are terrific in any situation because they help you figure a decision's numerous implications . . . the better you think out the implications prior to making the decision, the better the decision ultimately turns out to be. That's why a devil's advocate is always a great person, irritating sometimes, but a great person."

Best practices for board process also include directors taking upon themselves the task of soliciting feedback from more junior, and less vocal, directors. For example, the consumer products CEO we interviewed said that he makes it a point to solicit feedback from quieter board members. In fact, he noted that in some circumstances, he might even call or have lunch with such board members so that he can talk to them individually. Such initiatives might push junior and quieter directors to speak up and help these directors feel more a part of the board, improving the board's chemistry and ability to act as a team.

Even senior directors can get shut out of a debate when "airtime" is constricted in tightly choreographed board meetings. It starts with directors who encourage facilitation techniques that can promote greater director involvement and debate. A director of several Fortune 500 companies said:

If there is a good CEO, they have the unique power and ability to facilitate an extremely effective board by good communications, by chemistry... by candor and openness, and that can't be stressed enough. What does 'an ability to facilitate' look like? To encourage participation, to draw out the best in people, to not allow a prominent personality to be the only voice that everybody hears, to establish the climate where you feel comfortable to express an opinion.

Facilitation techniques abound. It could be as simple as asking each director to comment on major issues or employing more sophisticated methods such as the nominal group technique [22] , dialectical inquiry [23] , or the Delphi method [24] , all of which are designed to improve the richness of discussions and reduce the opportunity for one or two people to dominate.

To make the most of board meetings, directors should also take time out to regularly ask CEOs probing, big-picture questions. For example, in each board meeting, directors might ask the CEO to identify the top three issues the company is focused on, or the top three things that could go wrong and what the company is doing about them. Either by asking such questions or just through the ordinary course of board meetings, directors should be actively involved in scenario planning to prepare for major events that are potentially "life changing" for the corporation, such as merger, bankruptcy, or fundamental competitive or regulatory change. One long-time board member said that it isn't enough for the board to passively await an unknown fate. The board "should prepare ahead of time. Expect the worst and prepare."