26 July 2017 by Andrew Kakabadse
Andrew Kakabadse of Henley Business School discusses how to healthily manage clashes in the boardroom.
Over the past 15 years, I have focused much of my work on the dynamics of boardroom relationships. I have studied how boards are formed and looked at how a group of disparate individuals, all with their own specific skills and typically with strong opinions, come together and work effectively as a team.
I am also interested in who facilitates that teamwork and draws together all those disparate strengths.
In 2014, I worked with ICSA: The Governance Institute on a piece of research into the role of the company secretary, which we published under the title ‘Building trust through governance: the role of the company secretary’.
One of the interesting findings of that research was the similarity between the skills and attributes of the best company secretaries and those of a chairman, for example: humanity, humility, high intelligence, understanding of agendas, negotiation and resilience.
Previous research that I had undertaken, using our unique database of 12,500 top teams and 5,500 boards, identified significant tensions in the boardroom between the chairman and CEO, the CEO and CFO, and the executive and non-executive members of the board, among other pairings.
By way of example, that earlier research suggested 75% of chairman-CEO relationships were in some way dysfunctional.
However, these tensions are rarely recognised. My previous research identified that boardroom conflict primarily involves clashes over the purpose of the organisation and competitive advantage.
A state of at least some tension will be an inevitable result of the way in which our boardrooms are filled with intelligent, high-achieving people.
Intelligent and informed people can, and often do, reach different conclusions and, having done so and being conscious of their own intelligence, can be unwilling to let go of a clearly developed and logically founded perspective. I have referred to this phenomenon as ‘disruptive diversity’.
“A good board is one with managed tension, while a dysfunctional board allows it to fester and escalate into conflict”
In ‘Building trust through governance: the role of the company secretary’, our first key finding was: ‘The role of the company secretary is much more than just administrative. At its best, it delivers strategic leadership, acting as a vital bridge between the executive management and the board, and facilitating the delivery of organisational objectives.’
I was therefore delighted when ICSA approached me to look at the role of the company secretary in managing tension in the boardroom, an issue the Institute had recognised in its work on the ‘soft skills’ of senior company secretaries.
There have been half-hearted attempts at analysing conflict in the boardroom, but they have lacked depth and I thought it would be interesting to undertake a more comprehensive study.
This would examine the nature of conflict; the reasons for conflict; contextual influences; the nature of the protagonists; the length of the conflict; any attempts at resolution or not; the impact of the conflict on the board and the organisation; and whether a pattern exists concerning approaches to resolution/intervention and the type of conflict.
It would also give us an opportunity to identify and distinguish the characteristics of ‘good’ boardroom tension against ‘bad’; understand the characteristics of productive conflict resolution; evaluate the role of the company secretary in supporting productive conflict resolution; and assess the support needed to develop the relevant skills of company secretaries.
Our interviewees drew a clear distinction between tension and conflict. Tension is disagreement, which is often uncomfortable but can be resolved by healthy debate.
Conflict, on the other hand, is regarded as aggressive tension that usually escalates to extreme and unresolvable levels. Tension is also seen as a positive and necessary force for any effective board, while conflict is disruptive and detrimental.
When conflicts do occur they can fundamentally alter the dynamics of the board in ways from which it can prove difficult to recover. Tension and conflict are most likely to emerge during decision-making, or be linked to people, personality and historical issues, such as changes in board structure.
This structural tension occurs as a result of the conflicting demands of different roles. However, this is largely seen as positive and necessary to the function of the board.
Tension is most likely to lead to disruptive conflict when disagreements and concerns are left unresolved for too long. This can also be the case where board member disputes become personal and it becomes difficult or impossible to find any middle-ground.
We were told, however, that board diversity is not an issue that is likely to lead to unresolvable conflict. On the contrary, it was seen as positive and facilitates healthy tension.
Given that tension and conflict are different, it follows that the method for effectively dealing with them is also different. Drawing on the personal experience of board members working in a variety of roles, we have identified that robust debate, open dialogue and tackling uncomfortable issues head-on explicitly benefits boards’ decision-making and actions.
However, our findings challenge the fundamental assumption that conflicts should always be aired, discussed and addressed in the boardroom. Strategies for managing tension and minimising conflict in the boardroom include:
Conflict, on the other hand, is most effectively resolved in informal one-to-one meetings outside the boardroom.
In general, therefore, strategy and decision issues are more appropriately resolved inside the boardroom. A good board is one with managed tension, while a dysfunctional board allows unresolved tension to fester and escalate into conflict situations.
Such boards become politicised as views become entrenched and teams try to work out their differences. In these circumstances, some board members dare not raise uncomfortable issues for fear of exacerbating already tense situations and, more often than not, a culture of paralysis can emerge.
The causes of boardroom tension are varied. Top managers can rightly hold diverse views on what competitive advantage is, and almost one-third of organisations worldwide find that they cannot agree on this.
34% of boards indicated that they had no shared view on mission, vision or strategy, and 66% that there was a known, difficult but critical issue which board members felt too uncomfortable to raise.
In many cases, this related to the organisation’s strategic advantage and how it should be differentiated from its peers. In many other cases it related to people and their recruitment, promotions and/or remuneration. These issues are always sensitive and more than usually open to subjective and strongly held opinion.
These people issues included defensiveness on the part of the CEO; a lack of understanding of the role and intent of non-executive directors, seen as meddling or interfering rather than supportive; and the rise of what I have described as the ‘psychopathic CFO’. By this I mean a CFO who is focused entirely on the numbers and whose view on any boardroom issue can be defined on that basis.
The chairman and company secretary play the most important roles in managing tension and conflict resolution.
The role of the chairman is to be clear about what is properly discussed in the boardroom, what needs to be dealt with outside, and what needs to be dealt with outside the business completely. The chairman sets firmly established boundaries about what can be discussed within and outside the boardroom.
Company secretaries play a critical role in conflict resolution, facilitating and maintaining boards’ ability to function. They are the honest broker in many such situations.
As the principal point of contact for the non-executive directors, their focal point for data and information, and their 24-hours-a-day, 365-days-a-year presence in the company, company secretaries also have the ability to build strong relationships with executive colleagues.
Their generally high IQ, coupled with the high EQ developed in this role, means they can also be the first to spot developing tensions.
Perhaps the most important factor is, however, the trust placed in their integrity and independence. Although more can be done to foster this – I know that ICSA believes company secretaries should report to the chairman and that their pay should be a matter for the remuneration committee – it remains widely recognised.
A theme that emerged from a number of our interviews was that the board was both a collection of individuals and an ensemble. Each single member acts alone, but also works with others to make 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 these attributes, they must ultimately work as part of a wider team that is responsible for the organisation’s long-term interests.
As such, effective boards should be places of harmony and collaboration, as well as challenge and independence. Boards ideally act as environments in which each member can respect and incorporate the views of others and, when needed, retain their independence and question fundamental assumptions.
“Top managers can hold diverse views on competitive advantage”
It has long been recognised that challenge, scrutiny and robust debate can lead to disagreement, tension and conflict in the boardroom. However, our respondents for this unique study on conflict and tension in the boardroom stress that tension and conflict are not only inevitable, but also play an essential part in effective boards.
Boardrooms would be far less effective places without a degree of constructive tension. It is only by understanding and embracing this process, we were told, that the best possible decisions can be reached.
Both the management oversight and decision-making roles of the board benefit from an atmosphere of constructive challenge and the freely-expressed views of board members. If non-executive directors are to hold management to account properly, they must not be shy about expressing their views, testing assumptions or challenging groupthink.
As one board member notes: ‘If everybody is thinking and behaving in exactly the same way, it is utterly pointless.’
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 and his or her right-hand man or woman – the company secretary.
You can read ‘Conflict and Tension in the Boardroom: How managing disagreement improves board dynamics’ on the ICSA website