7. Culture in the boardroom

Question 1

What has triggered the shift to greater appreciation of importance of culture?

Answer 1

Corporate failures and the financial crisis

Question 2

Simple definition of culture

Answer 2

The way we do things around here

Question 3

6 levels to an individual’s culture (areas of influence)

Answer 3

National
Regional / ethnic / religious / linguistic
Gender
Generational
Social class
Organisational

Question 4

Schein’s iceberg model of culture

Answer 4

Surface level - artefacts and etiquette (visible concrete elements)

Middle level - espoused values (drive pattern of behaviour)

Deep level - underlying assumptions (unconscious, taken-for-granted values and beliefs)

Question 5

What does Schein’s iceberg model of culture summarise

Answer 5

Schein’s more descriptive 10 categories of culture

Question 6

Simple definition of board culture

Answer 6

The repeating patterns of the board dynamic

Question 7

What is a key marker/indicator of board culture?

Answer 7

Board conversations and interactions

Question 8

What constitutes conversations and interactions? (8)

Answer 8

• Words
• Tone
• Body language
• Interruptions
• Note taking (or lack of)
• Later or early arrival or departure
  etc.
• Eye contact
• Facial expressions

Question 9

FRC Guidance - 9 aspects of healthy culture
HORARRAAA

Answer 9

Honesty
Openness
Respect
Adaptability
Reliability
Recognition
Acceptance of challenge
Accountability
A sense of shared purpose

Question 10

4 issues (of many) that may that may arise on boards if board conversations go wrong

Answer 10

• Directors may cease to be engaged
• Board susceptible to group conformity / groupthink
• Individual concerns may not be raised
• Conflict conversations may turn personal

Question 11

6 (of many) commonly occurring conversational issues on boards

Answer 11

• Issues discussed at length are unresolved
• Overly talkative or quiet members
• Lack of diversity of opinion
• Chair favours certain directors over others
• A small group sews up decisions before the meeting
• Over reliance on a single director

Question 12

Korn/Ferry and KPMG research - 4 top issues given by directors as reasons for poor or ineffective conversations

Answer 12

• Dominant personalities / groups
• Inappropriate allocation of time at meetings
• Lack of preparation
• Unhelpful manner of presenting info

Question 13

4 models/frameworks which help make sense of some basic assumptions of boards which create emergent dynamic behaviours of boards

Answer 13

• Bedrock of board culture model - Chait
• Power culture - Pearce and Zahra
• Ethical culture
• Performance culture

Question 14

Chait’s four archetypes to diagnose boards - free agent vs group member & institutional guardian vs public watchdog

Answer 14

Type I - Orchestra - group member & inst. guardian

Type II - Consultants - free agent & inst. guardian

Type III - Regulatory agency - group member & public watchdog

Type IV - Lone rangers - free agent & public watchdog

Question 15

(Chait’s) Bedrock of board culture model is guided by which two assumptions (questions)?

Answer 15

1.
‘To what extent a board is more akin to a symphonic orchestra or a jazz ensemble?’
…meaning…
Are directors group members, or are they free agents?

2. Chait’s work was on public sector entities, but we can expand this to all co’s
   Chait - Is the board’s role as a ‘public watchdog’ or an ‘institutional guardian’
   ie.
   Is the board’s role concerned with wider stakeholder interests, or much more internally focussed?

Question 16

Chait’s four archetypes to diagnose boards - Orchestra

positive and negative

Answer 16

Highly collegial and cohesive boards

At risk of group think and excessive deference (submission and respect) to peers

Question 17

Chait’s four archetypes to diagnose boards - Consultants

positive(ish) and negative

Answer 17

Serve organisations best interests, but with individuals adding value as individuals rather than as a whole

Risks micromanagement and reduced decision-making ability through information asymmetry

Question 18

Chait’s four archetypes to diagnose boards - Regulatory agency
(2)

Answer 18

Compliance and oversight focussed board, which sees responsibility as monitoring rules, regulations, policies and procedures

Formal and bureaucratic board may lack ability to be strategic in issues or generate innovation and insight

Question 19

Chait’s four archetypes to diagnose boards - Lone rangers (3 including positive and negative)

Answer 19

Weaker, as individual directors see role as representing particular stakeholder interests

Directors will be willing to use expertise to challenge decisions

Risk of org falling into zigzagging strategy, and of non-execs and execs often working at cross purposes

Question 20

Pearce and Zahra’s power culture model determines a type of board culture based on…. (2)

Answer 20

• Low or high chief executive power
• Low or high board power

Question 21

Pearce and Zahra 4 types of board culture - and whether they are low or high chief exec power & low or high board power

Answer 21

• Caretaker board - low CE power & low board power
• Statutory board - high CE power & low board power
• Proactive board - low CE power & high board power
• Participative board - high CE power & high board power

Question 22

Pearce and Zahra’s power culture - caretaker boards (2)

Answer 22

Weak board existing out of legal necessity, with decision-making being largely ceremonial

Power shared by CEO and other chief execs, causing board’s weakness

Question 23

Pearce and Zahra’s power culture - statutory boards (2)

Answer 23

Prototypical image of ineffective board, existing out of legal necessity to rubberstamp exec decisions

Cultural norm in the UK before 1992 Cadbury report

Question 24

Pearce and Zahra’s power culture - proactive boards (2)

Answer 24

Think supervisory board model seen in continental Europe

Usually comprised of outside directors representing key stakeholders

Question 25

Pearce and Zahra's power culture - participative boards (2)

Answer 25

Characterised by discussion, debate and disagreement Emphasis placed on building and reaching consensus in decision-making

Question 26

Pearce and Zahra - Power culture - overall conclusions (4)

Answer 26

- No difference in composition, characteristic, process and style across all board types - Participatory board included significantly more women, had more efficient processes, and were less impulsive - Board with more women showed higher subjective and substantial performance - Boards advised to create culture of sharing power across all directors, in attempt to ensure all capabilities are leveraged to produce more favourable results

Question 27

Why is it useful that board culture models are understood?

Answer 27

As starting points to diagnose, discuss, and if needed, review, board assumptions/culture

Question 28

Performance Culture - Extent to which a board is focused on long-term sustainable performance is dictated by... (2)

Answer 28

- Whether it is oriented towards learning and - The extent to which it balances its focus on relationships and tasks (Trickier)

Question 29

Garratt's learning board model - 4 functions (external/internal & shorter-term/longer-term considerations)

Answer 29

Accountability (external, shorter-term) Supervision (internal, shorter-term) Policy (external (longer-term) Strategy (internal, longer-term)

Question 30

Garratt's learning board model - accountability

Answer 30

Board should be holistically accountable for all aspects of business

Question 31

Garratt's learning board model - supervision

Answer 31

Board must have involvement in supervisory overview of the business, and ensure matters are not kept from it and debated fully and effectively

Question 32

Garratt's learning board model - policy (2)

Answer 32

Policy should be set at governance level rather than operational level Policy assurance and challenge should be present at board level

Question 33

Garratt's learning board model - strategy

Answer 33

Strategy should be a core board activity, and not driven by just a single individual

Question 34

Boards with a high focus on learning (and therefore a learning culture) will... (3)

Answer 34

- Place significant emphasis and value on yearly board evaluation - Build reflection, evaluation and feedback into their meeting processes - Hold a 'growth mindset' rather than a 'fixed mindset' in relation to individual contributions and the board's joint capacity to improve

Question 35

How prevalent is a learning culture in boards currently?

Answer 35

Not very!

Question 36

Performance culture (task or relationship focus) - boards could be placed into one of Trickier's 4 board cultures based on... (2)

Answer 36

- Concern for cohesive board relationships - Concern for achievement of tasks and challenge by the board

Question 37

Trickier's 4 types of board culture - and whether they are low or high concern for board relationships & low or high concern for tasks of the board

Answer 37

- Rubberstamp board - low concern for board relationships & low concern for tasks of the board - Country club board - high & low - Representative board - low & high - Professional board - high & high

Question 38

Trickier's 4 types of board culture - Rubberstamp boards (2)

Answer 38

Rarely adds much value Largely symbolic

Question 39

Trickier's 4 types of board culture - Country club boards (2)

Answer 39

Feel-good board Prone to groupthink and lack of diversity of opinion

Question 40

Trickier's 4 types of board culture - Representative boards (2)

Answer 40

Likely to be the largest board of the 4 types, ensuring it meets requirements of as many stakeholders as possible Group cohesion will naturally be lower with directors fighting for wants of diff groups

Question 41

Trickier's 4 types of board culture - Professional boards

Answer 41

Acknowledges need for strong team cohesion ... alongside ... Appropriate, well-delivered and diverse challenge to enable deep dialogue and effective decision-making

Question 42

Recent report by consultancy firm Korn/Kerry found which 3 board characteristics were overwhelmingly mentioned in relation to having effective culture of quality conversations (and therefore to improve board culture)? * these are in addition to understanding the board identity, values and culture as a starting point

Answer 42

1. A quality chair Chair, who: - leads board - demonstrates objective judgement and promotes culture of openness and debate - facilitates constructive board relations and the effective contribution of non-execs 2. Directors having a real interest and commitment to the company and its activities 3. High board diversity

Question 43

8 problem behaviours of a chair that may limit board culture

Answer 43

- Difficulty seeking and accepting feedback - Fails to make others feel viewpoint is heard and valued - Discourages legitimate questioning and challenge - Offers and defends own decision or opinion too early in discussions, with summing up biased in own views - Tolerates poor behaviour, or unwilling to stand up to dominant individuals - Dominates discussion - Prone to emotional outbursts - Relies on inner group to make decisions that belong to board as a whole

Question 44

Who is responsible for challenging problem behaviours of the chair? How?

Answer 44

All of the board, but most particularly the SID & CoSec Through feedback, coaching/mentoring, or failing that, challenging their position

Question 45

Schein's definition of culture

Answer 45

A pattern of shared basic assumptions that was learned by a group as it solved problems of external adaptation and internal integration, has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think and feel in relation to those problems