Three actions to support effective decision-making for your board

When you’re making a decision, you will likely consider different options, then select one that fits with your purpose or goal.

Many important decisions are made by groups such as governance boards. Groups can bring increased cognitive diversity to a problem, increasing the likelihood of a higher quality decision.

Complex problems, those which involve ‘unknown unknowns’ and cannot be addressed by expertise alone, are particularly suited to input from groups. Group members can apply different approaches to problem-solving. This is especially important when the situation involves an ambiguous task, is dynamic, or where there is no inherently right or wrong answer. In group decision-making, the aim is to find a consensus solution, or at least one that all group members can accept. Our definition for effective group decision-making is therefore:

The process through which a complex problem is understood, alternative solutions are identified, and one or more solutions are selected to best meet the objectives.

Governance boards carry the ultimate responsibility to steer organisations towards their fundamental purpose. This often involves decisions around strategy, statutory compliance, stakeholder preferences and fiduciary duty. The pursuit of effective decision-making should be foremost in the minds of boards.

Beyond following an effective decision-making process, what else can boards do to ensure they are an able board team, ready to make effective decisions?

Social psychology research since the 1960s has shown that diversity of background and perspective leads to increased cognitive resources and better overall problem-solving capacity for groups. These differences create an opportunity for group members to talk and think about problems in different ways.

Different problem framing, perspectives and options contributes to the quality of the final choices made by the group. But such differences can also cause misunderstandings, frustration, interpersonal friction, and difficulty achieving a required consensus.

Therefore, cultural climate elements such as successful communication and social interaction are critical factors in mediating group performance.

Studying effective decision-making for NZ boards

To investigate group culture and effective decision-making, we recruited members from 35 New Zealand-based decision-making groups - half were governance boards and the remainder other work teams.

Participants were first asked to think of a complex decision their group has faced. Next, they were asked how effective their decision-making was. We also asked questions to determine whether their group had a culture based on factors including:

Psychological Safety - feeling safe to take interpersonal risk in a group context.

Independent thinking – different approaches to problem-solving are supported by sharing actual thoughts, opinions, and viewpoints.

The cultural climate that supports effective board decision-making

Our findings showed effective decision-making is enabled by cognitive and emotional components. Psychological safety contributes to the emotional component, and independent thinking relates to the cognitive component.

Participants with a higher level of psychological safety reported their group was more likely to use effective decision-making.

Psychologically safe individuals can freely communicate without fear of negative consequences. This has also been associated with benefits such as increasing creative ideas and overall performance.

A longer group tenure also positively contributed to effective decision-making. Tenure and familiarity relate to psychological safety. This is especially helpful in ambiguous, uncertain, and changing work environments.

Higher perceptions of independent thinking from the group members suggest they can see things differently and create new opportunities when it comes to making decisions. Group members are able to challenge each other, which is further enabled in a psychologically safe environment.

To support you in increasing the decision-making performance of your board, we have outlined three recommended practices:

1. Check you are following an effective decision-making process

• Our objective - what are we seeking to achieve by making the decision?
• Do we understand the problem/opportunity that is being addressed?
• If it is a complex matter, are we applying a range of perspectives (cognitive diversity) and including those who should be involved?
• Are we considering more than one potential solution?
• Have we selected the solution/s best aligned with our objectives?
  
  

2. Foster psychological safety

• Have a shared set of values and a clear vision to support constructive discussion
• Encourage curiosity instead of allowing defensiveness
• Frame decision-making as a team sport, not a win (or loss) for the individuals whose ideas are supported (or discarded)

(For more see Realising your board’s diversity of thought – Psychological safety)

3. Support independent thinking and expression

• When facing an important complex decision, use a disclosure technique (eg a poll or providing a written response) that allows each board member to share their view before they are exposed to the views of others
• If a prior discussion with a fellow board member has changed your view, share that this has happened and why you changed your mind so everyone can benefit from both previous and current viewpoints
• Chairs and CEOs should be especially careful not to unduly influence board members’ independent thinking

(For more see Realising your board’s diversity of thought – Independence) 

About the authors

Story Dealy Cottrell is a Research Fellow for DOT Scorecard, a consultancy that works with boards and senior teams facing complexity to evaluate both the cognitive and cultural elements of their diversity of thought to enable them to improve their decision-making. 

Lloyd Mander CMInstD is the Principal Consultant for DOT Scorecard. He is the chair of the Institute’s Canterbury Branch Committee and is a representative on the Institute’s National Council.