How to enhance boardroom effectiveness – Part 1

To understand a board, we need to understand how behavioural dynamics influence decision making to deliver board effectiveness, inclusion, and ultimately accountability. Behavioural dynamics are the continual interplay between the contexts of the board, the board processes, and the expected and achieved outcomes as individual directors become a collective board. We believe strategic inclusion is achieved when these are managed effectively but our research team needs to verify that this corresponds to real board experiences. Please help us by joining our consultation!

Board success is not sufficiently understood  

We speak infrequently about the people side of the board, usually focusing on decision-making and information requirements. However, research has shown that board effectiveness is derived equally from decision-making and the group’s ability to work together. When we talk about a board’s ability to work together in research and practice, we tend to focus on who serves on the board, but this is only one facet of board environments. Our behavioural dynamics research focuses on the drivers of board behaviour and how relationships form to enable effective and inclusive boards. These topics have become more urgent and important as boards of large organisations have become more diverse, multifaceted, and tasked to deal at speed with increasingly more significant challenges. This complexity requires additional actions to enable effective and inclusive boards where the Chair is instrumental in driving change. Therefore, we need to increase our understanding of behavioural dynamics and all the levers which can be used to drive a board’s performance.

Important behavioural dynamics

Many boards are making significant progress in addressing their behavioural dynamics. However, this has been achieved on an organisation-by-organisation basis without an overall guide to structure the actions available. We believe that more sustained progress can be made if we raise behavioural dynamics as a topic discussion so that this is explicitly and openly understood.

To understand behavioural dynamics fully, we need to have a better understanding of what drives board changes (the key institutional, organisational, and board-level pressures), the power of the Chair to drive positive change (and where appropriate the Nomination Committee), and the processes available. We also need to better understand the behavioural drivers behind board outcomes; for example, prior research has shown that more inclusive boards are more effective, but that the role of the Chair is central to achieving this.

To accomplish this, we are undertaking a research programme to develop a view of what drives board change, the actions put in place, and their outcomes. Phase 1 systematically reviewed the existing academic literature and revealed the need to understand dynamics within their interlinking contextual pressures, chair driven processes and their expected outcomes. Phase 2 then reviewed disclosures of 50 FTSE 350 companies. The companies chosen were the top 10 by market size, plus highly scored diverse boards and leadership teams evenly distributed across sectors from the 2023 FTSE Women Leaders report.

From our analysis to date, we show that inclusion is becoming a key factor for the whole board. We have drafted guidance on the people side of the board which summarises our findings on the drivers of behavioural dynamics, the three levels of process maturity, and their outcomes. The guidance highlights the interventions a Chair can consider, with assistance from the Nomination Committee, to implement strategic inclusion in the boardroom.

Investigating behavioural dynamic experiences  

Our next phase of research is to facilitate consultations on behavioural dynamics using our draft guidance, starting in September 2024. Using the consultation feedback, we will revise the guidance for release in July 2025. The consultations focus on two areas:

• Strategic Inclusion: How do we use behavioural dynamics to enhance inclusion? We will interview FTSE Chairs, and Senior Independent Directors to establish how to define the actions of an inclusive Chair, the outcomes sought from behavioural dynamics, and the drivers for change in boards.
• Codifying Strategic Inclusion Processes: We will have detailed presentations, process workshops and surveys with Board Members, Company Secretaries, and governance advisors. This will validate our bottom-up analysis of the proposed processes, the influences on the processes, their expected outcomes, and the three levels of maturity for each process.

The aim of the consultation is to explicitly understand and reach agreement on the levers and actions which progress board effectiveness and inclusion.

Let’s talk differently about boards!

Join the conversation, find out more about our research and opportunities to participate: https://exe.qualtrics.com/jfe/form/SV_6EDIIoBz0WXtG2G

Read Part II of this series here.