How to… Apply Wisdom in the Boardroom

This month’s blog is part of The Governor’s ‘How To Series.’ The series covers a range of topics which offer brief practical guidance on some of the issues that I normally explore from a more theoretical perspective. In doing so, I hope to ensure that my blogs don’t just keep you up to date with what is happening within the governance as a whole, but will also assist you in becoming a competent, confident and effective governance practitioner.

Reading time this month – 4 minutes

In Caribbean and West African Folklore there is a character called Anansi who is seen to be the quintessential embodiment of wisdom. Often portrayed as a spider in the stories that bear his name, the tales in which he features use clear and simple messages to offer readers guidance on how to apply wisdom.

So what does Anansi have to do with governance I hear you ask? Well, some of you will have read or at least heard of the book ‘The Wisdom of the Crowds: Why the Many are smarter than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations. Published in 2004 by American Journalist James Surowiecki, the basis of the material is that oftentimes, decisions made in groups are better than those made by individuals based on the power of his four elements he sees as being required to form a wise crowd. These are:

  1. Diversity of opinion – each person should have private information even if it is just an eccentric interpretation of the known facts;
  2.  Independence – people’s opinions aren’t determined by the opinions of those around them;
  3. Decentralization – people are able to specialize and draw on local knowledge;
  4. Aggregation – some mechanism exists for turning private judgments into a collective decision.

These four principles can easily be applied in the boardroom of any organisation across the private, public and voluntary sectors.

Diversity is a key component of a balanced boardroom with codes such as the UK Corporate Governance Code advocating it when it states that:

“One of the ways in which constructive debate can be encouraged is through having sufficient diversity on the board. This includes, but is not limited to, gender and race. Diverse board composition in these respects is not on its own a guarantee. Diversity is as much about differences of approach and experience, and it is very important in ensuring effective engagement with key stakeholders and in order to deliver the business strategy.” 

Moving on to the second element, independence is a crucial trait of any non-executive director and helps the organisation to remain strategic and fulfill its duties to promote the long-term success of the company they govern. The 2003 Higgs review introduced emphasized the importance of independent non-executives, also paving the way for what is now seen as important guidance on the balance of execs and non-execs on a board.

We then have decentralization which speaks to the board ensuring they have the right balance of knowledge, skills and experience with board members who bring their unique specialist expertise and often time local and sector knowledge. Rather than rely on business norms the idiosyncrasies of the business in its localities can be explored by giving the time and space to their individual perspective.

The boardroom is a unique place in business and similarly the role of a chair is crucial. In order to benefit from the first three elements the chair should try to engage all board members. The combination of diverse views, local knowledge, an understanding of the sector and the willingness of the board to harness these individual facets and deliver collective outcomes are the essence of collective decision-making. But it takes wisdom to make the right choice.

Carver says and I have quoted many times that: “Boards tend to be in fact incompetent groups of competent individuals.” What keeps boards collectively competent is the application of wisdom.

Back to Anansi. In the governance forum zoo, there a number of animals whose behaviour fits into the four categories of dysfunctional board behaviour that I conceptualised. As a spider, Anansi is a builder of webs that are used to capture his prey. Spiders that build webs are incredibly sensitive to vibrations as many of them have poor sight.

Like this analogy of the spider feeling the vibrations through its web, boards must be able to feel the vibrations of pending changes in legislation, regulatory demands, budget cuts and risks and the impact this will have on their stakeholders and the viability of the business, always applying the wisdom of the crowds in while doing so.

One of the stories of Anansi tells of his attempt to hoard all of the world’s wisdom in a pot which he intended to hide. Fearing that the pot was not a secure enough hiding place for wisdom, he decided to try and hide it in a tree in the forest. As he knew he could not hold the pot and climb the tree, he decided to tie the pot in front of him but had little success trying to climb the tree. His son Ntikuma who had followed him to the forest laughed at his father and asked him why he hadn’t tied the pot to his back making it easier for him to climb the tree. In a moment of frustration when Anansi realised that he had not applied diversity of opinion, been too independent and acted only in his own interests, not engaged the benefit of decentralization and failed to aggregate, he lost his grip of the pot which smashed releasing all of the wisdom he had harnessed. At the same time, a passing storm arrived and washed all of the wisdom into the sea.

An unfortunate tale you might say but what the sea did was carry the wisdom across the world so that there was enough for everyone. A measure of wisdom was fictionally transferred to everyone as a result of the smashed pot but in reality, that measure of wisdom can be found in us all. The closing adage in this tale sees Anasi evaluate the unfortunate series of events by asking: “What is the use of all this wisdom if a young child still needs to put you right?”

So what is the Anansi lesson for today? I pose the same question to you as a non-executive director, an executive director, a CEO, COO or FD who contributes to a board – what is the use of all of this wisdom if we allow groupthink to dictate our decision-making processes? Let’s ensure our boards are diverse, those around you do not influence your opinons, you bring and impart your specialist knowledge and then contribute to a collectively competent board.

To be successful in the boardroom we must take the wisdom we have been given individually and apply it collectively.

Until next time…