Board Composition

How Business Chemistry Can Perfect Board Composition

Diligent Governance Cloud supports perfecting board composition

It’s official: Australian boards with well-composed memberships perform better.

A 2018 study of Australian boards shows that effective boards are defined by what the board does (roles),  and who is on the board (composition). “Communication and teamwork refer to the degree to which the board works as a team, board members trust and respect each other, and board discussions are positive, productive and constructive,” the study notes.

How can boards achieve this kind of ideal board composition?

It’s particularly challenging considering that the average board member spends about 245 hours on board matters over the course of a year, according to the (US) 2018-2019 NACD Public Company Governance Survey. However, less than one-third of this time, a total of 74 hours, consists of board member interactions, such as telephonic and in-person board and committee meetings and a handful of board dinners.

With so little time spent in person-to-person communications, how well do board members actually know one another? How can they build up an interpersonal dynamic?

Business Chemistry offers a new approach to boardroom dynamics

A new concept, Business Chemistry, is helping to achieve better board composition, working with Modern Governance tools like dedicated applications for Nominations.

“Business Chemistry draws upon the latest analytics technologies to reveal four scientifically based patterns of behaviour,” explains Deloitte in a recent note. “Developed by scientists, the system is designed to provide insights about individuals and teams based on observable traits and preferences. By understanding these differences, you may improve the effectiveness of your interactions with other types of individuals, as well as combinations of types in team environments.”

Companies have used personality assessments, in the past, for this kind of analysis. But business chemistry takes the concept further, Deloitte says, because it is focused on interaction and not on static assessments of character. It takes into account aspects like risk-taking and communication styles. And it tracks characteristics with biological linkages that are hardwired in most individuals.

Business chemistry first helps executives to understand themselves — Identifying personal predilections and weaknesses in personal communication. Then the new concept seeks to help executives understand others — identifying how to observe behaviours in others and what key traits to identify.

Four characteristic behaviours

Business Chemistry works with four basic behaviours, according to Deloitte, each of which is part of a given executive’s interaction style:

  • Pioneers value possibilities. They are known for sparking energy, being outgoing, spontaneous and adaptable. Pioneers are creative thinkers who see the big picture and believe that with big risk come big rewards. Pioneers love to brainstorm big ideas. They are known for speaking up and making decision quickly; however, they are not known for thinking through all the execution details before sharing ideas widely which at times can add significantly to management’s workload. Pioneers can be an asset to the board when discussing a company’s long-term strategy and innovation concepts.
  • Guardians value stability. They are known for bringing order and rigour to the boardroom. Guardians are practical, detailed oriented and deliberate in decision making. They tend to stick with the status quo and can be a bit risk averse. Guardians typically present themselves as reserved and calm, as they like to listen and collect the facts prior to presenting an opinion. They appreciate a large amount of information before making a decision but at times can get stuck in the weeds. Guardians can be extremely useful in the boardroom due to their attention to concrete detail and love of data.
  • Drivers value challenge. They are known for being direct in their approach to people and problems. Drivers are technical, quantitative, logical and skilled at identifying patterns to understand things. Drivers typically are tough-minded and ask the hard, to the point-of-the-matter, questions. They are not afraid to ruffle the feathers of other board members or members of management. Drivers are focused on the end goals and can be often seen as leaders in the boardroom. Drivers can be resourceful and insightful in technical discussions brought to the board, as they are skillful at understanding complexities and simplifying through logic, but can come across as abrasive if others do not catch on as quickly.
  • Integrators value connections. They are known for being the “glue” that holds the boardroom together, especially during chaotic times. Integrators are empathic, diplomatic, non-confrontational and consensus oriented. Integrators can be a good resource on a nominating and governance committee, human resources and personnel issues, and the oversight of the new board member orientation processes due to their interpersonal skills, love of people, and vast network/connections.

Board composition means connecting types together

No one, of course, is simply a ‘driver’ or a ‘pioneer.’ We are all combinations of these behaviours. But particular board members lead with certain characteristics that affect boardroom dynamics. This is what the chairman, the senior non-executive director and the company secretary have to watch for, and then to react in a way that enables good communication among the whole board.

For example, in the boardroom, Integrators can offer their connections as resources. But Integrators may clash with Pioneers, who want to move ahead on big ideas, while integrators would prefer to test the waters by networking first. The chairman should bring the two together, by proposing that the Integrator develop the Pioneer’s bold proposals.

“Board composition is not susceptible to a one-size-fits-all approach. It reflects a mix of skills, experience, and diversity, in all forms, each of which has its own complexities. In addition, board composition is never a completed project; it requires ongoing focus, monitoring, and attention, as both the directors’ attributes and the company’s needs change over time,” Deloitte adds.

Through the use of Business Chemistry, by recognising the different types that make up the board, the chairman can integrate the advantages each board member brings, and build a board dynamic that leads to superb performance.

Diligent Governance Cloud helps build a healthy board dynamics

The suite of Modern Governance tools that comprises Diligent Governance Cloud addresses every aspect of board dynamics.

The Nominations app scours thousands of candidates so that boards can find those with the right skills as well as the right chemistry.

There are tools for competitive intelligence, for understanding the market the company works in, for rapid and secure communications, virtual meeting rooms for secure exchanges of ideas, for evaluating board performance, for entity management and more.

A world of governance knowledge informs Diligent Governance Cloud.

Good governance isn’t just one thing – so why buy software that only manages your board documents? At Diligent, we empower leading organisations around the world to turn good governance into a competitive advantage for their business. In the ever-changing landscape of the world, governance hasn’t kept up with the fast pace of business. Quarterly board meetings, paper board books and not using secure communication tools for sensitive data have opened up numerous companies to risk.

With Diligent Governance Cloud, boards can gain a competitive edge to improve governance by having the right information, analytics and insights to spot risks, act on opportunities and turn insights into action

 

Featured Blog