Late last year, I looked at the concept of Groupthink, the term coined by Yale psychologist Irving Janis that describes the situation when people act like sheep and just follow the crowd. No-one raises any questions, and no-one steps out of line. As I said in that blog entry, Groupthink resulted in disasters like the bay of pigs and the invasion of Iraq.
But it also happens on company boards and when it does happen, it's a failure of corporate governance.
So what are the warning signs of Groupthink? They can be summed up as follows:
1.Self-censorship where people are frightened of raising any doubts or asking questions.
2.Illusion of unanimity where the deafening silence is taken as a sign that everyone agrees.
3.Self appointed gatekeepers who make sure that any information contrary to the prevailing point of view does not get through.
4.Illusion of invulnerability where people are too optimistic and upbeat and ignore the problem signs, leading to poor risk management and a failure to plan for contingencies.
5.Rationalization where the group explains away information or opinions that are contrary to the prevailing point of view.
6.Collective conformity where members of the group pressure anyone dissenting to get into line.
7.Illusion of morality where everyone in the group believes their decisions are morally correct.
Those are the red flags. What do you do when you see them? There are several steps that need to be taken.
1.Critical thinking. All directors need regard critical thinking, objections and misgivings as part of the job.
2.Alternative options on agenda papers, instead of single preferences put up by management. Also the company secretary should have the job of presenting contrary evidence.
3.Second chance meetings where directors get the opportunity to review decisions.
4.Devil's advocate – a role that should be given to a director whose job would be to identify and challenge board assumptions.
5.External scrutiny of board meetings where outside experts are invited to attend board meetings. They can be guest speakers or participants but their role is to have them scrutinizing the form and substance of the material presented to the board.
6.Single issue committees with independent leadership working on single issues that were initially considered by the board.
7. No hasty decisions. Agenda items requiring a decision should be introduced well in advance. No decision should be taken until all the information is gathered and there is a debate.
8.Feedback from the outside. All directors should routinely discuss the board's deliberations with a trusted associate on a confidential basis. They then need to report back to the board on the associate's reactions, bearing in mind that any of the deliberations have taken board confidentiality into account.
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