Boardroom Culture: Insights from Behavioral Psychology
According to a recent publication from PwC’s Governance Insights Center, no boardroom culture is perfect, and insights from behavioral psychology might explain what’s holding boards back.
“Every director has witnessed derailed discussions, dismissed opinions, side conversations, directors who dominate and those who seem to be biting their tongue. Boards are spending a great deal of time thinking about composition issues like director expertise and diversity. But what they might be missing is the importance of group dynamics—the human element. After all, each director brings his or her own habits, preferences, past experiences and individual biases. These all impact the board’s culture and decision-making.”
Four Common Boardroom Biases
The publication identifies four common boardroom biases:
Authority bias occurs when boards rely too much on one director’s experience or opinion.
Groupthink occurs when boards are too inclined to seek harmony or conformity, making it difficult to voice dissenting views.
Status Quo Bias
Status quo bias occurs when boards overvalue what they know and are reluctant to pursue initiatives involving substantial change. A related problem is the “sunk cost” bias—the idea that the board has devoted too much time and effort to an idea or topic to walk away.
Confirmation bias occurs when boards subconsciously seek out and overvalue evidence that confirms their own beliefs, while undervaluing contradictory evidence. The Ticker has previously discussed the related problem of “choice-supportive bias.”
Greater awareness of these insights from behavioral psychology will enable boards to view their interactions through a new lens and help facilitate improvements in boardroom culture.