There have been a number of boardroom scandals over the past months that must have caused shudders in boardrooms across the country, and put a national focus back onto boards and board composition once more. The question is, what can boards do to avoid board melt-downs, corporate scandals and company failures?
Peter Cebon in an article in Harvard Review recently argued that pro-active boards, and ones that focus on problem finding rather than problem solving, put their organisations on a more solid footing. He emphasises that boards are strategic, and not operational. They scan for problems but allow line managers to resolve them.
Problem-finding boards establish structures and processes that prevent many problems from arising and stifle nascent problems quickly and effectively.
These boards work even better when they look for several types of problems:
- Those problems that it can predict, easily identify the causes and deal with quickly. Rather than rely singularly on information from the Chief Executive to the Board (sometimes only good news filters up) they will have eyes and ears within the business as well.
- Those that are unpredictable, for example, scanning for risks in the external environment.
However, underpinning the ability of the board to fulfill its duties is the competence of the board via its members.
- The third type of problem that problem-finding boards look for is the collapse of their own competence and problem solving systems. Problem-solving boards look inwards and check on the board’s competence, working styles and preferred approaches. They recognise competence-collapse and take remedial action, and ensure that decisions are made only when enough information and knowledge is available.
A board is only functional if it
- remains competent (has the skills to effectively manage as a board)
- and is cognisant of each member’s working style, approach and biases (has the traits to manage effectively).
As the business changes (grow, shrinks, adopts, adapts and morphs), the board must also adapt its competencies and approaches to meet the challenges arising from the needs of the changing business. Current statistics show that a business must reinvent itself every 5 years, and thus, by implication, a board must monitor its own response to the need for change and the process of change.
How Does Psychometric Testing Assist Boards
This is where we come in. Psychometric testing has gained traction in organisations, and is increasingly being mandated in many regulatory areas. A Wall St Journal Article says:
The use of online personality tests by employers has surged in the past decade, especially as they streamline the hiring process…. Such tests are used to assess the personality, skills, cognitive abilities and other traits of 60% to 70% of prospective workers in the U.S., up from 30% to 40% about five years ago.
Psychometric testing is helpful in many ways, not only in recruitment. When we work with boards we begin by looking inwards. What does it mean to have boards explore their working style and preferred approaches? Psychometric testing will paint a clear picture of the balanced and imbalanced areas of the working styles of a board in areas such as:
- tendencies to be open with the truth, withhold the truth, or be evasive
- problem identification and solving
- dealing with risk
- operating strategically
- working under stressful situations
- the level of narcissistic or other limiting behaviours
- the ability to deal with ambiguities, and to think and operate paradoxically – thinking AND instead of OR
Using a psychometric test provides deep insights into these and other areas, and allow us to scan for not only known board problems, but also unpredictable board problems. Our preferred tool is Harrison Assessments, because:
- we can ensure that we are measuring areas that are significant to the particular board
- the deep insights that it provides into individual and group behaviours is very specific
- we have the ability to use data analytics to scan for unpredictable board problems
- the data indicates the best areas to target process change and board development – getting the best value for the dollar.
When Should Boards Use Psychometric Testing
A board that recognises its need to manage itself as well as the organisation will use Psychometric Testing:
- for all current board members so that the pattern of working style is transparent to the board, and adjustments can be made to moderate areas that are low, lacking or imbalanced
- for potential board members, before being invited onto the board
- when hiring a new CEO
- when a board recognises (or is given the feedback) that it is not functioning well
- when the relationship between the board, executives and/or line managers is not effective.
For more information on how we can help your board with psychometric testing, please contact us.