Thursday, April 09, 2015

Company Directors should act without fear

I invest a lot of time assisting people running businesses to do the right thing and to find the correct decisions for their company or organisation.  Often, to do this effectively, we need to reflect on our own practice.  Here is a thought for you on fear.

Have you been in this situation before? You are facing a dilemma and need to make a hard decision. Racing through your mind are all sorts of scenarios and distractions. A decision seems obvious, but something holds you back.  It could be that you’re racked with fear that people won’t like your decision. You might fear looking stupid. We fear that people may feel hurt, or that you might damage a friendship or a working relationship. Will making a decision be seen as me having got it wrong in the past?

So you compromise and make a decision that you think might keep the peace, or please everyone.  Or, worse still, you avoid making a decision at all.

Now, ask yourself this: what would I do if I had no fears?

Prolonged exposure to boardrooms, and listening to the war stories of respected directors, tells me that the above situation is not unheard of in the governance arena. But there can be no place for fear in decision-making for directors. They are charged with making decisions that are in the best interests of the company.  Importantly this requirement includes making decisions in the best interests of the company even if that is not in their own interest.
 
Directors are expected to make the tough call, and this can often be a daunting and difficult task.   But they cannot avoid their responsibility by ducking the hard decisions.

Perhaps the most valued asset that any director possesses is his or her reputation. Reputation risk is often discussed by directors, and an association with poor decisions and/or practices could damage that reputation. This provides a very strong motive for directors to ensure that they are making sound decisions that are in the best interest of the company. Best interest, of course, now goes beyond narrow interpretations of shareholder value, to ensuring that decisions enable the company to continue to trade in a sustainable manner, and reflect the needs and interests of staff, customers, and the wider community as well as shareholders.

But directors, like all people, are not immune to fear. They, however, may have a heightened responsibility to ensure that fear does not distort good decision-making. If we asked the question, “what would I do if I had no fears?”, then we could remove one major obstacle to the operation of sound judgement.

When you ask “what would I do if I had no fears?” then often the correct decision stares you in the face…your choice becomes clearer.

Want to learn more? I recently completed a program offered by the University of Lausanne through Coursera entitled, Unethical Decision-Making in Organisations.  Delivered by Guido Palazzo and Ulrich Hoffrage from the UL Business School, the course covered many topics, including the Enron story and Lehman Brothers collapse.  I would recommend the course to anyone interested in developing their decision making skills. I would particularly recommend it to anybody serving at Board or C-Suite level.

Amongst other things, the Lausanne course has helped me to re-appreciate the operation of fear, and particularly concerns about making decisions that might isolate you in work or social settings. The course also help be put in context the importance that leaders such as Field Marshal Bill Slim and Gen George Patton both applied to the advice “do not take the counsel of your fears”.  And the words of Max DePree: “Leaders stand alone, take the heat, bear the pain, tell the truth.”

High on the list of screens I will now apply to the difficult task of decision-making, especially at board level, will be to regularly ask myself: what would I do if I had no fears?

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