In 2015 Volkswagen shocked their shareholders when the truth came out about their emissions testing. The German car giant had been cheating emissions tests for their diesel cars. This development has destroyed the public’s trust and has spotlighted the Volkswagen board.
Now the car maker is in damage control mode, suspending employees, replacing their CEO, and trying to gain back the trust of their shareholders.
Dysfunctional boards are bad for business. They tarnish a company’s credibility, erode public trust, and lead to toxic cultures. A functional board supports the company and CEO while moving towards the goals of the company and maintaining its values. Clearly having a functional board is better than having a dysfunctional board right? So what exactly makes a board functional and how can a chairman effectively assess the functionality of their executive team? Luckily Harvard professor, Richard Hackman put together the three characteristics of a functional board.
Let’s take a deeper look at each of these characteristics. “It completes its tasks and reaches its goals” – This is fairly obvious but it’s a good place to start. Anthropologically, the human brain is designed to reward us with hormones that reinforce the behavior for our survival. Dopamine, one of the hormones is released when we eat that is why eating feels good and it also releases when we achieve goals. If you want your board members to create experiences where dopamine is released, make sure that your board has clear goals and a way to accomplish it.
“It develops and maintains good relationships that help its members work together and maintain group cohesion” – Does your board get along well? For boards to be effective, they must work together and for boards to work together, they must work in safe environments that promote mutual trust. Trust is a cornerstone to group cohesion. Trust flourishes when a board has strong control over emotions. Empathy replaces judgement in trusting environment which increases positive relationships and allows for a functional board.
“It promotes its members’ personal and professional development” – Effective board members are successful in their careers and personal lives. It is important for the board to give its members the tools to reach their own personal goals and develop as professionals.
These are great simple tests of functionality. If a board is lacking in any of these characteristics, it’s probably due to poor board dynamics.
Board dynamic structures are the practices that keep a board united and strong. Simply having a group of highly intelligent individuals does not guarantee success. An executive team must practice and maintain board dynamic structures. In Volkswagen’s case, a functional board would have saved the company their reputation.
If your board is dysfunctional or you have any comments or questions about our discussion on functional boards, contact us for more information.