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The term "groupthink" was first coined by Irving L. Janis in his 1972 book of the same name. Groupthink is a phenomenon that occurs when a group of well-intentioned people makes irrational or suboptimal decisions spurred by the urge to conform or by the belief that dissent is impossible. The problematic or premature consensus that is characteristic of groupthink may be fueled by a particular agenda — or it may be due to group members valuing harmony and coherence above critical thought.
Boards are fertile grounds for groupthink as their members meet often and make many decisions together. In many cases, board members do not turn over regularly; as a result, directors get accustomed to one another and each director's thinking, and the can sometimes become complacent.
So how does groupthink materialize at board meetings? In my years of serving on multiple boards, I've seen that groupthink actually can come in a variety of ways. Here are some examples that I've experienced:
In this scenario, one board member in particular is well known, perhaps even famous, and has a strong personality. The rock star's force of personality and sheen of celebrity can pressure others into agreeing even though, if left to their own devices, they would not make the same decision on their own. Because no one speaks out, the tacit consensus is that the rock star is right and the decision is unanimous — further propagating the power of the rock star.
Board members may live in the same community and be active in the same social circles. In this scenario, groupthink arises because the board's decisions are based more on not rocking the boat and keeping peace in the community, and less on what's actually good for the organization. No one speaks out, so everyone is assumed to be happy. The socializing can continue harmoniously, but the board is neglecting its oversight obligations.
Boards are diversifying more than ever and increasing turnover in the process. That means more new directors, and more new experiences being brought to the boardroom. What should be a good thing — studies show that more varied experience on the board leads to better company performance — becomes a chance for groupthink to arise. Because a new board member may be hesitant to open their mouth and end up looking silly because of their lack of familiarity with the company, they end up going with the flow and agreeing with everyone else. This in turn becomes a hard habit to break.
Let's say a company has always done well and everything has always gone smoothly. There may still be clouds on the horizon, but the board either cannot see them or refuses to acknowledge them. Instead, they insist they don't want to break something that does not need fixing. And performance has been so good so far! Everyone gets very complacent, comfortable and inactive. No one speaks out so everyone continues to feel all is well — even when risks lie in wait.
This one is a variation on the rock star and newbie scenarios. The rocket scientist board is made up of highly skilled and trained experts in their field. Board members who are not as specialized feel reluctant to voice an opinion even on more mundane matters, in case the rocket scientists make them look ignorant or under-informed. So they don't speak up. And groupthink emerges.
The board members in this scenario share some similarities with the country club board. Each directors' primary driver is to keep the peace and not do anything that could result in a reprisal against them. As the board becomes more unanimous in its views, it starts seeing nonconforming perspectives as inferior.
Some behaviors never mature beyond the playground. In this scenario, a board chair or CEO maybe so forceful and intimidating that no one dares to disagree with them. Those who do are ridiculed, isolated and taught not to speak up. Consequently, the board goes along with the leader, even to the detriment of the company. Groupthink is the only winner.
In my time as a director, I've seen all of these scenarios emerge, and sometimes multiple variations on groupthink within the same board. Here are a few examples in greater detail, and in some cases how to combat them.
The board of a mutual fund had considered first quarter earnings which were not good and had underperformed their benchmark of the S&P by 10%. The board questioned the portfolio managers about the performance and discussed the cause of the underperformance. The second quarter earnings were much improved and outperformed the benchmark by 15%. The portfolio managers looked very pleased with themselves going into the meeting. Then the rock star director, who had just come from an interview on Bloomberg TV, launched into the portfolio managers and chastised them for their poor performance.
Then, one by one, the other board members jumped into fray and chastised the portfolio managers. It was groupthink, plain and simple.
Finally, one brave board member asked why the second quarter performance was considered so poor. She said, “I don’t know what I'm missing, but I actually thought the 15% outperformance of the S&P was quite impressive." This got the other directors looking at their papers again, and they started doubting their view. Silence ensued briefly, and then the board backed off and started approving the results.
What happened? The rock star was so busy giving TV interviews he did not read his board materials and just remembered the the bad results of the previous quarter. By sheer force of personality, he had been able to bring a majority of the board along with him — until one brave director broke through the groupthink.
The company in question was a manufacturing conglomerate with several subsidiaries. One subsidiary was a company that sold do-it-yourself house building kits and simultaneously provided the borrower with financing. This was not a good business model as the company had too much exposure to the house building kit and its finance, and the security was too dependent on the borrower to build the house and provide the value of the security.
This subsidiary was the brainchild of the chair, and it was his favorite unit. One board member voiced his concerns about the value of the partially built kit houses as security. The chair was apoplectic that anyone should question his brainchild and slammed his fist on the board table. The board member asking the question was ostracized that day and no one would talk to him. Groupthink at its worst. Still, the speaking up may done its job: Shortly, afterwards the subsidiary discontinued its operations.
The board of this company had one director who was in his mid-80s; he had been on the board nearly 25 years and was losing his hearing. Attempts at suggesting he retire were met with resistance from the CEO and lead director.
Eventually, a new board member joined and realized the situation, and in the annual assessment said the aged board member was too old to perform adequate oversight and should retire. The outspoken director was not identified but could probably be guessed by the others.
After howls from the old board member, nothing happened. The complaining director fell into line, nothing was ever said again about the subject, and there were no retaliatory complaints. Eventually, a shareholder brought up the age and tenure issue, and the old director finally retired.
The company was in the genetic sciences industry and had a board mainly comprised of highly technical and skilled scientists. One board member was more of a business generalist and not a genetics Ph.D. This director felt that the company’s data protection procedures were weak, as patients could access their records by a single factor password. Yet the board member felt too overawed to bring up such a seemingly mundane matter amongst the “real stuff” of genetics, so they postponed questioning the password protection. By the time the director eventually did speak up, some of the company’s patients’ record had already been hacked.
While speaking up is often one of the best ways to combat groupthink in the moment, there are other methods for making sure your board recognizes the signs and is prepared to act when the time comes. Here are a few I've experienced:
Groupthink is inevitable from time to him in virtually any regular gathering of people — and boards of directors are no different. Yet by being able to recognize the signs of groupthink, and being able to recognize its pervasiveness in the boardroom, directors are well positioned to break out of it and conduct their oversight duties with the best interests of the company and its stakeholders at the forefront.
