Case Western Reserve University management researcher finds corporate finances reflect how well board members play as a team
A board of directors can better accomplish a company's goals when the members function well as a team, according to a management researcher who studied what makes boards effective and good for the bottom line. Solange Charas, a PhD student from Case Western Reserve University’s Weatherhead School of Management, summarized her research in a recent post—"The Key to a Better Board: Team Dynamics"—in the Harvard Business Review Blog Network. Charas, who has 25 years of consulting and executive management experience, surveyed 182 randomly chosen directors with an average of 12 years of board experience for companies with market values of $2 million to $78 billion. The directors were asked to rate their interactions based on various characteristics, such as engagement, active listening, solidarity, openness and ability to have power and influence. They were also asked what their boards’ interactions would have to be like to maximize their effectiveness. Then she measured the gap between those two scores. Charas, who runs a New York management consulting firm, found that boards with smaller gaps between the two scores tended to oversee companies that are more profitable. "I have personally worked with over 25 board teams in this research process, and the results are consistent—improve boardroom dynamics, and overall board creativity, innovation, satisfaction and outcomes are enhanced,'' she said. Charas said most companies mistakenly rely on the “same old approaches” to finding board directors by recruiting friends and others thought to have appropriate experience and expertise. But teamwork can suffer, especially if each board member is a high-profile, successful executive used to intense competition and possibly uncomfortable with teamwork outside of his or her own organization, she said. "My recent research provides evidence of what directors (and academics) have intuitively known for years, but have been unable to verify: Namely, that the quality of board members’ interaction is crucial to board success," Charas said. Her research arrived at three key findings:- Cultural intelligence of directors, meaning their predisposition to working well in teams and relating well to others, is critical;
- The quality of board-level team dynamics is highly correlated with firm profitability; and
- Boards able to work effectively as a team can have a significant impact (up to eight times better) on the bottom line than boards not as team-oriented.
