How much information is enough for a board to make a decision with impact?
The best boards can make decisions without perfect information. Waiting for perfect information often results in a missed opportunity. Analysis paralysis is a description applied to the inability to make a timely decision while waiting for more and more data. I’d like to suggest that it’s just an excuse to procrastinate. (I’ve been there.)
For board directors, the good news is they don’t have to make significant decisions in isolation or in the absence of collaboration and support. As a director, you’re part of a board team that makes group decisions. Collectively, you’re looking for the right balance between perfect information and speed, keeping in mind that crisis situations demand a different sense of urgency.
When the board chair strives to create a safe space for directors to contribute without fear of rebuke or personal attack, a well-framed process to engage the board on major decisions helps ensure management isn’t left waiting over multiple meetings just to get a decision. Waiting on decisions slows the business down, frustrates employees, and can cause the organization to miss key opportunities.
Routine decisions, like approving the quarterly financial statements, rarely encounter any delays. There’s usually a motion, discussion, and approval soon after the agenda item is introduced.
In contrast, a decision such as selecting the organization’s next CEO is long and drawn out, requiring a process that is robust and methodical. A poor hiring decision can be expensive or even catastrophic. Taking a few weeks to make a CEO hiring decision is not an example of analysis paralysis, especially if there’s a plan to decide how to decide.
At the end of the day, too much information slows you down and can cause delays in making important decisions. The antidote is to accept a certain amount of ambiguity and uncertainty. You can’t know everything, but you can ask the right questions and explore relevant answers before pulling the trigger on your decision.
Scholars, CEOs, and public leaders have all shared their personal views on how much information is enough. The late General Colin Powell earned a stellar reputation for making decisions. In retirement, General Powell spoke about his 40/70 rule for decision-making. In brief, he said that less than 40% of required information is insufficient to make a good decision, while having over 70% often implies taking too long, thereby missing an opportunity.
In the boardroom, analysis paralysis can result in several issues.
Wasted time and resources: If board members spend too much time analyzing data and information, they may miss important opportunities or delay making decisions that could have a significant impact. Employees, investors, and other stakeholders may become frustrated and lose faith in the board’s leadership, leading to a decline in morale, productivity, and overall performance.
Lack of progress: Analysis paralysis can lead to indecision and inaction, which can result in a lack of progress and missed opportunities. Board members may become so focused on analyzing data and information that they lose sight of the bigger picture and get bogged down in the details without taking decisive action.
Loss of trust: If board members don’t make timely decisions, it can erode the trust and confidence of stakeholders. To avoid this, it's important for the board to communicate with stakeholders, demonstrating that they’re taking action to address key issues and challenges.
Narrow focus: Too much analysis can lead to a narrow perspective and a lack of creativity, innovation, and risk-taking. A narrow focus can limit the diversity of thought in the boardroom, with directors becoming entrenched in their own views and failing to consider alternative approaches.
Groupthink: Board members may fall into Groupthink, where they defer to the opinions of others rather than making independent judgments. Groupthink makes it difficult for directors to challenge one another, leading to a situation where everyone is thinking and acting the same way. To avoid Groupthink, it's important to encourage a diversity of perspectives and ideas, and to create an environment where dissenting views are valued, so that multiple viewpoints are considered. The group is then able to make well-informed decisions that take into account a range of factors and perspectives.
Overwhelming complexity: The abundance of data and information available to board members can sometimes be overwhelming, leading to confusion, uncertainty, and a lack of clarity. Moreover, overwhelming complexity can make it difficult to focus on the most critical issues, as directors get bogged down analyzing a wide range of options and reams of data, rather than focusing on key elements of the organization's strategy.
To avoid analysis paralysis in the boardroom, it's important for the board to establish clear decision-making processes, set priorities, and balance the need for information with the need for action.
It’s also important for directors to receive the board material ahead of time, in a concise format that enables discussion and decision-making. If that’s not the case, a decision might be deferred until the required information is provided.
Finally, it's important for every director to have a clear understanding of the organization's strategic objectives, and to use them as a guide to for decision-making. With a clear focus on the goals, directors can avoid getting bogged down in analysis paralysis and ensure they’re making decisions aligned with the organization's long-term vision.
Governance expert David Brown suggests board chairs use ‘Tuckman’s Catalytic Model’ to set the stage before the board engages in non-routine decisions. David advocates using the Tuckman framework consistently to create a habit of thoughtful, process-driven decisions with built-in mechanisms to prevent analysis paralysis.
You’ll probably recognize the Tuckman model - Forming, Storming, Norming and Performing - from team-building exercises. Here’s how it can be adapted by board chairs for use in the boardroom. By providing directors upfront with a process and a plan for how the decision will be made, the board chair makes it more likely that analysis paralysis can be avoided.
Before the discussion, the board chair:
To encourage divergent thinking during the discussion, the board chair:
To drive toward consensus, the board chair:
To move forward, the board chair:
It’s easy for board directors to get bogged down in analysis paralysis – endlessly considering the risks and rewards of every possible action without actually making a decision to move forward on any of them.
It’s certainly true that thorough research and consideration is required before making certain key decisions, such as a major investment or a change in strategy. But for a savvy director, that reality shouldn’t lead you down an endless path of fretting over every potential decision.
By using a thoughtful approach to analyzing scenarios, considering how your decisions will impact stakeholders, and collaborating with your fellow board members, you can make a sound contribution to board decisions without losing yourself in analysis paralysis.
Scott Baldwin is a certified corporate director (ICD.D) and co-founder of DirectorPrep.com – an online hub with hundreds of guideline questions and resources to help directors prepare for their board role.
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