There are no HiPPO’s in the boardroom, are there? Yes, there are when HiPPO stands for “Highest Paid Person’s Opinion.”
The HiPPO effect is when the highest paid person’s opinion carries more weight than anybody else’s in the room. That’s because we subconsciously endow highly-paid people with a degree of authority that they don’t necessarily deserve. It’s human nature to believe they are smarter, savvier, and more strategic than the rest of us.
In a boardroom context, the HiPPO is probably not actually the highest-paid individual. It could be the person who has acquired the most wealth, achieved the most success, has the most credentials, or is simply the most confident.
The term HiPPO first appeared in the 2007 book “Web Analytics: An Hour a Day”. The author, Avinash Kaushik, noted that, when a HiPPO is in the room and a difficult decision needs to be made, the group will often defer to the judgement of the HiPPO. Once the HiPPO’s opinion is out, voices of dissent are shut out.
The HiPPO effect is a catchier term for Authority Bias – one of several cognitive biases that have a significant effect on board dynamics and the quality of board decision-making.
Wouldn’t it be great if you could put a diverse group of high-achieving, experienced, strategic-minded individuals in a room and automatically produce an effective board with a healthy culture?
What gets in the way of this simple formula is human nature. Each director brings to the table their own assumptions, preferences, experiences, and cognitive biases, subtly shifting the group dynamics and affecting the way decisions are made.
Every person has biases – they’re like mental shortcuts that help our brains organize information, evaluate opinions, and make decisions.
In a group setting such as a board meeting, our biases may cause us to over or undervalue certain people or ideas, even dismissing opinions outright. These biases are unseen - they operate under the surface to push collective decisions in a certain direction, and they can produce a feeling that it’s unsafe to speak out or disagree.
Cognitive biases are constantly at work in our busy brains. When it comes to board work, one of the most pervasive is the authority bias. It make us predisposed to believe, support, and trust those whom we perceive as authority figures.
An authority figure might actually be someone in a position of authority over us – our parents or guardians, the school principal, our boss, or our commanding officer. In the boardroom, they’re probably someone we view as an expert – a fellow director, an advisor, the CEO, or a member of the management team.
We’re influenced by authority cues like a doctor’s white coat, a badge, a set of initials after someone’s name, or even just a person’s air of confidence. That’s what causes the HiPPO effect – we’re subconsciously using “highest-paid” as a cue for authority and expertise.
Authority bias plays a role in our daily lives, from school to the workplace, from marketing to healthcare, and everywhere else. It’s a useful mental shortcut that lets us make decisions quickly by relying on an authority figure to tell us what to think.
Most of the time this works out well – it leads to more good decisions than bad. But problems arise when we rely too heavily on this mental shortcut – problems such as defaulting to expert opinions, holding back from sharing a dissenting view, and believing that experts are completely objective.
Unfortunately, we tend to underestimate the impact of authority bias, and we rarely recognize when we’re falling prey to it ourselves. And every time we simply default to an expert’s opinion, we miss out on diversity of thought.
So how can a savvy director deal with authority bias in the boardroom – as part of their meeting PREP and during the board meeting itself?
Who are the HiPPOs in the boardroom? That depends on the topic at hand and the area of expertise that makes any given person an authority figure.
It’s pretty obvious that every boardroom needs experts. As directors, we each bring expertise to our role, sometimes with credentials in law, accountancy, corporate finance, investment, IT, HR, governance, etc.
The CEO is an obvious HiPPO, and on some boards the CEO must be right and their viewpoint always carries the day. But consider as well that members of the management team often have credentials that make them authority figures in their areas of expertise.
And where there are gaps in expertise, the board accesses external experts – consultants, advisors, legal counsel, and other subject matter experts. I’ve seen both directors and management defer to the opinion of advisors without even questioning them.
Paying attention to experts when they’re sharing knowledge and providing information just makes sense. Boards need fact and figures, data, and evidence to make good decisions.
But opinions are not facts, and viewpoints are not evidence. HiPPOs are just as susceptible to cognitive biases as everyone else. So that means overvaluing the experts’ opinions can be problematic. Authority bias is a factor when:
Here are a few techniques the board chair can use to mitigate the effects of authority bias.
The first step to avoiding or reducing authority bias is to be aware of its existence, and to acknowledge that you, as well as everyone else on the board, are influenced by it. But recognizing it and doing something about it in the middle of a board meeting is easier said than done. Try some of these tips:
Sometimes you’re the expert in the boardroom. When that happens, try to keep in mind everything you’ve just read and apply it to yourself.
When you speak on a topic within your area of expertise, remember that the authority bias may influence how your fellow directors receive your message. To counteract that tendency, try these tips:
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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