Edit ModuleShow Tags

The risks and benefits of board bias

Board members, like other people, have hidden biases. They might include weighing older director voices more than those of younger members, or vice versa. Board leadership, such as board or committee chair, needs to identify whether unconscious bias has crept into their own thought processes and the board’s deliberations. Everyone has blind spots and can unwittingly favor certain types of people. Giving preference is a fact of life. With this in mind, I sat down with Dave Chapman, chairman and CEO of The NorthPoint, to explore decision-making and personal bias.

Tell us about the good, bad and the ugly of personal bias and decision-making?

In the enterprise, from offering management to enterprise investments / divestures and or acquisitions, personal bias can be a significant asset or a significant value deterrent that adds risks and serious limitations to achieve the original goals and objectives.

The question is then how does one identify, with specific characteristics, what are the important tests that have to be made as to identification of whether it creates more risk and less value or less risk and more value. This knowledge is imperative to establish effective sustainable leadership and management of the initiatives and the enterprise in general.

How is personal bias an asset and or a liability?

There are two professions that incorporate into their process the concept of analytics - of identifying the required knowledge before a decision is made with accurate bias that the solution will work and work well.

First no professional doctor would ever say “tell me your symptoms”, i.e. the problem, and here are your meds. They want to identify accurately the problem and the root cause before any solution is proposed. Where they do not have the accurate root cause connected to the problem it represents risks to the patient. Likewise good engineers would also want to understand the problem then the root cause and last the solution and how it eliminates the original problem. This is referred in the industry as PCS (Problem Root Cause and then the Solution).

The scariest person is one that has the solution attached to the perceived problem without identifying the root cause of the issue.

Where personal bias can be a distinct asset is where the person has updated accurate knowledge, experience and performance of the subject area at the problem’s root cause. This requires the intimate knowledge of any risks attached to the solution. 

Where personal bias is a liability is where the knowledge – information and data - is not available, or they do not have the KEP™ Knowledge Experience and Performance to identify what is required and how to achieve it.

How is personal bias playing out in business decision making?

The term "revenue" refers to all money a company earns. Realized revenue is revenue that the company already has received. Realizable revenue, on the other hand, is revenue that the company hasn't received yet but expects to receive in the future. Examples of issues in the acquisition process, for which industry pundits suggest 70 percent fail to meet the key objectives, one of which is called “realizable revenue.”

That means the market and the offerings and the revenue channel i.e. sales force or channel partners will deliver revenue to the enterprise from the acquisition.  This is the most uncertain of the three types of revenue listed above so it makes sense to be aware of an overly optimistic bias. The second bias is we can manage the integration successfully without the knowledge of specific cultures and biases as to what should happen on both sides after the acquisition.

Culture is the set of habits that allows a group of people to cooperate by assumption rather than by negotiation. It is the people, the leadership, and the ideas that are ultimately driving the numbers and the results. That said, if the acquisition decision is ego driven, there is a greater chance of a bias toward the idea that we can override their culture. Given the people and the flow of business that culture provides, too much ego is a costly position from the get-go.

Any last words to help in making aquistions?

One of the characteristics of what bias is valuable is the goal of learning five new things every day.  To be targeted in your learning, think about an upcoming acquisition. Select one aspect of the acquisition and find accurate analytics and metrics. Then pause and see if this set of facts backs up your decision. This process of learning and updating one's fundamental beliefs around key deals is a valuable asset.

Bias that is current and accurate and has the force of personal dedication to its success can be very helpful in decision-making.  On the other side, bias that is driven by ego and political needs can be a stunning disaster.

Dave Chapman specializes in enterprise risk management. He can be reached at: www.thenorthpointgroup.net or 508-942-6440.

Edit Module
Tracy E. Houston

Tracy E. Houston, M.A. president of Board Resource Services, is a board advisory consultant and executive coach headquartered in the Denver area. She conducts board evaluations and assists boards with a variety of issues that increase effectiveness. She can be reached at hello@eboardmember.com  or  http://www.eboardmember.com
www.eboardmember.com ;eBooks: www.amazon.com/author/www.eboardguru.com


Get more of our current issue | Subscribe to the magazine | Get our Free e-newsletter

Edit ModuleShow Tags

Archive »Related Articles

Why do so many millennials live in their parents' basement?

As a result of watching the value of their parents’ home drop drastically during the 2008-2009 housing bubble, Millennials have grown wary of homeownership.

The woman behind Denver's community workspace movement

Before Ellen Winkler made a name for herself in Denver, shaping work spaces, she started her career on construction sites in New York City.

Thinking of working for a founder? Read this first!

The founder — someone who birthed several companies but never got any of them to profitability — has turned from “The Creative One” (he developed the first product) to “The Critical One,” now more boat anchor than cheerleader.
Edit ModuleShow Tags

Thanks for contributing to our community-- please keep your comments in good taste and appropriate for our business professional readers.

Add your comment: