When looking for new or replacement board members, founders and investors alike often think about the knowledge and experience they need in their board. Do they lack financial knowledge, do they need someone from the specific industry the company is in, or a commercial type? I see this happening again and again in my own job as investment manager. During term sheet negotiations and due diligence on a new investment, we are already thinking of the board seat we are going to get and who should fill it, and we ask the company: What sort of experience or knowledge do you need?

However, it might be equally important to ask what type of character traits the board needs to ensure good board dynamics. I have seen several highly dysfunctional boards during the five years I have worked in investment funds, and the dysfunctionality never seems to come from missing knowledge or experience per se. In my opinion, one of the key drivers of board dysfunctionality is a mismatch in characters. Specifically, I have seen several boards where one dominant person ends up destroying the board’s group dynamics.

 

Dominating board members can kill a board’s group dynamics if the other board members allow the dominant member to be dominant, if there’s not enough self-reflection or evaluation, and no opportunity for anonymous feedback. When one person continuously takes over the conversation and is the first to express their opinion, they often leave little room for others. With every board meeting, other board members try less hard, and they lose motivation as time goes on, allowing the dominant member to become more dominant and have more influence. Board discussions lose quality, or do not happen at all. The board becomes completely dysfunctional.

The virtuous cycle of a well-functioning board

To prevent dysfunctional group dynamics, we need to understand what the opposite looks like. I like what Jeffrey Sonnenfeld says about highly functional boards or teams: “Well-functioning, successful teams usually have chemistry that can’t be quantified. They seem to get into a virtuous cycle in which one good quality builds on another. Team members develop mutual respect; because they respect one another, they develop trust; because they trust one another, they share difficult information; because they all have the same, reasonably complete information, they can challenge one another’s conclusions coherently; because a spirited give-and-take becomes the norm, they learn to adjust their own interpretations in response to intelligent questions.”

According to Jeffrey, the most important link in this virtuous cycle is the capacity to challenge one another’s assumptions and beliefs. This capacity is exactly what dominant board members are in the way of. 

I have seen boards becoming more and more dysfunctional due to dominant members on several occasions. In one of them, the dominant member was replaced by someone with more of a team player approach, and the board went through a true transformation. This is just my own observation of a very small sample, but I feel strengthened in my view from the various presentations that were given during ScaleUpBoard. Character traits are important. Soft skills are important. And, most importantly, boards should be evaluated. Dominant members need to be identified, need to adjust their behavior, or need to be replaced if needed.

Kim Wagenaar

Investment Manager at Aqua-Spark

Sources

  1.  “What makes great boards great”, Jeffrey Sonnenfeld

Kim Wagenaar is an Investment Manager at Aqua-Spark, a global investment fund that makes investments in sustainable aquaculture addressing the planet’s health and food security. Previously she was a strategy consultant at Bain & Company in London, as well as an Investment Associate at Low Carbon, a specialist renewable energy investor and asset manager. Kim is a member of the board of Ecto, a company that offers digital decision support tools for aquaculture, with a focus on making aquaculture production more efficient and sustainable.

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