Parochialism and Conflict at the Boardroom During Crisis: The Difficult Balancing Act Between Self-interest and Organizational Goals

Boards in crisis resemble organized anarchies. These organizational forms share three traits: (a) unclear preferences, (b) unclear technologies, and (c) fluid participation. Preferences are problematic; organizations act according to uncertain or inconsistent priorities. Technology is unclear; participants do not fully understand organizational processes and “trial and error” affects the collective output. Participation is fluid; participants vary in the amount of energy devoted to different activities and their involvement fluctuates across time. The garbage can model of choice (GCMC) aims at theorizing how these organized anarchies cope with uncertainty. The decision outcome of this GCMC is related to the temporal connection between issues, actors, solutions, and choices, rather than to the rational sequence of problem setting, solution finding, and problem-solving. Logics of appropriateness proliferate, instead of rational approaches to decision. There are more issues and more pressing, but more managerial information is available (not always timely or reliable), making analysis more challenging. Timeliness of decision becomes yet more critical. Under crisis, every group (Chair/CEO, Proprietary and Independent Directors, etc.) defends their self-interest. Political maneuvering, coalition, and consensus building become even more important to harmonize individual and organizational interests, fostering a more loosely coupled nexus between decisions and outcomes. Intensity of debate is proportional both to the number and complexity of issues and to the asymmetry of participants’ interests. Board effectiveness is more at risk when the Board is not cohesive or capable enough. Finally, crisis is more emotionally laden. The context of decisions is affected by increased tension. On top of intense debate, other structural differences (e.g., confronted ownership) boost this tension. Personalities, participation, and egos have also a vital role. Another likely outcome of Board dynamics is its effect on mood and morale. Decisions fall downstream in the organization eroding management energy and risking decision implementation ability and timeliness.