Effective governance involves people working together in a system, yet governance is too often approached in a purely legalistic or box ticking process-orientated way.
Strong emotional and interpersonal connections, along with the culture this helps to create, make boards more effective and helps them to deliver good governance. In fact, effective governance demands three fundamental human characteristics that are the currency that keeps the system working well. They are trust, respect and honesty. All attributes of people!
Additionally, it’s important to recognise it’s the dynamics of the group – the way that they interact and the way that power manifests in the social system that is our governance – that has an enabling or constraining impact on how well governance works. Therefore, boards ignore the human factors of the system that is governance at their peril.
Challenges Due To Reduced Opportunity To Meet In-Person
Unfortunately, the move to the virtual world, the growth in hybrid working and the challenges of meeting ‘in-person’ have made relationship building between those on the board increasingly difficult. This makes it harder to assess nonverbal communications and has reduced the opportunity for spontaneous ‘corridor’ or ‘kitchen conversation’ interactions where governance and other issues can be informally raised and advice dispensed.
The Importance Of Emotional Intelligence
It’s why directors are required to be emotionally intelligent today, so they generate good relationships with others on the board, and beyond. By being emotionally intelligent they are empathetic and have self-awareness when communicating; enabling them to build engagement, generate trust and respect, and provide leadership.
For example, a chairman with emotional intelligence will evolve away from a traditional command and control style to a more facilitative leadership. This will see them construct and nurture a board culture of psychological safety, where bad news travels to the board faster than good, where directors have the courage to constructively challenge, and where it is fine not to have all the answers, particularly during these difficult times.
Challenging assumptions is very important during a period of volatility, when decisions need to be taken quickly. Only then can the board have assurance that they are on the right path and governance is as it should be.
Relationship Between The Chairman And CEO
Due to the enormous impact it has on the performance of the business there must be role clarity and mutual respect at the foundations of the most important relationship in the governance system – that between the chairman and the CEO. To be a value adding relationship it needs to be one built on trust and where there’s candour and honesty on both sides, which is where emotional intelligence comes in. It’s those who operate with emotional intelligence who will reflect on how well the relationship is working, and take the opportunity to recalibrate, where required, to ensure that the rapport is an asset to the board and the organisation.
Culture
Emotional intelligence plays a very important role in helping the board to foster a positive company culture. This encourages healthy day-to-day attitudes, ethics, behaviours and ‘ways of doing things round here,’ that sets the foundations for real, tangible business growth.
During these complex and uncertain times there are four pillars of culture that engender business success and good governance, all associated with the board being emotionally intelligent.
1) Agility and adaptability. To achieve this boards need to promote an entrepreneurial spirit which will help unleash the potential of their people to create new ideas to take the business forward. Boards need to engender a curiosity and fearlessness to inspire creativity, innovation and continuous improvement. As part of being emotionally intelligent boards must lead by example by demonstrating diversity of thought and ideas in the boardroom, so the rest of the organisation has the confidence to follow suit.
2) Resilience. To bounce back after setbacks and be in a position to deliver growth it’s emotionally intelligent boards that have robust, transparent and visible leadership, to help ensure engaged and empowered employees.
3) Moral courage. Building on from resilience it’s emotionally intelligent directors who are courageous in confronting reality and dealing with problems with integrity. They will create a culture of psychological safety to protect those employees who do speak up, and encourage them to do the right if sometimes difficult thing.
4) Candour. It’s those organisations with an open culture where bad news comes to the board more quickly than good which can quickly focus on and solve challenges before they potentially become bigger issues.
Ticking off a set of legal requirements is not the way to deliver effective governance. Good governance relies on positive relationships between those on the board and the culture they generate, which requires directors to have emotional intelligence. This enables directors to gain trust and respect on the board, and throughout the organisation, enabling them to deliver effective governance in today’s increasingly hybrid working world. Additionally, having an emotionally intelligent board is vital in helping businesses to navigate uncertain times and drive long term profitability.
About the Author - John Harte is the Managing Partner at Integrity Governance and leads a global team that is focused on making boards more effective. A boardroom expert working with multinationals and SME’s, he provides practical, impartial advice to directors, business owners and CEO’s to help improve performance. He is a regular speaker and thought leader on board effectiveness, practical governance and business disruption. John grew up in a family business and his extended family run fifth generation businesses and he has also served as a board member, chairman and adviser to many family firms. He also worked within Mars, a globally recognised family business for the best part of a decade.