Tuesday, 6 September 2016

When Having Too Many Experts on the Board Backfires

Why boards succeed or fail and how to make them better are critical questions for corporate governance. We know that board composition—who the directors are and what backgrounds and perspectives they represent—can influence important outcomes like firm value and sales growth. But the full spectrum of these relationships is far from fully understood. We conducted a study, recently published in the Academy of Management Journal, to learn more about a neglected dimension of board composition: the proportion of domain experts. That is, the percentage of directors whose primary professional experience is within a firm’s industry. Though companies can easily manipulate the proportion of directors with domain expertise when building a board or appointing new directors, we know virtually nothing about its effects on corporate performance.  Aug. 29 http://linkis.com/cCeb3

The above article was published just as Mercury began its retrograde phase on Aug.30. Since Mercury is in Virgo, the sign associated with  analysis and research, the article is about a research study.  Moreover, Mercury retrogrades  often bring about a rethinking of a previous opinion or idea which is exactly what this study is aiming to do. But that is not all. A chart drawn for the Mercury station at Cambridge, MA  from wher the Harward Business Review is published can actually give us clues not only about the nature of the study but also the conclusions reached.  Note the configuration anchored to the TNPs Kronos-Hades on the MC. Listed below are some of the conclusions along with what the planetary configurations reveal.

The study focused  on a neglected dimension of board composition: the proportion of domain experts.
Kronos-Saturn: Experts (Kronos) on governing boards (Saturn).
Kronos-Hades-Saturn: Expert dominated (Kronos) governing boards (Saturn) can create problems and messy situations (Hades).

As we gain deeper expertise in an area, we acquire more accurate and detailed knowledge but also become less flexible in our thinking and less likely to change our perspective.
Kronos-Saturn: Experts (Kronos) tend to be less flexible (Saturn).

Research suggests that a high proportion of domain experts can suppress task conflict because non-expert directors may defer too much to the judgment of experts.
Kronos-Neptune-Saturn: Danger of giving up (Neptune) one’s power (Saturn) to domain experts (Kronos).

Problems of expert-dominated boards are most likely to be damaging when a company veers off the beaten path and faces uncertainty. Dealing with changing, unfamiliar situations requires flexible thinking and a healthy dose of disagreement.

Kronos-Saturn-Uranus: The inflexibity of experts (Kronos-Saturn) is most damaging when a company needs to leave the beaten path and do something new (Uranus).

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