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The Death of Groupthink

http://www.businessweek.com/managing/content/feb2008/ca2008025_687188.htm?link_position=link2

The Death of Groupthink
Diversity isn't just the best way to guard against the proliferation of Groupthink—it's also good for the bottom line, says Deloitte's Sharon Allen
by Sharon Allen

As the chairman of the board at Deloitte LLP, I've witnessed many times how the courage of one person with a very different perspective can keep the flame of critical thought burning brightly.

Yet, for me, one of the most dramatic illustrations of this healthy communications dynamic didn't come from a boardroom. If you haven't seen the 1957 movie classic Twelve Angry Men, you might want to check it out the next time you have a rainy weekend afternoon—or if you want to learn more about good corporate governance.

The Power of Independent Thinking
The story is about a jury of 12 white, middle-class, middle-aged men deciding what appears to be an open-and-shut murder case. We quickly learn that the group is quite willing to let closely held attitudes harden without much stirring into a foregone conclusion. That's when the soft-spoken Juror No. 8—an architect named Davis played by Henry Fonda—begins very calmly to ask questions and propose possibilities from a different point of view.

I won't spoil the story for you. Let's just say that I would have been delighted to serve with Juror No. 8 on any board of directors.

To me, this epic of jury room debate is really what good corporate governance is all about: the willingness to consider new ideas, ask tough questions, and enable every voice in the room to be heard. But what most captivates me about the movie is its ability to portray "Groupthink," a social dynamic that can become a challenging roadblock to informed decision-making.

Originally coined by the business author and editor William Whyte, Groupthink describes a behavior you may have seen or even been a part of—one in which members of a group avoid conflict and expedite consensus by choosing not to test, analyze, and evaluate ideas critically. Unfortunately, Groupthink isn't just the stuff of compelling movies. Historians have cited this flawed approach to decision-making as a prime suspect behind a diverse array of events including Pearl Harbor, the space shuttle Challenger explosion, the dot-com meltdown, and the collapse of Enron.

In business organizations, opportunities for Groupthink abound, from the shop floor to the C-suite. Yet the insidious nature of Groupthink may be most dangerous in a corporate sense if it takes root in the boardroom. There, the gravitational pull of conformity can become so strong that directors fail to rise above it by questioning and challenging management.

How can boards build a firewall to keep Groupthink from corrupting boardroom deliberation?

Why Diversity Works
As a chairman, my preferred method for guarding against Groupthink is diversity of thought—made possible by including new voices in the boardroom along with those that are traditionally white, older, and male.

If you think that I'm just saying that because I'm a woman, think again. Several studies conducted by Catalyst indicate that there is real value to be gained from diversity beyond the window-dressing of political correctness. That makes sense. If a board wants to think "outside the box" it may be useful to include directors from demographics that historically have had limited access to boardroom participation—such as women and minorities.

Research conducted by the Wellesley Centers for Women supports the premise that a variety of perspectives can enrich boardroom dialogue. Wellesley discovered that women directors make three contributions that their male counterparts are less likely to make: a willingness to consider the concerns of a wider range of stakeholders; greater persistence in pursuing answers to difficult questions; and a more collaborative approach to leadership through improved communication.

Evidence about the value of diversity also comes from our legal system. In a 2007 study, Tufts University found that racially diverse juries deliberated longer, raised more facts about the case, made fewer errors discussing the case, and conducted broader and more wide-ranging deliberations.

While that sounds promising, can boardroom diversity really translate into greater value for stakeholders?

Financial Results
As Juror No. 8 might suggest, let's take a look at some new evidence. In October, Catalyst announced that Fortune 500 companies with the highest representation of female board members attained greater financial performance, on average, than those with the lowest. And the results weren't just significant. They were astonishing. Returns on sales, equity, and invested capital ranged from 42% to 66% higher. Now there's a motive for bringing new voices to the boardroom.

Diversity of thought gives needed vitality to corporate debate. Through robust and rigorous examination, diverse boards can help management develop the best approach to any challenge or opportunity. In doing so, such boards elevate the good of the enterprise above the self-interest that can sometimes prevail among like-minded individuals.

The verdict is clear. As the death of Groupthink, diversity of thought can be the heart and soul of your board—and add impressive value to your bottom line.

Sharon Allen is chairman of the board, Deloitte LLP.

Comments

The course readings for Feb. 27 consist of leading practices and examples of what not to do to establish organizational learning. Groupthink is major derailer in forward movement of firms. Tragic events have occurred as a result of groupthink: Pearl Harbor, the Challenger (course reading), the .com meltdown, Enron (course reading). These events are part of our histroy, and as one of our course readings said, "Will we ever learn?"

On way to combat groupthink is through encouraging and ensuring diversity throughout the organization. By including various voices in projects and on teams, you gain a diverse perspective or an outside the box view, which generally leads to better results (even better bottom lines as mentioned in the article - 42-66% higher).

If diversity is part of the fabric of a company, you could say that learning is as well. However, fostering an open environment for individual thoughts and analysis and challenging of the status quo must be apart of the fabric as well. In order to remain competitive, an organization must be innovative, especially in our current times. Diversification strengths the opportunities for innovative ideas, but an organization must welcome them and foster the development and execution of the great ideas.