The Blind Men And The Elephant

Blind men and an elephant

And so these men of Indostan
Disputed loud and long,
Each in his own opinion
Exceeding stiff and strong,
Though each was partly in the right
And all were in the wrong!
– A poem by John Godfrey Saxe based on the Hindu parable, The Blind Men and the Elephant

Background

According to a recent survey completed by the Canadian Board Diversity Council (CBDC), 95.1% of FP500 directors feel that board diversity is important (1) – and for good reason. It’s been shown that board diversity contributes to better member recruitment (2), more effective corporate governance procedures (3), increased corporate social responsibility (4), and improved environmental innovation (5). But what is meant by the term ‘board diversity’?

The most classical definition of board diversity pertains to one’s experiences: educational background, functional expertise, business expertise, and market knowledge. These are the metrics commonly contained in board skill matrices, and this is the type of diversity often discussed by the nomination committee, i.e. “What skill sets, or industry representation, are we missing in our current board composition?”.

The CBDC expands on the traditional definition of diversity to include measures of demographic representation: women, visible minorities, Indigenous peoples, people with disabilities, and the LGBTQ community (6). And considering that 51% of Canadians self-identify as female, 22.3% as visible minorities, and 4.9% as aboriginals (7) – the additional measures proposed by the CBDC not only facilitate better corporate practices, but also fair representation of our nation’s citizens. But are there any aspects of diversity that we are missing?

In 2009, the executive search firm Russel Reynolds proposed a model of board diversity whereby a director’s perspective is influenced by three separate sets of attributes: experiential attributes (as in the traditional definition), demographic attributes (as in the CBDC definition), and personal attributes (8). Personal attributes can be defined as the characteristics that influence a person’s perspective independent of their experiential or demographic backgrounds. However, very little discussion exists about whether personal attributes should constitute part of board diversity. Neither the 2016 CBCD Annual Report, the 2016 Alliance For Board Diversity Census (9), the 2016 Egon Zehnder Global Board Diversity Analysis (10), nor any diversity report that we could find mentioned anything about personal attributes.

Thus, the purpose of this paper is to briefly explore a specific personal attribute mentioned in Russel Reynold’s diversity model: personality. This paper will also explore how personality may contribute to the success or detriment of a board, and why one may want to include personality in future discussions about board diversity.

Personality

The five-factor model of personality (11) is the most commonly used method of describing personality traits. The five-factor model organizes all possible qualities into one of five spectrums: openness to experience, conscientiousness, extroversion, agreeableness, and neuroticism. For our purposes we will assume that personality traits are binomial, i.e. individuals are either creative or not creative – but not perfectly in the middle. It’s from here that we will begin our analysis.

Openness to Experience

In the context of governance, openness to experience can be interpreted in at least two ways: one’s degree of creative tendencies, and one’s degree of risk tolerance. Both of these qualities can have a significant effect on the types of strategy that a board may engage in, and having a good balance of each quality may be more beneficial than having a board dominated by either extreme.

One might imagine how a board over represented by creative, risk tolerant individuals is a bad idea. This composition may result in uncommonly risky decisions (or frequent risky decisions) which can cause an organization to fail, or to veer too far away from their mission statement. On the contrary, a board dominated by non-creative, risk intolerant individuals may consistently make decisions based on incumbent, time-tested methodologies. This may cause the organization to lose out to competition for lack of innovation or progressive thinking.

A board that’s well balanced in terms of its creativity and risk tolerance would be most likely to find a healthy balance between the two traits. They may be more realistic and methodical about weighing individual strategies and risks, instead of adopting a culture that influences too far to either extreme.

Conscientiousness

One important director quality that falls into the category of conscientiousness is the spectrum of preference towards spontaneous or planned decision making. Planning is undoubtedly an important part of any board’s role, however there are times when a board must make immediate or crisis decisions for which no pre-prepared plan exists. In these instances, decision making (or discussion) may be better led by individuals who are more spontaneous in nature, and thus more accustomed to, and comfortable with, making in-the-moment decisions.

Whereas on the other hand, if a board were to be dominated completely by spontaneous individuals, there may be less emphasis placed on long term planning. This could lead to avoidable issues further down the road, or a strategy that’s incomplete in its long-term outlook.

It’s therefore reasonable to conclude that a healthy balance between individuals who prefer spontaneous decision making and individuals who prefer well thought out decision making would be the best option for a board which must inevitably carry out both decision making processes.

Extroversion

The issue regarding a board dominated by introverts or dominated by extroverts is that of healthy communication. Just imagine a board composed entirely of extroverted personalities. It may be very difficult for the group to discuss and decide upon issues if every board member feels an equal need to talk or guide the group discussion. On the other hand, a board composed completely of introverts may lean against hosting or attending events that may be appropriate for the organization: conferences, forums, luncheons, etc. A board dominated by introverts may also be problematic in that there may be too few individuals willing to chair the board or any given committee.

Having a board composed of both introverted and extroverted individuals is thus a good strategy for facilitating healthy discussion, filling appropriate board roles, and for deciding upon the frequency in which networking or social events must be hosted or attended by board members.

Agreeableness

One’s degree of agreeableness is a very important factor that contributes to the health of group discussion and decision making – enough healthy skepticism must exist such that poor ideas are challenged, while at the same time enough agreeableness must exist such that decisions can be made without fracturing the board. There is a very clear danger that lies at each extreme.

A board that is entirely agreeable may be unwilling to call out bad ideas in front of the group, leading to weak decision making. Similarly, a board that is completely unagreeable would find it very difficult to decide upon issues in an efficient and healthy way. It’s also possible that under or over agreeable boards are more dissatisfied than is common. The over agreeable board may be dissatisfied with the poor decisions being made. And the under agreeable board may be dissatisfied with the level of perceived conflict during discussions. It’s therefore best to have a board that is equally balanced between the two agreeableness extremes.

Neuroticism

At first glance, it may be difficult to appreciate the benefit of being ‘neurotic’, but one trait that fits this category is one’s sensitivity to perceived risks. For example, a healthy amount of risk sensitivity is required during the process of risk identification. If a board is dominated by members that are under sensitive, they may be careless or incomplete in identifying the risks that face their organization. Likewise, a board dominated by highly sensitive individuals may place undue importance on events that are unlikely to occur.

It’s therefore fair to assume that a balance of perceived risk sensitivities is optimal for board composition. It’s required that a board identifies all risks that face their organization (which may be better accomplished by a risk sensitive person), but also required that due weighting is attributed to each (which may be better accomplished by a non-risk sensitive person).

What Are The Odds?

Before we conclude this paper, we want to emphasize the importance of tracking personality traits by pointing out that the statistical probability of having an ‘unbalanced’ board is rather high. The trait that we are going to use in our example is agreeableness.

First, we are going to assume (reasonably) that a board dominated by under or over agreeable individuals would be suboptimal, and that a balance of this trait would be best. We are also going to assume that without prior consideration, the probability of recruiting an under or over agreeable board member is exactly equal.

Unacceptable Representation

We now need to establish a benchmark for what may be considered an ‘unacceptable’ representation – this is the prevalence of a trait that would be considered unhealthy for a board. To do this, we are going to look at a simple example: the CBDC’s goal of having a board composed of at least 30% women. This goal implies that a quality existing in 50% of the population (being female) should have at least 30% representation on a board.

Since the probability of being born female and choosing an under or over agreeable member (given our assumptions) are both 50%, we can conclude that a board composed of any less than 30% over or under agreeable members would also be unacceptable and unhealthy board functioning may exist.

Board Size

The last thing we need to do is to establish a hypothetic board so that we have some numbers to work with. Our board is going to contain 10 members, it’s going to have 4 committees, and each committee will have 5 members.

Using our 30% cut-off value we can finally state that a board consisting of 2 or less under or over agreeable members (20% composition) would be unacceptable. Likewise, a committee composed of 1 or less under or over agreeable members (20% composition) would also be considered unacceptable and unbalanced.

Statistical Conclusions

From here, we can use basic binomial mathematics to determine the probability of obtaining a board or committee that’s under or over agreeable. (A sample math problem can be found at the end of this paper)

Our conclusions:

  • There is a 10.9% chance that any given board composed of 10 members is unacceptably represented by either under or over agreeable members.
  • There is a 37.5% chance that any given committee composed of 5 members is unacceptably represented by either under or over agreeable members.
  • There is an 84.7% chance that at least one committee (when 4 committees are present, each containing 5 members) is unacceptably represented by either under or over agreeable members.

Note that this statistical theory can be applied to any binomially occurring personality trait – under or over representation by risk adverse individuals, extroverted individuals, or spontaneous individuals are all equally as likely to occur as in the conclusions stated above. This is particularly interesting given the fact that potentially hundreds of individual personality traits exist. If we were to compound the probabilities of each individual trait being under or over represented, it’s statistically probable that every single board in existence is dominated by at least one personality trait.

Conclusion

Given everything that we’ve covered, we feel that it’s fair to say that well balanced personality traits are important for the healthy functioning of a board, and that personality should be assessed and included in discussions about board diversity. This is particularly evident given the fact that up to 10.9% of boards composed of 10 members may be dominated by any given personality trait, and that nearly every board in existence may be dominated by at least one personality trait.

The Blind Men and the Elephant

Do you ever sit on a nominations committee and wonder… “what parts of the elephant are we actually perceiving?”. Some don’t track demographics, so there goes the head. Some don’t track personality, so there goes the body. But most track experiences, so are you at least perceiving the feet?

 

Blind men and an elephant

And so these men of Indostan
Disputed loud and long,
Each in his own opinion
Exceeding stiff and strong,
Though each was partly in the right
And all were in the wrong!
– A poem by John Godfrey Saxe based on the Hindu parable, The Blind Men and the Elephant

References

Canadian Board Diversity Council. 2016 Annual Report Card. (2017). https://www.boarddiversity.ca/sites/default/files/CBDC-Annual-Report-Card-2016.pdf. Accessed on Dec. 22, 2017.

Chandler L. et al. Beyond Political Correctness Chandler. Kenneth Association Management, Jan 2005, Vol.57(1), pp.29-32

Cook A. et al. Do minority leaders affect corporate practice? Analyzing the effect of leadership composition on governance and product development. Strategic Organization Vol 13, Issue 2, pp. 117 – 140

Bear S. et al. The Impact of Board Diversity and Gender Composition on Corporate Social Responsibility and Firm Reputation. Journal of Business Ethics, 2010, Vol.97(2), pp.207-221

Galia F. et al. Board composition and environmental innovation: does gender diversity matter? Int. J. of Entrepreneurship and Small Business, 2015, Vol 24 Issue 1, pp 117 – 141

Canadian Board Diversity Council. Vision And Mandate. (2017). https://www.boarddiversity.ca/vision-mandate. Accessed on Dec. 22, 2017.

Statistics Canada. 2016 Cencus Topic: Age And Sex. (2017). http://www12.statcan.gc.ca/census-recensement/2016/rt-td/as-eng.cfm. Accessed on Dec. 22, 2017.

Russel Reynolds Associates. Different Is Better – Why Diversity Matters In The Boardroom. (2009). http://www.russellreynolds.com/en/Insights/thought-leadership/Documents/different-is-better_0.pdf. Accessed on Dec. 22, 2017.

Deloitte, Alliance For Board Diversity. Missing Pieces Report: The 2016 Board Diversity Census of Women and Minorities on Fortune 500 Boards. (2017). http://www.catalyst.org/system/files/2016_board_diversity_census_deloitte_abd.pdf. Accessed on Dec. 22, 2017.

Egon Zehner. 2016 Global Board Diversity Analysis. (2017). https://www.gbda.online/assets/EZ_2016GBDA _DIGITAL.pdf. Accessed on Dec. 22, 2017.

Wikipedia Foundation Inc. Big Five Personality Traits. (2017). https://en.wikipedia.org/wiki/Big_Five_personality_traits. 2017. Accessed on Dec. 22, 2017.

Sample Math

Below is the probability of a binomial event occurring 2 or less times out of ten. From our example, this would represent the probability of ending up with 2 or less members on a 10-person board who are under agreeable. The probability is the same for over agreeableness, and thus the final probability is multiplied by two.

Binomial Mathematics

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