BOARD COMPOSITION: THE IMPORTANCE OF PERSONALITY FACTORS

At the very top of the corporate pyramid sits a group of experienced members of the board who are perceived by management and shareholders as the right people for the right jobs. Generally speaking, they have the skills, experience and expertise to monitor and supervise the company’s chief executive and top management.

In his book, Boards That Deliver, Ram Charan mentions specific criteria for director candidates, such as global experience, financial literacy and M&A expertise, along with general criteria including high ethical standards, thoughtful counsel and the ability to take a tough position while being a team player. With these criteria in mind, what should be the right composition of a board in order for it to perform as expected by shareholders?

Individual personality: In her book Building Better Boards, Beverly Behan indicates three important factors to consider when choosing a board director: skills and experience, representational factors (demographic and geographic diversity), and individual attributes. However, people may focus mainly on skills and experience, which is perfectly understandable because one of the main duties of a board is to ensure that management is performing in the best interests of the business and its shareholders. Unfortunately, individual attributes don’t receive the same level of attention when it comes to board composition.

In its publication “Standards for the Board (2001)”, the Britain-based Institute of Directors suggests a list of valuable attributes for directors in six areas: decision-making, communication, interaction with others, analysis and use of information, strategic perception, and achievement of results.

John Harper, in his book Chairing the Board, offers another six factors: courage, common sense, perseverance, diplomacy, wisdom and intellect. These attributes relate directly to the personality of the individual. In reality, of course, understand an individual personality is like trying to guess how big an iceberg is below sea level, although some may believe that they are more capable than others at reading people.

Five Factor Model: Knowledge of modern psychology makes it easier to understand individual personality traits, based on theories that have been found to have sound practical applications. One of the most recognised theories in this area is the Five Factor Model, which says that every human being has a psychological foundation that can be classed in five groups: openness to experience, conscientiousness, extroversion, agreeableness and emotional stability.

These “Big Five” factors are independent, meaning they don’t vary with one another. In my coaching and consulting work, I actively apply this theory through one of the most accurate assessment psychometric assessments, which helps me predict the behaviour of each individual.

Moreover, each of the five factors comprises personality traits as follows:

Extroversion: sociability, leadership, influence and energy.

Agreeableness: cooperation, concern for others and diplomacy.

Openness to experience: adaptability, innovation, analytical thinking and independence.

Conscientiousness: achievement, initiative, persistence, attention to detail, dependability and rule-following.

Emotional stability: self-control, stress tolerance, self-confidence and emotional self-awareness.

Four directors: Chalit, Nava, Panya and Tanee (not their real names) are directors on the board of a leading firm listed on the Stock Exchange of Thailand. The table presents the personality traits of each one as percentile scores that are based on and compared with data collected from around the globe. Their scores reflect differences and similarities, offering some insight into potential advantages and disadvantages of having them together on the board.

At first glance, it’s obvious that they prefer a fast-paced working environment, since their energy scores are very high. They’re also highly innovative, which means they always keep an eye out for new ideas and appreciate conversations about creativity.

However, only Mr Chalit and Mr Nava score high on analytical thinking, which refers to the tendency to be logical and think through an issue with good reasons before making a decision. Mr Panya and Mr Tanee, on the other hand, may make decisions based more on individual impressions and imagination, given their high scores for innovation and lower scores where the application of reason and evidence are concerned. This is where problems can start for this group of directors.

These directors also don’t hesitate to express their emotions to others if they think this is what’s needed in order to get the job done. However, Mr Panya is likely to express himself very strongly, to the point that he is considered hot-tempered; his self-control and diplomacy scores are very low.

The above analysis is only a brief example of how personalities of board members should be considered in order to get the best out of the entire group. Clearly understanding the individual personality of each director can also help ensure an effective combination of members on board subcommittees as well.

Sorayuth Vathanavisuth is principal and executive coach at the Center for Southeast Asia Leadership and lectures at the Mahidol University College of Management. His areas of interest are executive coaching, leadership development, succession planning and talent management. He can be reached at sorayuth@sealeadership.com