Reducing Bias through Board Decision-Making: An Information-Processing Model of Board Decision Synergy

Abstract

The board of directors is the highest decision-making group in the organizational hierarchy. Yet, there remains considerable ambiguity as to what constitutes effective board decision-making, and even greater ambiguity as to how to achieve it. We conceptualize the board decision-making process as occurring in three phases—discovery, deliberation, and decision—and we introduce the concept of board decision synergy as a form of effectiveness applicable to this process. Board decision synergy occurs when the board decision-making process reduces the overall influence of cognitive, personal, and group biases on a given decision. We develop a configurational model in which board decision synergy occurs if, and only if, all of the following information-processing outcomes are present: information heterogeneity, information elaboration, and choice consensus. Each information-processing outcome occurs in a specific decision-making phase, and only as the consequence of specific configurations of board cognitive diversity and director empowerment. Though multiple configurations of board cognitive diversity and director empowerment can produce board decision synergy in our model, we find that no configuration is individually sufficient. These insights underscore the complexity of board decision-making as a phenomenon and the potential for theory explaining its effective practice.