The year 2016 was rife with turbulence and turmoil: Brexit spawned a wave of uncertainty across Europe, pressure in capital markets caused considerable strain for many businesses, and the unexpected result of the U.S. presidential election ushered in fears of a global trade war.
These events exposed public divisiveness unlike anything seen in modern times. In turn, these divisions contributed to unprecedented levels of conflict in businesses both public and private: It was dubbed the “Year of the Activist Investor,” with a number of internecine boardroom battles splashed across the pages of the Financial Times, and a range of private companies struggled in public ways, with some failing outright. In our firm, requests for help in resolving boardroom conflicts was more than double that of any year in our history.
Given the unprecedented disunity that exists on both sides of the Atlantic, some fear the stage is set for a continuation of this dynamic in 2017. These concerns are not unfounded: In times of discord, individuals and organizations assume defensive stands, which increase the likelihood of conflict. Events in both the U.S. and Europe in the first weeks of the year suggest a perfect storm for still more conflict. How then do we avoid the mistakes of 2016? Despite the divisiveness that exists at a global level, how do we prevent self-destructive conflict within our own organizations?
While there factually is an increased probability for conflict in 2017, we hold that the majority of conflicts in business are avoidable. Moreover, even though the antecedent causes of uncertainty in today’s European and American markets are unique, the underlying causes of conflict are anything but. Given the fundamental underpinnings of most conflicts in business, we hold that they can be avoided in many instances, and efficiently reconciled when they do surface. This is true even in today’s political environment. That said, given the turbulence that lies ahead, individuals must be intentional about avoiding conflict in the months to come.
Some of most damaging conflicts in business happen in board rooms. They have the propensity to trickle down throughout the organization, and also have the unfortunate possibility of becoming public knowledge, causing injury to the company’s identity, with negative impact on financial performance. In our firm, we have seen an uptick in requests for conflict prevention, particularly those around major corporate events such as acquisitions, divestitures and restructurings. This focus on prevention is not accidental: Given the pressures inherent in the the global business environment, corporate boards are well aware of the increased likelihood of conflict and are motivated to avoid the missteps of 2016. Drawing on our experiences with these clients, we focus below on preventing and reconciling conflicts among an organization’s board of directors.
To wit, a brief primer on avoiding conflict in the board room in 2017:
Emotions are not the enemy. We often hear that being “rational” is key to effective decision-making, where rationality presumes the avoidance of emotion. But this denies fundamental facts: In today’s turbulent market, emotions run high. Moreover, whether we like it or not, all thinking and actions happen within moods . . . and those very moods shape our own interpretation of reality, including our interpretation of what is rational and what is not.
We are often called in by one party in a conflict and told the other party’s position is “simply not rational.” When we then speak to the other party, we often find that they lay claim to having the only rational stand. This is why businesses usually fail to resolve boardroom conflicts through rational thinking. In today’s times, with anxieties heightened, a reliance on “rational thinking” is likely to be futile.
We take a different approach when it comes to moods and rationality. We hold that when conflict threatens, one should deliberately seek to produce specific moods and emotions, not only in oneself, but also in the other parties in the conflict.
Emotions and moods are determining factors in all conversations, including those in business. This is why the emotional intelligence work of Peter Salovey at Yale has such relevance — If someone isn’t “in the mood” for something, it constrains the space of possibilities. When conflict threatens, people are biologically triggered into defensive stances, and their thoughts follow. This can result in a negative spiral in which the parties hunker down in opposed positions, deepening conflict and making resolution impossible.
But rather than deeming emotions the enemy, sophisticated negotiators know that causing specific moods can help secure outcomes.
In times of conflict, negative moods such as anger and fear are weak: Their purpose is to defend us by putting distance between us and threats, whether real or perceived. Seen in the context of evolution, if we are angry, it enables us to neutralize the source of threat. If we are afraid, it enables us to get away quickly. Both put distance between us and the source of the negative emotion, and this is antithetical to collaboration.
Instead, when conflict threatens we should seek to instill positive moods, both in ourselves and in in the other affected parties. This can be easier said than done, but is an extremely efficient means to produce outcomes quickly.
We recommended such a “mood shift” to the board chair of a Dutch company, whose board was in dissension and chaos. When he expressed skepticism, we conducted a simple experiment: We took the executive team of the company and split them into two groups. I delivered an address to both groups – a simple overview of the fact that my firm had been engaged to resolve problems in the company. For the first group, I deliberately manifested a grim mood. My tone was somber, and I spoke with gravity. For the second group, I purposely held a mood of enthusiasm. I spoke in excited tones that conveyed possibility. The language I spoke to both groups was identical – I read it verbatim from a text. But with the simple shift of mood, the difference in reaction was sharp: The first group viewed my firm’s engagement as a sign of how bad things were, and this instilled a sense of deep concern. The second group reacted with enthusiasm, and even excitement about the possibilities we could produce.
We took this approach into the board room, and produced a near immediate shift in mood. This in turn shifted the conversation, and resulted in new collaborations that ultimately led to a successful exit event.
Avoid Inflexible Positions
When faced with a difficult challenge, highly accomplished people often have an instinct to quickly identify a solution. The problem arises if it is dubbed the solution, versus one of several possibilities. If other solution-oriented people in the conversation identify other solutions, a sharp divide can quickly arise. If people fixate only on their original idea, the situation can quickly devolve into an interpretation that one idea must “win” . . . which of course means another must “lose.”
This can result in what Roger Fisher deems “trench warfare” wherein people dig in to defend their specific position. The costs of such battles are enormous – the resulting acrimony can not only prevent resolution of the issue at hand, but it can leave deep wounds that color future interactions. We’ve been called into many companies wherein one board member speaks of another director as though she were an enemy . . . even though they’re both on the same team. Often we trace the root cause of such animus to conflicts that happened years ago. Meanwhile, as they are embroiled in friction, their competitors are competing.
To avoid this trap, we recommend identifying a range of possible solutions and putting them forward. If people are already entrenched, we offer a metaphor to illustrate the logic of this approach: “Who should the Democrats put forward to run against Donald Trump in 2020?” At this juncture, very few people will identify one specific person, but instead will outline a range of possible candidates. It is precisely this kind of flexible thinking that should be deployed in dispelling extreme positions.
We worked with one company in which the board was effectively deadlocked: One side of the boardroom wanted to sell the entire company, whereas another wanted to invest in additional growth. Meanwhile, revenues were declining. The trench warfare was so intense that neither side could see past their position; they were incapable of even conceiving new possibilities on their own. We outlined a range of simple, theoretical possibilities, all of which were different from the entrenched positions. The relief was palpable – people in general do not enjoy conflict, and the new options were seized upon as if a life preserver in a stormy sea. This opened an entirely new conversation, one in which conflict was dispelled and the directors were able to focus on operational issues.
Not surprisingly, the conflict in the boardroom had spilled over into management. When the boardroom conflict was addressed, it enabled resolution of nearly identical conflicts within management using board members as role models. The resulting collaboration reversed earlier revenue declines, which in turn made the entire company attractive to buyers. When suitors approached, the the newly-harmonious board actually turned them away at first, preferring to continue to grow. Eventually, they collaboratively designed a solution of selling their assets in one country, while maintaining their other global interests.
Understand supra-ordinate concerns. Understanding each party’s concerns is critical in resolving or avoiding conflict. While this might seem obvious, we find that a rigorous understanding of the other party’s full set of concerns is absent in most conflicts.
In situations where conflict threatens – but has not yet arisen – we recommend focusing on this fundamental design: “I’ll do X for you, provided you do Y for me.” The “Y” of course, is well known – it’s what we want from the other individual. But we often overlook the “X” – that is, we fail to truly consider what might be of value to the other party in the discussion. Importantly, what we do for them must be of value. To execute this design with integrity – “I’ll do X for you, provided you do Y for me” – we must invest thinking and energy in understanding the other person’s concerns. In other words, we must spend some time in the other person’s shoes, for it is only from doing this that we can truly appreciate what their concerns are. We need to know what challenges, problems or potential breakdowns they face.
Importantly, these breakdowns need not be directly related to what we want. If, for instance, there is conflict surrounding the share price in the sale of an asset, this difference would be the focal concern. But why does one party favor one price over another? The answer is rarely about money per se; and it is never superficial. Money of course factors into the focal concern, but what is the money for? What fundamental issue does it address for the individual?
These are the supra-ordinate concerns that are often the core of many conflicts.
To illustrate, we once had a client in which one board director struggled to build credibility with the board chair. We guided him to spend time with his board chair in structured extra-mural settings; and from doing this, he learned that the chair’s daughter was motivated to attend Princeton. It so happened that the board member’s spouse was a Princeton alumna and because she was active in interviewing applicants, she was able to arrange an interview. This shifted the chair’s relationship with the director, and opened an entirely new space of possibilities for transaction.
The point, of course, is not the Princeton connection; it’s the purposeful action to learn about the board chair’s supra-ordinate concerns.
When a conflict has already arisen, the focal point of difference is known; but often one party will label the other’s position as “extreme” or a “deal breaker.” These labels shut down the conversation, and prevent an understanding of what the individual cares about. What’s more, it precludes any discussion whatsoever of why an individual cares about a specific position they’ve taken.
Here, an understanding of supra-ordinate concerns is often a prerequisite to resolving conflict. Supra-ordinate concerns may include issues of legacy or deeply personal motivations. With one client, we learned that one board member’s primary motivation was to “prove himself” to an older family member, who happened to be the primary wealth generator in his family. This resulted in him taking a position of extreme risk that made other directors uncomfortable. Only when this motivation was disclosed was a compromise approach designed . . with the help of his fellow directors, one of whom had faced a similar challenge years before.
If the foregoing practices are made part of an organization’s ongoing interactions, they can help resolve conflicts when they arise; and if held proactively, can prevent conflicts from occurring in the first place. This is true even within the divisiveness and discord that exists today on both sides of the Atlantic.
As such, even though recent events have understandably triggered fear and uncertainty for businesses both public and private; we see that boardroom conflicts need not be a foregone conclusion in 2017. On the contrary, we see new possibilities within the turbulence around us:
- Individual’s supra-ordinate concerns may well have been thrown into turmoil in the wake of Brexit and the U.S. Presidential election – and this in turn may trigger defensiveness. Those defensive stands are only natural – when we are threatened, we seek to defend ourselves. Considering this, the threats that people rightly feel present new opportunities to be of help to them.
- That same defensiveness can result in taking extreme positions, effectively building walls between people who should ideally collaborate. But if we see those walls for what they are – barriers between partners – real possibilities arise to collaboratively design new, as-yet-unconceived solutions.
- Within the anxiety that is felt in global markets, moods of mistrust may exist; but we need not let them calcify. Shifting the moods of our conversations, regardless of the external environment, can create a new space of possibility for avoiding threats that we commonly face.
For these reasons, we look forward to 2017 with optimism and enthusiasm. Adversity and uncertainty can, in fact, bring people together. The very concerns that worry people can be new opportunities to be of help.
We hope that you find this so, and that you have a successful and prosperous 2017.
For more information about the practices in this article, contact info(at)adaltius.com
Authored by Thomas Brown – a Yale-educated psychologist and the CEO of Ad Altius Advisors. The firm specializes in preventing and resolving boardroom conflicts, particularly those surrounding major corporate events such as acquisitions, divestitures, and restructurings
Compliment of Adaltius – a member of the EACCNY