Navigating Misjudgement: A Practical Framework for Better Board Performance

This episode draws neglected attention to a decision-making error that is crucial to high-stakes decision-makers in all types of boards. Based on the concepts of bias, ‘deaf spots’, and ‘tone-deaf leadership,’ it contains a framework of misjudgement traps that act as warning flags. We also discuss solutions to sources of mental misinformation. This episode draws neglected attention to the sources of human misjudgement across all types of boards, from ego to identity to false narratives.

In this podcast, Dr Sabine Dembkowski, Founder and Managing Partner of Better Boards, discusses navigating misjudgement with Nuala Walsh, non-executive director, chair and CEO of MindEquity, where she advises on reputation, culture and strategy. Appointments include Chair of Innocence Project London, iNED at British & Irish Lions, President of Harvard Club Ireland, Deputy Chair of The FA Inclusion Advisory Board, and Vice-Chair at UN Women (UK). A former FTSE-100 CMO with 30 years in investment management at Standard Life, BlackRock and Merrill Lynch, she is recognised among the 100 Most Influential Women in Finance. Adjunct Professor of Behavioural Science at Trinity College, her debut TUNE IN: How to Make Smarter Decisions In a Noisy World has won multiple international book awards.

“Even the smartest boards, I think, are more at risk of tuning out really what matters”

Nuala identifies context as the most critical factor influencing boards, and experience, background, and situational context limit a person’s perspective. For boards today, the challenge is compounded by a noisy and fast-paced world, and Nuala points to a combination of data overload, disinformation, and constant distractions as key factors undermining effective decision-making, combined with the pressure of speed and divided attention to create a “toxic mix” for sound judgment. Then, even the smartest boards are at greater risk of missing critical data, tuning out important voices, and rushing toward misjudgement. Boards are not immune to the effects of their decision ecosystems, and without intentional strategies to counteract these influences, the risks to effective governance remain high.

“We hear less; we misjudge more”

Nuala believes a key challenge for boards is the inability to fully listen and absorb what truly matters during meetings, which she terms ‘deaf spots’, stemming from a lack of appreciation for how the environment impacts human behaviour. Ironically, while a board’s reputation and performance depend on effective decision-making, the pressures of the boardroom often trigger decision risks, manifesting as a tendency to tune out critical signals and focus on what is convenient or comfortable. Under the strain of crises, conflict, or uncertainty, directors tend to rely on what they see rather than hear, and important data, uncomfortable truths, or divergent perspectives are often ignored or missed. Deaf spots differ from the well-known concept of blind spots. While blind spots refer to areas we fail to see, deaf spots occur when boards deliberately or subconsciously tune out important voices or data. The consequences of this tone-deaf leadership are significant, and Nuala argues, lie at the heart of many corporate scandals and governance failures, highlighting the urgent need for greater awareness and intentional listening in the boardroom.

“In order to know how to get it right, you need to understand why people get it wrong”

Nuala explains that to address echo chambers and tone-deaf decision-making, the first step for boards and directors is to recognise the problem. Overconfidence often blinds boards to their own vulnerabilities, with many assuming their judgments are sound even when presented with contradictory evidence. She highlights the illusion of validity, where boards cling to initial assessments despite red flags, whether in regulatory, budgetary, or risk-related decisions. She stresses the importance of analysing why decisions go wrong before jumping to solutions, referencing high-profile failures like Yahoo, which made 53 acquisitions, 52 of which failed. At Theranos, board members tuned out critical concerns despite whistleblowers and consultants raising red flags because the board was enamoured by the confident narrative of Elizabeth Holmes and failed to act. This, she explains, is a classic example of motivated reasoning – where individuals hear what they want to hear or avoid challenging a narrative that appears successful. Another example she cites is the Penn State board during the Jerry Sandusky abuse scandal, where, despite recurring allegations, the board remained overly confident in their governance and saw no reason to ask more profound questions. Nuala argues this reflects a fundamental failure to embrace second-order questioning – challenging assumptions and interrogating data, even when the answers seem obvious. She believes the broader issue lies in how environmental factors influence decision-making. Early warning signs are almost always present, but detecting them requires deliberate effort.

“A major warning sign of potential misjudgement is too much board consensus and groupthink”

Nuala also points to the behaviours and culture within the board itself, as boards often discuss organisational culture but rarely scrutinise their own. She highlights several key warning signs that should trigger reflection and corrective action. Boards that reward short-term results, especially under pressure or resource scarcity, are one issue. A Harvard study showed that CEOs who make quick, confident decisions are 12 times more likely to be promoted than those who take a more deliberate approach. High-pressure environments foster decision-making prioritising speed over sustainability, which may be a mistake. Another warning sign is a lack of self-investment, and Nuala stresses the moral responsibility of boards to educate themselves, particularly on biases. There are over 200 cognitive biases, with 75 of them categorised into ten misjudgement traps in her work. Yet, most boards do not focus on understanding these dynamics, even though it could greatly improve their judgment and influence. Another issue is the failure to monitor behaviours and decision-making processes because, without active monitoring, boards lose the opportunity to address the human factors underpinning most business problems. Data obsession is another warning sign, as while data is critical, boards often fall into the trap of wanting more and more, using it to avoid making decisions. However, studies show that additional data does not improve accuracy after a certain point, and in forecasting, 83 pieces of data offer no greater accuracy than five. To avoid misjudgement, boards must avoid too much consensus, which often signals groupthink and a lack of critical questioning. While consensus may seem harmonious, Nuala argues that it often stifles dissent and discourages directors from fulfilling their duty to provide honest, independent opinions. Another red flag she highlights is overly tight relationships between the chair and the CEO. This can lead to unbalanced power structures, suppressing healthy debate and fostering a rubber-stamp culture. Such “Country Club boards,” as Nuala calls them, prioritise non-confrontation over accountability, leaving organisations vulnerable to poor decision-making.

To address these risks, Nuala has identified ten core misjudgement traps that cloud boardroom judgment, grouped under the mnemonic PERIMETERS: Power, Ego, Risk, Identity, Memory, Ethics, Time, Emotion, Relationships and Stories. Each represents a source of misinformation that distorts decision-making. For example, power-based traps include biases such as the illusion of invulnerability or authority bias, where deference to a dominant figure overrides critical thinking, or the “halo effect”, where an engaging personality blinds boards to deeper issues. To combat such vulnerabilities, Nuala advocates for boards to assess their judgment risk profile, measure their susceptibility to these traps, and implement strategies to mitigate them.

“The peacock cares about who’s right, not what’s right”

Nuala highlights ego-based traps as one of the most dangerous influences in board decision-making. Ego, she explains, often leads boards to overestimate their ability to make sound judgments, creating a false sense of confidence or illusion of validity that results in rushed decisions, often made under the influence of distractions, time pressures, or overconfidence. Ego-based traps do not exist in isolation but intertwine with other factors such as risk appetite, identity, and emotion. A desire to leave a legacy or a narrative of denial or wishful thinking can exacerbate these biases, so boards must also consider the stories they are told – and the stories they tell themselves – when making decisions. She illustrates this with examples, such as the British Post Office scandal and the OceanGate submersible tragedy, where the CEO’s excessive belief bias led him to dismiss warnings from 38 experts, convinced his vessel would safely reach the Titanic. These cases demonstrate how ego and belief bias can combine with other traps to create catastrophic outcomes.

“Check your intuition”

Nuala offers practical advice for boards to enhance their decision-making and avoid common pitfalls, starting with intuition. While intuition often guides decisions, it is not infallible, and studies show that rechecking your intuition can improve decision accuracy by 10% to 40%. This process involves stepping back, fact-checking, and validating assumptions rather than relying solely on gut instincts and questioning assumptions, answers, and gaps in communication. By seeking clarification and challenging the information presented, boards can avoid taking data or narratives at face value. Her book outlines 18 science-based techniques to improve decision-making but notes that even a simple checklist is a powerful starting point. These practical steps encourage boards to approach decisions with greater intentionality and rigour, reducing the likelihood of misjudgements.

The three top takeaways for effective boards from our conversation are:

• Your decisions really matter more than you think.
• Nobody is immune from these misjudgements, so evaluate your board mindset regularly and teach, educate, and update constantly.
• Not everything you hear is valuable, and not everything valuable is heard. Listen differently, tune in to what you hear, and don’t take things at face value because the smartest thing you can know is who to listen to and who not.

 
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