Group thinking and tunnel vision, the biggest pitfalls in governance
October 5, 2015 | 1 min read
The shareholder model has been replaced by the stakeholder model in the Netherlands. Organizations, profit-making and non-profit alike, more and more take the interests of all stakeholders into account in their actions and decisions. Customers, employees, and society as a whole receive more attention. However, it seems that the profit-making sector still needs to make more effort in that respect.
Prof. Dr. Mijntje Lückerath-Rovers is Academic Director of the TIAS Commissarissen en Toezichthouders Programma (Corporate and Public Governance Program). She notes that the non-profit sector is ahead of the profit-making sector in terms of corporate responsibility and in reflecting the interests of various parties in their decisions. "The non-profit and the public sectors have incorporated this into their modus operandi to a much greater degree. They are ahead of many commercial enterprises in that respect."
What often seems to be missing in the profit-making sector is the realization that stakeholder thinking also pursues the objectives of the shareholder model. Lückerath-Rovers: "Serving multiple interests – including those of customers and employees – ultimately leads to higher returns. No company will survive for a long-time if it does not focus on the customer or ensures that its employees are motivated. It will eventually lose to its competitors. The stakeholder model, therefore, does contribute to the shareholder value."
Bias in the boardroom
Profit-making and non-profit organizations can learn a lot from each other, and looking at a problem from multiple perspectives helps avoid what Lückerath-Rovers calls bias in the boardroom: the bias and adherence to certain ideas because there are simply no other ideas available. Such bias results at best in missed opportunities and at worst in a downfall: "Group thinking and tunnel vision are the biggest pitfalls in management and supervision. If you do not consciously look for other perspectives and remain isolated, you will not progress. Many companies that have gone under might have survived if, for example, they had learned more from social organizations. If they had looked at multiple stakeholders, they would have made other choices. We all know examples of where things went wrong in the corporate sector."
It is precisely for that reason that Lückerath-Rovers attaches great importance to TIAS including participants from both the profit-making and the non-profit sectors in its program. "Both sectors can learn a lot from each other. Only when you put multiple perspectives and thoughts together you can progress yourself.
"Customers and employees are becoming increasingly less loyal. They have more choices and more options. If you ask your peers for advice about winning this battle, you will probably get the same answers, and that will not help you."