Effective decision making

Decision making is a process that often occurs against a background of varying levels of uncertainty (see also our SGA advice on principles of sound decision making, here). To manage that uncertainty, we strive to make decisions in a rational, systematic manner. But decision making cannot be entirely rational because we are all inherently influenced by our education, history, experience, cultural and social networks, emotions and personal motivations. All of these factors impact our behaviour and opinions. Thus, when 8–12 individuals in a room attempt to make collective decisions, it can lead to conflicts and tensions.

However, while conflict is to be avoided as detrimental to effective decision making, a degree of tension in the boardroom is beneficial to aiding quality of decisions. Disagreement, alternative opinions, diversity of viewpoints can all lead to an informed exploration of alternatives before a final decision is made. The key is to establish the right amount: too much can decrease organisational performance and negatively impact on decision making; too little can result in a complacent board that fails to critically evaluate relevant information, lacks innovative and creative ideas and makes decisions too quickly.

To avoid this, understanding how to manage conflict and tension in the board room or within committees and even subcommittees is essential.

Managing conflict and tension

The Chartered Governance Institute and Henley Business School produced a report that provides thorough guidance on managing conflict and tension in your boardroom. Here, we provide an overview of the main points from that report which can help sports organisations to make effective decisions or recognise how to manage conflict to improve decision making in the boardroom.

Some key findings from the report include:

• Tension can be defined as disagreement which is often uncomfortable but can be resolved by healthy debate. It is a positive force in the boardroom.
• Conflict is regarded as aggressive tension that usually escalates to extreme and unresolvable levels. It is disruptive and damaging to the board.
• Tension and conflicts can be structural, personal or historical.
• Structural tension occurs due to different role responsibilities and priorities and is normal in a well-functioning board.
• Personal or personality conflict can be unhealthy if left unresolved.
• Personal issues and conflict can be resolved through acknowledgement of individual points of view and encouragement to re-focus on the organisation’s priorities rather than individual ones.
• Conflict resolution may need to take place outside of the boardroom to avoid distracting the board from their responsibilities.
• The chair and the governance lead play important roles in managing conflict and may lead an informal conversation outside of the boardroom to resolve personal conflict issues, maintaining boardroom time for strategy and business of the board.

It can be helpful to understand the sources of conflict in your organisation, to better understand where you may concentrate conflict management efforts. Sources of conflict include:

• Differentiation (number of sub-units to complete tasks) Requires greater communication between sub-units and hence increases the chance for misunderstanding.
• Interdependence The more units are dependent upon one another to complete their work, the greater the chance for conflict
• Low formalisation Lack of formal rules and policies can create confusion, unfair treatment or decisions and conflict
• Competition over resources Internal competition for resources can be healthy and can highlight highly effective personnel but if resources are required to function and can’t always be accessed, it can be seen as wasteful to some and conflict emerges.
• Differences in reward systems Ensure equality in rewards among different groups in the organisation. Recognise that highly paid staff may be resented by lower paid staff who feel they make an equal contribution to the organisation, albeit in different ways.
• Power incongruence Perceptions of power and differing power dynamics can result in conflict.
• Participative decision making While important in making effective decisions, it can also a source of conflict. Not all decisions can be fully participative and you must consider where and why participation is included.

Written Resolutions

Written resolutions can be performed by boards or an organisation’s members – let’s take a look at both below.

Boards

A board resolution is a formal decision of the organisation’s board members. Most board decisions require due consideration of background information and active discussion of the issues before the formal decision is taken. So, most board resolutions are passed at board meetings. However, some may be passed as written resolutions. Whether or not this is possible depends on:

• the nature of the resolution to be passed; and
• the provisions of the organisation’s governing document.

Key considerations for written resolutions are:

• Is the resolution suitable to be dealt with in writing?
• Whether prior consideration of appropriate background information and a board discussion are needed. If so, the resolution ought properly to be addressed at a board meeting.
• Does the governing document permit the passing of written resolutions of the board?
• What is the specified procedure?
• Check the provisions in the governing document with regard to the percentage consent required to pass a written This is likely to be unanimity (rather than the majority vote usually required to pass a resolution at a board meeting).

Unlike company members’ written resolutions, there is no statutory provision empowering the board to pass written resolutions. Board members must only use written resolutions if the governing document empowers them to do so.

You should follow the procedure specified in your organisation’s governing document. Ensure a record is made of the written resolution, including the text of the resolution, its date and details of the names of the board members who signed the resolution. If your governing document requires unanimous agreement, all board members should have signed the resolution.

Members

A members’ resolution is a formal decision of the organisation’s members. While such resolutions are usually passed at a meeting of the members, sometimes they may be passed as written resolutions. Whether or not this is possible depends on: the legal form of the particular organisation; the nature of the resolution to be passed (some resolutions must be dealt with at a meeting); and/or the provisions of the individual organisation’s governing document.

If your organisation is a private company, including a company limited by guarantee (CLG), a written resolution of its members may be passed in accordance with the procedure set out in the Companies Act 2006 (i.e. the statutory written resolution procedure).

• A written resolution may not be used to remove a director or remove an auditor. Otherwise, a written resolution may be used to pass either an ordinary or a special resolution.
• Only eligible members may vote, with ‘eligible member’ being one who qualifies to vote on the relevant resolution at its circulation date (see further below).

A Charitable Incorporated Organisation’s (CIO) constitution may, or may not, include provisions for the passing of written resolutions of the members.  Meanwhile, a Scottish Charitable Incorporated Organisation (SCIO)’s constitution must contain provisions as to how members’ resolutions are to be passed. A particular SCIO’s constitution may or may not include provisions for the passing of written resolutions of the members. The regular statutory meeting of a SCIO’s members, required by the SCIO regulations, must be held as a meeting.