Peter Crow
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Board size and composition: the Goldilocks effect

19/2/2016

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Board diversity and board size are common topics of conversation in governance circles these days. Hardly a week goes by without one or both topics being mentioned. Most commonly people ask about board diversity and the relationship with firm performance, and the 'perfect' board size. Typically, my responses have been "Yes, diversity is good" and "No, there is no such thing as a perfect board size". Beyond that, context kicks in because every board, governance situation and even every decision is, to some extent at least, unique.  
I have happily shared these responses and offered other supporting commentaries to all who ask—until now. What's changed? This article has set me thinking. Here are some insights that bear further consideration:
  • On team (read, board) size: Many boards of directors have five to fifteen members (the largest board I have advised had eighteen members—what group dynamics disaster). Contrast that with the research cited in the article and elsewhere, which suggests that six is pretty close to optimal. Beyond six, cliques emerge and the likelihood of free riding increases. Have you seen any of these characteristics? It might be time to review the size of your board.
  • On diversity: Diversity has been heavily promoted amongst the governance community in recent years. While diversity can be great for ideation, it can also be bad for cohesion. That's because the board needs to operate as a team. The research suggests that some similarity is good (i.e., shared understandings not same physical attributes) because it enhances effectiveness in performing complex and unpredictable tasks (like board decisions!). The point here is that sameness is good in some ways (operating basis and purpose) and diversity is better in others (ideation and debate). Striking the balance takes maturity.
So, food for thought. The article was published by the Wharton School at the University of Pennsylvania—not by some backyard consultant or agency trying to sell services. This means we can rely on the commentary. While it may or may not be 'right', it certainly has substance. I would love to hear what you think about these matters after you have read the article and pondered the ideas and suggestions.
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Peter Crow PhD CMInstD

Company director | Board advisor
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