What has been done?

We know from the literature that despite the increasingly widespread view that board research should include a greater number of behavioural studies (Hough, McGregor-Lowndes & Ryan, 2005, van Ees, Gabrielsson & Huse, 2009, Huse et al., 2011, Francoeur et al., 2018), studies in this area are still dominantly structural in approach, and researchers have tended to eschew theoretical lenses other than those with legal/economic origins, despite their possible usefulness (Eisenhardt, 1989, Pye & Pettigrew, 2005, Roberts, McNulty & Stiles, 2005, Hambrick, Werder & Zajac, 2008). The relative paucity of behaviourally focussed research overall, has meant that little work has been done in studying the relationship between behaviour and board effectiveness in any specific board context (Gabrielsson & Huse, 2004, van Ees, Gabrielsson & Huse, 2009, Huse et al., 2011), hence the gap in these findings on early-stage boards.

The literature establishes the fact that boards may be considered episodic and elite decision-making teams (Forbes & Milliken, 1999), and as teams, are therefore subject to group constructs such as intra- group conflict (van Ees, Gabrielsson & Huse, 2009) and power dynamics (Pettigrew & McNulty, 1998, Hambrick, Werder & Zajac, 2008, Peebles, 2010, McNulty et al., 2011).

Arguably the most widely used model for intra-group conflict is the Intra-group Conflict Scale or ICS (Jehn, 1995, Jehn, 1997), in which conflict is categorized as task (ideas, decisions and solutions), relationship, or process (who does what) conflict. Jehn’s ICS has been successfully employed in multiple recent papers on conflict on boards, including startup boards (Hamm-Kerwin & Doherty,

115 2010, Zacharakis, Erikson & George, 2010, Kerwin, Doherty & Harman, 2011, Bjornali, Knockaert & Erikson, 2016, Vandenbroucke, Knockaert & Ucbasaran, 2016, Heemskerk, Heemskerk & Wats, 2017). The broad acceptability of the ICS in studies of organizational intra-group conflict, including in the board domain, made it eminently suitable for use in this study where conflict is expected to have an effect on board effectiveness.

Somewhat surprisingly, despite calls for more research on the way that power works within boards (Hambrick, Werder & Zajac, 2008), and pointers to its importance in influencing board decisions (van Ees, Gabrielsson & Huse, 2009), there have been relatively few studies in this area as most research is concerned with on inter-group power dynamics, e.g. between directors and top-management teams. However, Peebles (2010) has investigated agenda-setting power (an example of ‘power-to’) on boards, McNulty et al. (2011) have studied the power of the Board Chair (an example of ‘power- over’) while Purdy (2012) has considered ‘power-for’ in creating a framework, in addition to other types of power in her research on collaborative governance.

In a large UK study of boards in the UK, Pettigrew and McNulty (1998) specifically set out to develop a framework for board power dynamics that was based on behaviours, and which was processual and contextual rather than based on the “rather structural and (through their use often of secondary data) distant methods of the agency and managerial hegemony theorists” (Pettigrew & McNulty, 1998, p. 201), and explicitly considered directors’ individual qualities and perceptions of themselves in the context of power and influence in addition to contextual factors and structural conditions.

The components of the Pettigrew and McNulty (1998) model are as follows: context, both internal (board history and culture, norms, selection patterns, and role expectations) and external (social, legal, political factors, sector culture, business crises and codes of conduct and practice), which enable and legitimatize; structure (e.g. ratio of NED to ED, committees, separation of CEO/Chair roles); power sources (e.g. relevant experience, relationships, access to information, coalitions, prestige, and positional power – Chair/member of committee); will and skill, which refers the individual’s ability to

116 convert power sources in an environment where influence is possible into realised influence, and requires skill in reading a situation and being willing to intervene appropriately; and finally, the content area of influence, whether or not the individual perceives themselves to be able to influence in a particular domain such as CEO compensation as opposed to international expansion strategies for example. An executive director may perceive themselves to be more influential than a non-exec in the area of strategy for instance, and a non-executive in the domain of corporate governance.

The Pettigrew and McNulty conceptualization of determinants of board power is shown in Figure 13 below, and has been used to model power dynamics in this study of Australian startup boards as it is a good methodological fit, having been developed for use with interview data gathered by means of the Critical Incident Technique (CIT), and philosophical fit because it accounts for behavioural and contextual issues, and not just structural elements. The context and structure set the parameters and shape which content areas are possible for board members. Power sources can then be activated given that the will and skill to use these exists. The whole process is dynamic, and the encircling arrow signifies that an episode of the use of power may often result in changes to context for subsequent episodes.

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Figure 13 Determinants of Board Power Source: Adapted from Pettigrew & McNulty (1998)

The Forbes and Milliken concept of board effectiveness (see Figure 14), where only two outcome criteria were required to determine effectiveness(that is, task performance and board cohesiveness) has been backed by other, later, research (Levrau & van den Berghe, 2006, Petrovic, 2008). Forbes and Milliken additionally identified three board processes which influence these outcomes: effort norms (for example, sufficient diligence in reading board papers and attending meetings, and attentiveness and participation in meetings), task or cognitive conflict, and use of knowledge and skills (that is being willing and able to apply any knowledge or skills that a board member may have in the service of the board).

Several papers have successfully employed the integrated Forbes and Milliken model including Nielsen et al. (2008),Bailey and Peck (2011)and Minichilli et al. (2012), all being largely concerned with the task performance outcome rather than the cohesiveness component. Nielsen et al.’s research empirically validated the positive influence of the processes of conflict, effort norms, and use of knowledge and skills on task performance in the board’s strategy and monitoring roles (although they

118 found task conflict to have a negative influence for these tasks), and Bailey and Peck validated the positive effect of effort norms and task conflict on task performance in the board’s service and control roles, however found no support for use of knowledge and skills. It seems that no previous studies have considered the effects of the full set of conflict types in the ICS, or have applied both power and intra-group conflict to Forbes and Milliken’s model of board effectiveness, a possible explanation for the slight variation in results.

Figure 14 Forbes and Milliken Board Effectiveness Model Adapted from Forbes and Milliken (1999)

119 Previous research thus provides us some of the predicted effects of certain types of conflict, levels of effort norms, use of skills and knowledge, and power on the components of board effectiveness: that is, on task performance and board cohesiveness. Other than task conflict, where the effect on task performance varies in valence (Jehn & Bendersky, 2003, DeChurch, Mesmer-Magnus & Doty, 2013), conflict typically has been found to be a negative influence on both task performance and cohesiveness (Jehn & Bendersky, 2003, Jehn et al., 2008, Curşeu, 2011, Shaw et al., 2011, de Wit, Greer & Jehn, 2012, DeChurch, Mesmer-Magnus & Doty, 2013, O'Neill, Allen & Hastings, 2013)

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The effects that power may have on effectiveness are not as clear cut; although the use of power may for example trigger relationship conflict, which has a uniformly deleterious effect on various components of cohesiveness (Petrovic, 2008, de Wit, Greer & Jehn, 2012), but power may also be used to require higher levels of effort norms or more task conflict from the board (‘power-to’), or increase collaboration (‘power-for’), or use prestige (‘power-over’) to engender higher levels of effort norms; al of these having a positive effect on effectiveness. Research has also shown that power can be used to maintain conflict, or to resolve it (Sell et al., 2004). We also know that power and its use can influence not only the way that the board’s tasks are performed, but also which tasks they actually perform (McNulty et al., 2011), for example through the power to set the board agenda (Peebles, 2010).

Past work has afforded an understanding of board task performance (Forbes & Milliken, 1999, Vandewaerde et al., 2010, Bailey & Peck, 2011, Minichilli et al., 2012, Machold & Farquhar, 2013), and from which roles these tasks derive. This requires consideration of the life cycle stage of the organization, and in the case of early stage boards we know this means focussing less on monitoring and more on service and strategy (Filatotchev, Toms & Wright, 2006, Levrau & van den Berghe, 2006, Nielsen et al., 2008, Ong & Wan, 2008, Zhang, Baden-Fuller & Pool, 2011).