Self-censorship. Overconfidence. Scapegoating. Excessive optimism. Taking the moral high ground. The illusion that committee decisions are agreed unanimously.
These are symptoms of a pervasive behavioural phenomenon that creeps its way into governments, corporate boards, work teams and investment committees.
"A shift to a more virtual working world presents an interesting opportunity in the context of group decision making. Of course, that does not come without additional risks and challenges."
Coined by psychologist Irving Janis in 1972, the term groupthink refers to a phenomenon where our desire for consensus and group cohesion overrides our good problem-solving skills - sometimes even at the expense of basic common sense. Essentially, groups tend to suppress or discourage dissenting views and become overconfident in their conclusions and abilities, leading to potentially risker and more extreme positions. Well recognised examples range from the Challenger Space Shuttle Disaster in 1986, where self-censorship and a lack of speaking up contributed to a catastrophic and fatal incident, to the failure of HBOS in 2008, driven by overconfidence, dominant leadership and a failure by the Board to effectively challenge management.
Inconveniently, this flies in the face of intuition, as we entrust groups with many of our most important decisions in politics, health and investing on the understanding they can do better than we could by ourselves. The temptation is to treat groupthink as an academic concept that you read about that applies to other groups, but that’s a mistake. We are all susceptible to it because it has its roots in social behaviours that are so deeply engrained in us. If you think honestly about it, you can probably remember experiencing the looming sense of peer pressure or choosing to stay quiet when you have something to say that was going against the tide.
Investment decisions can involve highly technical content and high pressure / high impact decisions with significant financial value. For pension schemes, this can be amplified further. The nature of pension investments - a long-time horizon for ultimate outcomes, combined with an over-emphasis of short-term volatility – means groups are at risk of over-emphasising near-term, lower impact results instead of the ultimate outcomes for pensioner members, and are rarely able to gain proper feedback or even measure whether any significant decision was “good” or not. Management of defined benefit pensions schemes, with corporate sponsors and scheme trustees, also tends to be riddled with conflicts of interest. Mismatches in knowledge and information also abound. All in all, this all adds up to fertile grounds for groupthink.
A new working world
A move to more virtual working in the wake of Covid-19 has brought about interesting discussions about managing groupthink for committees in a new and untested decision-making environment.
Of course, each team or committee is different, but there are some opportunities I believe groups can take advantage of whilst making virtual decisions.
One of the symptoms of groupthink is sometimes referred to as an “illusion of anonymity”, where we may interpret silence or a few head nods in the room to imply group agreement to a question or proposal. Reading the room is more difficult (or even impossible) in a video meeting. Instead of seeing this as a constraint, groups can embrace this opportunity to employ more objective and robust ways of gathering opinions from individuals – relying on more polling, anonymous votes, and gathering individual feedback. Where contributions are gathered simultaneously or anonymously this can reduce peer pressure.
The development of more built-in tools to help canvass opinions and ensure individual opinions and concerns are shared (such as “raise hand” functionality and comment pane) also provide more options for providing input or asking questions. This is particularly valuable where there is a dominant group leader and more introverted or quietly spoken members of the group.
For highly technical content, attendees have more resources available to hand – from searchable documents and papers to search engines. This not only aids understanding when discussing technical and complex content, but also can help boost confidence and limit self-censorship. People are more likely to speak up if they can independently verify their internal concerns first.
Unfortunately, as with most things, these opportunities do not come without other heightened risks and challenges.
In the interest of time and with demand for shorter, more “efficient” meetings, we may see more fully formed proposals being brought to meetings for approval or rejection. This could inadvertently hinder a collaborative approach at the proposal-creation stage, where most risk mitigation takes place. Since part of groupthink is a strong aversion to wasting time or resources, once the work has already gone into finalising a proposal, it becomes even less likely that individuals will challenge the content, highlight potential risks, or disagree with proceeding due to personal concerns. And without as many conversations over lunch or chats during the coffee break, opportunities to raise these concerns more informally are even more scarce.
In volatile markets, and amidst the risk of recession and poor financial outcomes across the market, investment decisions may seem more high pressure than ever.
The term “efficient” is not in quotations by accident – just because a decision feels painless and is reached quickly and without challenge does not mean it is the most ideal, or appropriate option. Decisions that are made in the interest of shorter meetings, but without appropriate challenge and discussion, will likely lead to suboptimal outcomes and more work and resources required down the line.
Where do we go from here?
A global pandemic ticks all the increased risk boxes for groupthink – high pressure, time critical decisions required of governments, businesses and individuals that have incredibly high personal and financial implications. Only time will tell how we will reflect on the impact of groupthink on the response to Covid-19 five or fifty years from now, though the warning signs are already here.
But we can learn from these reflections – whilst most of us may not be setting government policy or be making life or death medical and scientific decisions, the financial impact of the investment decisions we make and their outcomes are significant to those affected, whether members of pension schemes, charities or company finances. Perhaps these lessons serve as a stark reminder of the importance of open discussion and debate, scheduling that extra meeting, or taking the potentially daunting step to challenge a firm proposal before moving forward.