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AI can do amazing and wonderful things.
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And you know, we're all astonished every
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time we put a complicated question in
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and it outcomes the answer in 2 seconds.
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But actually, one of the things
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that AI cannot do is exercise judgment.
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Welcome to Grit in the Boardroom, the
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podcast that takes you behind closed
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doors to unpack the pivotal decisions
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that shaped organizations for better or
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worse. I'm Erica Elias and Norris and
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each week I sit down with a senior
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leader who stood at the edge of a
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defining moment, a crisis, a turning
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point, a challenge where the stakes were
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high and the outcome uncertain. These
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are the conversations you won't find in
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annual reports, honest, strategic, and
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grounded in lived experience because
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governance isn't about theory, it's
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about pressure, people, and making the
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call.
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My guest today is Sir Andrew Likierman.
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He's one of the UK's most respected
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voices on leadership judgment, corporate
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governance, and decision-making at the
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highest levels. Former Dean and
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Professor of Management Practice at
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London Business School, he has combined
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academic insight with deep practical
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experience serving as a non-exec
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director on more than 20 boards across
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sectors including the Bank of England,
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Barclays Bank, Times Newspapers
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Holdings, and helping to shape UK
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corporate governance as part of the
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Cadbury Committee.
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Alongside this boardroom experience, he
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has advised the United Nations on
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governance. He has led the Government
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Financial Service at HM Treasury and
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spent decades studying how leaders make
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better choices in uncertainty with
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insights captured in his latest book,
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Judgment at Work.
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Welcome to Grit in the Boardroom,
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Andrew. Let's get into it. Thank you
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very much for having me. Sir Andrew, um
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you've spent decades in boardrooms
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across sectors. Which moment comes to
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mind when you think about judgment
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shaping a company's fate?
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Well, when you use the word fate, of
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course, then it implies drama, it
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implies [laughter] conflict, it implies
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lots of things where you got a really
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big issue and big stakes and so on. Um
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and so inevitably, it's mergers and
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acquisitions that come to mind in terms
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of the big moments in a company's life
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and history. In fact, though, I think
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that judgment's an incredibly important
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element of everything a board does um
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and doesn't do. I mean, it's the thing
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leaves out as well as the things that
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actually does. But mergers and
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acquisitions is the big area here. And
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was it the case um that good judgment
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made the difference between the right
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and the wrong kind of answer or outcome?
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Yes, I I've been involved in in a number
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of discussions and negotiations and
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outcomes and what's completely clear is
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that judgment, the way the board
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approached this, was absolutely critical
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in terms of the future of the company.
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Um and the evidence seems to show, in
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general, that the people who gain most
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from an acquisition are the shareholders
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of the company that's being acquired.
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That's to say, very many acquisitions
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have very poor outcomes and it's a
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problem in getting value for money in
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terms of a takeover. Why is that? What
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what do you think is kind of one of the
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grounding issues that means that, as you
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say, the shareholders of the the company
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that's being taken over actually could
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end up in a better position than anyone
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else than the other stakeholders? Well,
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this links to the work I've done on
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judgment and one of the things that it
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seems to me is incredibly important in
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the way people make choices
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is the feelings and the emotions that
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they have.
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And feelings and emotions run high often
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in these situations
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and
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companies seeking to take another one
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over
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often are in the grip of a huge desire
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to go through with the deal and
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sometimes, not inevitably, but
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sometimes, embarrassing facts come to
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light during the negotiations, for
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example, and they're disregarded because
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everybody's so mad keen to do the deal
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that they kind of ignore these
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inconvenient facts. So that's a kind of
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example of feelings and beliefs getting
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in the way. Yeah, do you think ego has
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anything to do with that? Oh, yes. I
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mean, it's would be it would be naive
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not to believe that ego doesn't have
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part to play. To be fair, though, I
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don't think it's true that it's all
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driven by ego and that leaders are all
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about themselves and they don't think
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about the I mean, I've my experience has
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been on the contrary that people running
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organizations, on the whole, are pretty
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professional about what they do. You
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know, they will not do things on whims.
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Now, there are people who do things on
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whims and there are people who do things
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based entirely on emotion. And some of
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them get away with it. It's fine, you
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know, and it all ends well.
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But one has to understand that a risk is
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being taken here and sometimes the risks
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pay off. What we know very often is the
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risks don't pay off. What do you think
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stood out um for you on how the board
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navigated that uncertainty in that
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moment? Well, as I said, I've had
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experience of quite a lot of different
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um events of this kind. It is a moment
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of drama. It is a moment in which a
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great deal is at stake. Um assumptions
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are made.
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People have to come to a view
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often against deadlines
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and that's a tough thing to do. And on
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the whole, organizations who have good
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managers, good leaders, will be tending
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to make these decisions on a more
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rational basis than those that don't.
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Now, I mentioned rational because I've
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also mentioned emotion here
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and I'm not excluding the fact that
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emotion plays a good part in in these
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things.
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But
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those who use their mind as well as
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their gut
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in deciding what to do will tend to come
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out better. You can use your gut, you
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can take a big risk, but it is a risk
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and, you know, a lot is at stake here,
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particularly in terms of mergers and
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acquisitions. Mm. Have you got an
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example you can give where that was the
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case?
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Well, I mean, let me take one that I
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wasn't involved in because it's in the
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public domain and easier, which is uh
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the takeover by Royal Bank of Scotland
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of ABN AMRO where
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on the back of a successful merger
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or rather takeover by RBS of NatWest
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the board were very, very confident
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about their abilities and the chief
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executive in particular was very
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confident about his ability to do this.
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And the kind of incredibly complicated
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issues attached to this multinational
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merger were, it appears, rather swept
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aside in the fact that, you know, we are
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wonderful, we can do things and, you
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know, what is to stop us? And it all
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ended, as we know, in tears and not just
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for the shareholders of RBS.
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Mm. And do you think that those outcomes
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would have been the same but for a
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different set of board members? I'm
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absolutely sure they would. I mean, if
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if you undertake a huge merger of this
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kind, very, very complicated, which
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involves partners, which involves
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divestments
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the question of the use of cash rather
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than shares and so on. I mean, these
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were really big stakes involved. And all
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right, it's easy in retrospect to say
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that all
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ended really badly, but I think it must
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have been clear at the time that this
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was a huge risk. And how do you think
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board members can prepare themselves for
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something like this? Well, I mean, what
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you need
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unsurprisingly, since I write about
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judgment and talk about judgment, what
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you need, I believe, as a board member,
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as a as a company, is to have board
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members who have good judgment. In other
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words, you know, they look at what is
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going on here. You know, they're aware
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of the fact that feelings and beliefs
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are involved, they you know, and so on.
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They want to know who and what to trust.
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These kinds of elements, which for me
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constitute judgment, are a really
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important part of what a board has to
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have in order to achieve its objectives.
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And
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the difference between boards with and
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without these seems to me pretty
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significant. And it's judgment, I
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suppose, reflection on what they are
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bringing to the table as well as
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reflection on what they are hearing from
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other people because everybody works, I
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presume, on their own level of judgment
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and they bring that to the boardroom.
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You can end up with a lot of biases, for
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instance, around the table. That person
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themselves also needs to be able to call
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out their own biases, no doubt, to be
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able to say, "Actually, I'm feeling that
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because something's happened and I've
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experienced this before, I feel that we
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this is not a good idea or this is a
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good idea." How can people be objective
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about themselves um in that situation
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where there's high pressure and drama?
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No, I I don't think you can simply say,
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"I have no biases." Or indeed, you can
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say, "I'm going to get rid of all my
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biases." It's simply not realistic. You
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know, we're human beings.
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And so what we have to do, I believe, is
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to be aware of our biases. And I tell
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the story in in an organization which I
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was which I was running, one of my
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colleagues came to me and said, "Andrew,
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you know, I think you're a little bit
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cautious."
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And I was a bit surprised by this. I
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thought, "Oh, me? I don't think that's
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probably right."
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And then gave some evidence about this.
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Now, that was a very good example and I
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took that seriously and I thought,
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"Actually, that's right. Being aware
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thereafter of my tendency to be cautious
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then helped me, I believe, in making
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better choices. So, I think as long as
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everybody's aware, you know, what their
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biases are, what they tend to do, are
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they always optimistic about absolutely
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everything turning out brilliantly?
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Well, you need to know that before you
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plunge yourself into something. And
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similarly, like me, let's say you're too
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cautious, maybe you don't take enough
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risk.
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So, being aware of one's biases and
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one's feelings and beliefs seems to be
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really at the heart of this. Mhm. And
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how can people improve their
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self-awareness?
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There's lots of ways of doing it. It's a
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board appraisal, normally speaking,
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should be an important part of that
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every year. So, that when you get
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feedback on how well you're doing, how
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badly you're doing, what you're doing to
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do and so on. I mean, that's the kind of
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thing that ought to come up. And I found
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myself that board appraisals and, you
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know, board reviews each year are
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really, really helpful
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in terms of identifying things that you
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may not know about yourself and that
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your colleagues help you to get better
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at. You know, so I'm a great fan of
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board review because I think that
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actually is a way in which boards do get
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better. As individuals, you know, we can
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become more aware of ourselves. Plenty
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of ways of doing that. Simply getting
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mentoring or coaching or something like
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that can help you as an individual to
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become better. So, I think there's
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actually lots of ways in which you can
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get to know yourself. This was something
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back in ancient Greece, as it were, they
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talked a lot about and it still applies
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today. There are many examples of boards
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that have had board appraisals and have
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gone on to have corporate scandals or
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collapse or whatever else very soon
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after. What do you think are some of the
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key things that board should kind of
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think about when they have their reviews
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to make sure it's not just, you know, a
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pat on the back and
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and it's ceremonial as opposed to
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actually making the change or calling
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things out that really do need to be
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called out for for the kind of long-term
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sustainability of that organization?
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Well, look, there's a requirement to
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have board reviews for listed companies
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in number of countries.
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And that seems to me really sensible. It
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doesn't say you've got to have a great
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board review or a board review that
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really tells you what's going on. You
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know,
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actually, you know, board reviews can be
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rubbish. You know what I mean? They you
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can simply get somebody in to go through
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the motions, number one. Secondly, you
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can have a board review where nobody
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takes any action as a result of the
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board review. So, you've gone through
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the motions, okay, but nothing actually
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happens or changes. And I've known
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organizations where people are too
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polite, you know, or too afraid to
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address particular issues or particular
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people. And so, there's no guarantee a
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board review will do the business.
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But actually, if done well, being done
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well means usually being done by
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outsiders if possible because insiders
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are a problem in terms of
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confidentiality and so on.
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And having the right kind of structured
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review, having then it followed through
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by the chair talking to each individual
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board member or whatever it is, and the
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senior independent director talking to
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the chair,
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you know, these are ways in which you
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can actually make a review work. So, you
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know, of course, there are companies
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that have gone horribly wrong after
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board reviews because they've had to do
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the board review, but it may not be the
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board review that was the problem.
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Otherwise, it may have the board review
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that was the problem because they didn't
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address the issues. Yes, I've been in
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situations and experienced kind of
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companies whereby board reviews have
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very much been toned down before they
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even reach the board. So, the chair and
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maybe the CEO will review what's been
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drafted by an external independent and
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little did the rest of the board know or
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were they even aware that actually what
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then went to the board was a sanitized
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version with everything stripped out
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that could possibly be helpful to
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improve. Well, I'll give you two two
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examples. In one case, I was on a board
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where the board appraisal took place.
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The chair talked to the board member
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after the review was taken and the man
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resigned immediately. Basically, he had
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lost the confidence of his colleagues
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and the chair did not hide this from the
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individual as some chairs would. And
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basically, he said, in that case, I'm
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going. He resigned on the same day.
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Quite right. You know, I was on the
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board with him and he was useless. All
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right. So, that's that was a good
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outcome, I think, for the organization.
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I'll give you another example. So, on a
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board review that I was involved in, so
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I was the person being reviewed,
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and the chair said to me, Andrew, you
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know something?
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You're quite aggressive. And I said, me?
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I'm such a nice person, you know, I'm
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aggressive, me?
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Good heavens. And he said, well, yes,
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you when you ask questions, you ask them
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in a pretty aggressive way. I mean,
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you're not nasty, but it's aggressive.
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So, I walked out of the room and I
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thought, well, you know, I don't think
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she's right, actually. I think this is a
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bit of a mix-up here. Anyway, next board
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meeting, put up my hand and started to
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ask a question and I just listened to
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myself asking the question and it was
00:15:14
very aggressive.
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And I had simply not been aware of the
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fact that although I thought this was,
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you know, a penetrating question asked
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in a nice way, it was actually the tone
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was quite wrong. And again, that was
00:15:26
very helpful to me in toning down what I
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the way I then asked it. I hope I kept
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on asking good questions, but I didn't
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ask them in such a nasty way. Well, it
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comes down to self-awareness, right?
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>> It does. Exactly. Mhm. I think the
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chair's position can be particularly
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challenging. They may have to deliver
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feedback to peers or or others that
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maybe they don't want to hear. What do
00:15:51
you think are some of the kind of key
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things that chairs can do to prepare
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themselves for that sort of experience
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cuz it's very different, right? From
00:15:58
moving from a non-executive director
00:16:00
role to a chair. And often, people kind
00:16:03
of think, well, it's just the person
00:16:04
that's leading the group. Can be quite
00:16:06
different, right? It is very different
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and I do think that being a chair is a
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really skilled thing to do. And sadly, a
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lot of chairs are not very skilled
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because they haven't had the experience,
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they haven't had the training, they
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haven't had the feedback. And quite a
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lot of people become chairs and think,
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well, now I do whatever I want, really.
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You know, and people are too scared,
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perhaps. And sometimes, you know, they
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don't want to cause trouble, whatever it
00:16:33
is. So, the chair gets away with an
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awful lot.
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Now, it seems to me in terms of what
00:16:38
chairs need to do, chairs need to get
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good feedback on how they're doing.
00:16:43
Again, the senior independent director
00:16:45
has a role here to do that and act as a
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formal channel, as it were. So, people
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can say, look, the wrong things are
00:16:51
coming on the agenda or X and Y get a
00:16:54
lot of air time and
00:16:57
you know, A and B are ignored, you know,
00:16:58
these kinds of things. So, the senior
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independent director can do a lot to
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help the chair.
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But the chair really, you know, has the
00:17:06
responsibility
00:17:08
to act on behalf of the organization and
00:17:11
it not just to be a big ego trip, excuse
00:17:13
me, for the chair. Because it's all very
00:17:16
well, you know, people often love being
00:17:18
chairs because they're kind of in charge
00:17:20
of the agenda, charge of the meeting.
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You know, what could be nicer? They love
00:17:24
the sound of their own voice. When I've
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joined boards, after a while, I begin
00:17:29
began to ask, if I was approached to
00:17:31
join a board, I would look first at the
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chair.
00:17:35
And if my sense was this was a lousy
00:17:37
chair, then I wouldn't accept going on
00:17:40
the board even though it was a lovely
00:17:42
idea and I liked the idea of the company
00:17:44
because I knew the meetings would be
00:17:46
would not be good. Mhm. And what do you
00:17:48
mean by a not be good? Well, we've all
00:17:51
been in meetings, haven't we? On and on,
00:17:54
you know,
00:17:55
it will sit there for hours. We've
00:17:57
already set agenda items. Everybody
00:18:00
knows what the outcomes are going to be,
00:18:02
but we've gone through a 60-slide
00:18:04
presentation, you know, and lots of
00:18:07
discussion. Discussion about what
00:18:09
exactly? Have anybody advanced their
00:18:11
views? You know, very often people end
00:18:13
up with exactly the same views as when
00:18:15
they started. That kind of thing. I
00:18:16
mean, for me, my bugbear is meetings
00:18:19
that last too long, you know, and since
00:18:21
I've I've mentioned that. But also,
00:18:24
chairs who don't bring in the expertise
00:18:27
around the table, who ignore certain
00:18:29
kinds of people they don't like and
00:18:31
bring in others that they do like or,
00:18:33
you know, support their point of view. I
00:18:35
mean, the most brilliant chair I ever
00:18:38
saw was a man called Ron Dearing, um
00:18:42
long dead, Lord Dearing,
00:18:44
who came from very humble background,
00:18:47
rose up to be rose to be chairman of the
00:18:49
post office, then went to the House of
00:18:51
Lords, he did and his chairing of a
00:18:54
meeting was completely brilliant. It
00:18:56
wasn't anything which wasn't carefully
00:18:59
focused on getting through the agenda,
00:19:01
not because he had a view, because he
00:19:04
wanted to get the best out of the room.
00:19:06
And so, people were asked for their
00:19:07
contributions. He thought beforehand,
00:19:10
who shall I bring in to talk about this?
00:19:12
He brought them in that it's because
00:19:14
they had something to say. If he knew
00:19:16
somebody was counter that, he would ask
00:19:18
somebody, I understand you're not in
00:19:20
favor of that, could you explain why?
00:19:22
So, he guided the discussion without
00:19:24
ever pushing the board to a conclusion.
00:19:27
I mean, it was a, you know, it was a
00:19:28
work of art to see him as a as a chair.
00:19:32
And I presume that's not in any textbook
00:19:34
or any course that people just sign up
00:19:36
to and do a day and all of a sudden they
00:19:37
become an amazing chair. How how do you
00:19:39
learn these sorts of skills or is it by
00:19:41
experience? I think it's back to the
00:19:43
business of, yes, it's experience, but
00:19:45
also being willing to learn, getting
00:19:48
feedback, you know, trying to be better.
00:19:51
And I come back to it realizing that you
00:19:54
have responsibilities to the people in
00:19:55
this room and to the organization. This
00:19:58
is not simply a vehicle for your views
00:20:01
and your ideas about life, even though
00:20:04
you have the chair. I had a very
00:20:06
interesting conversation not that long
00:20:09
ago with somebody that was talking about
00:20:11
succession and particularly CEOs.
00:20:15
And they were talking about how you hire
00:20:19
CEOs, and they were talking about kind
00:20:21
of psychological type testing way beyond
00:20:24
uh you know, psychometrics and those
00:20:25
sorts of things. More what sort of a
00:20:27
individual is that and how will that
00:20:29
impact the organization and actually um
00:20:33
this particular person spoke about the
00:20:35
fact that you need to go through kind of
00:20:38
tests and things if you are a bus driver
00:20:40
or if you're an airline pilot, but you
00:20:42
don't you're not expected to go through
00:20:43
the same sort of tests as a CEO of a
00:20:47
business that could affect many, many
00:20:49
hundreds of thousands or even millions
00:20:51
of people. What do you think about that?
00:20:53
Well, look, uh it's absolutely right.
00:20:55
This is not something where you do some
00:20:57
psychometric tests, you know, and fit
00:21:00
into something or ask chat GPT, you
00:21:03
know, who's the best candidate. No doubt
00:21:04
this will happen increasingly. I mean,
00:21:07
what you need is who is the right person
00:21:10
for this group of people at this time.
00:21:13
And you know, you may want a CEO who has
00:21:16
certain characteristics for a
00:21:18
company at one stage of its existence
00:21:20
and a rather different kind of person at
00:21:22
a different stage.
00:21:24
And to face certain kinds of
00:21:25
circumstances where you've got dynamic
00:21:27
growth,
00:21:29
you don't necessarily need the same
00:21:30
person to lead that as the as the person
00:21:33
who's leading a kind of steady as she
00:21:34
goes approach to make sure the
00:21:37
organization doesn't run out of money,
00:21:39
you know, is well run and so on and seem
00:21:41
to be seem to be right. So, I think it's
00:21:43
very much a question of saying who is
00:21:46
right in these circumstances for this
00:21:49
situation. And coming back to my own
00:21:52
subject of judgment, it seems to me the
00:21:54
one thing you need, doesn't matter what
00:21:57
else you have or don't have in somebody,
00:21:59
is judgment. Because if they don't have
00:22:00
judgment, you know, frankly, it's a bit
00:22:03
of can be a bit of a nightmare. You
00:22:05
know, you never know what they're going
00:22:06
to do or how they're going to react to
00:22:09
things. You need that kind of quality to
00:22:11
make sure that they actually are able to
00:22:13
understand a situation and respond to it
00:22:16
and take action accordingly. Andrew, you
00:22:18
mentioned a little bit about chat GPT
00:22:20
and digital technology.
00:22:23
Looking at how boardrooms might evolve
00:22:26
over time, have you got any insights
00:22:28
into what you think might happen or the
00:22:30
impact that might have, particularly
00:22:31
around judgment? Well, yes, because I
00:22:34
mean, I would argue that AI can do
00:22:37
amazing and wonderful things. And you
00:22:40
know, we're all astonished every time we
00:22:42
put a complicated question in and it
00:22:43
outcomes the answer in 2 seconds and we
00:22:45
all think, "God, that's amazing,
00:22:47
fantastic." and so on.
00:22:49
But actually, one of the things
00:22:52
that AI cannot do is exercise judgment.
00:22:56
It is
00:22:57
programmed by people
00:23:00
with biases, with views and so on. The
00:23:02
data is trained by people. You have to
00:23:05
know what question to ask, the prompt
00:23:07
you give it. You've got to interpret the
00:23:09
results and so on. Somebody has to
00:23:11
program it. So, AI is not a person. It
00:23:14
is a thing programmed and interpreted by
00:23:17
us.
00:23:18
And
00:23:19
as I say, it's wonderful what it can do.
00:23:22
But we do have to interpret what comes
00:23:24
out of it. And I'll just give you one
00:23:25
example.
00:23:27
I asked chat GPT the other day, "Do you
00:23:29
tend to be more positive than negative?"
00:23:32
And it the answer came out,
00:23:34
"I am more positive and that is by
00:23:36
design." And it gave a series of reasons
00:23:39
why it tended to be more positive in the
00:23:42
outcome. Now, there you are. That's a
00:23:44
great example. You know, I'm not saying
00:23:46
it isn't lovely to have constantly
00:23:50
positive responses. And the way, you
00:23:53
know, it gives these answers with so
00:23:55
chatty and nice. It all feels as if it's
00:23:58
coming from another person and that
00:24:01
person is completely objective. It isn't
00:24:03
another person and the person isn't
00:24:05
objective. So, in a world of AI, people
00:24:09
have a great deal to contribute and that
00:24:12
applies also on the board. Mhm. And
00:24:15
people are starting to use AI for
00:24:18
minutes and for recording conversations
00:24:21
that took place. Obviously, there's a
00:24:23
certain amount of admin that gets taken
00:24:25
out of the the whole process if that
00:24:26
happens, but I guess there are some
00:24:28
challenges around that, right?
00:24:30
Particularly around the emotion in the
00:24:32
room and and other such things and the
00:24:35
way that people exercise their judgment
00:24:37
and biases and things that may be
00:24:40
apparent to a human, let's say, but not
00:24:43
to a piece of technology. How do we
00:24:46
navigate that sort of thing? You're
00:24:47
absolutely right. I mean, one thing for
00:24:49
example, if you think about it, a
00:24:51
machine does not have is consciousness.
00:24:54
All right? It's the kind of thing which
00:24:55
picks up what consciousness picks up.
00:24:58
So, in terms then of of how this can be
00:25:01
applied, it can it's wonderful. I mean,
00:25:04
it's fantastic that you can actually get
00:25:06
it doing the minutes, as it were, and so
00:25:08
on.
00:25:09
But, and this is the same but in every
00:25:12
field, including, for example, the use
00:25:14
of AI in medicine, you know, you can ask
00:25:16
the question, but you need to monitor to
00:25:18
make sure that the answer is, you know,
00:25:22
corresponds to what you understand the
00:25:24
situation to be.
00:25:26
So, it can't write the minutes and then
00:25:28
say, "Well, that we don't have to worry
00:25:29
about it." Somebody's got to read
00:25:31
through these brilliantly assembled
00:25:33
minutes and make sure that it actually
00:25:36
has captured what goes on. Just as, you
00:25:39
know, if you ask a machine
00:25:41
in the field of medicine I mentioned,
00:25:43
you know, it can do fantastic things on
00:25:45
the mechanics of the body.
00:25:47
But as soon as you've got any human
00:25:48
emotion involved in psychology or
00:25:51
comorbidity and so on, you need a human
00:25:53
being to do a quite a lot of
00:25:54
interpreting. You know, my sense is I'm
00:25:56
very optimistic about AI. I believe
00:25:58
it'll do wonderful things that were
00:26:02
often drudgery and, you know, not and
00:26:04
make us more productive, but it's going
00:26:07
to be us plus machines, not one or the
00:26:10
other. I've even heard surgeons say that
00:26:13
they won't take somebody into surgery if
00:26:17
they have a very pessimistic view of
00:26:18
their own ability to be able to get
00:26:20
through, for instance. But actually, on
00:26:22
paper, it may look like they absolutely
00:26:23
need what they need to have done. And uh
00:26:26
yeah, I've got friends that have turned
00:26:28
around and said, "Actually, we just we
00:26:30
said no. That you come back another day
00:26:32
and think about it and think about the
00:26:34
upside and the positivity because we
00:26:36
can't have you going in." which is an
00:26:37
element that technology can't yet do.
00:26:41
Yeah, and you say not yet. You know, the
00:26:43
technology will get better. Mhm. You
00:26:45
know, it'll At the moment we've got
00:26:47
hallucinations, we've got things made
00:26:48
up, you know, and so on. It'll get
00:26:50
better at that. Of course it will.
00:26:51
What it can't do is it can't know what
00:26:54
it doesn't know. If things are not in
00:26:57
the public domain, if they're in
00:26:58
people's minds, if they're not
00:27:00
registered, the machine by definition
00:27:03
can't know about them. You know, so
00:27:05
that's, you know, that's one of the
00:27:07
reasons why
00:27:08
um you know, so there's a number of a
00:27:10
number of reasons why, you know, it
00:27:12
simply won't just be the inevitable
00:27:15
march of the machine. And taking it back
00:27:17
to independent judgment, what do you
00:27:19
mean uh with regards to boards when you
00:27:21
say that they need to exercise
00:27:23
independent judgment? And what is it and
00:27:26
why is it important and how do you
00:27:27
actually do that in practice? I wrote a
00:27:30
a booklet for the uh for the Chartered
00:27:32
Governance Institute on this because
00:27:35
having done my work on judgment, I was
00:27:37
struck as a director by the fact that as
00:27:40
a director, one is obliged by law,
00:27:43
section 173 of the Companies Act in the
00:27:45
UK,
00:27:46
to exercise independent judgment. Ah, I
00:27:49
thought, "Really interesting.
00:27:51
Where's the definition of independent
00:27:53
judgment?" And there is no definition of
00:27:55
independent judgment. In other words,
00:27:57
directors are required by law to
00:28:00
exercise something that is not defined.
00:28:02
So, I thought, "Okay, well, I'll try and
00:28:04
help here." And so I talked to a lot of
00:28:06
directors about this. I talked to, you
00:28:10
know, people who would worked in this
00:28:12
field and so on.
00:28:13
And I came up with a number of ways,
00:28:16
mainly based on examples of what
00:28:18
independent judgment means. The law, for
00:28:20
example, says it's all about conflicts
00:28:23
of interest and so on and being
00:28:24
independent from that.
00:28:26
But for me, it's also a branch, as it
00:28:28
were, of the general area of judgment.
00:28:31
The question, for example, of you are
00:28:33
presented with figures and facts. You
00:28:35
look at the person and you think to
00:28:37
yourself, "Do I trust this person?" That
00:28:39
is part of independent judgment because
00:28:41
simply taking things on trust
00:28:44
from somebody, you know, without
00:28:47
understanding whether it needs to be
00:28:48
vetted or not, does not seem to me
00:28:50
independent judgment. It's simply taking
00:28:52
things as they're given to you. So,
00:28:54
that's just one example. And I go
00:28:57
through a number of ways in which
00:28:59
directors can think about the question
00:29:01
of how they exercise independent
00:29:02
judgment and I hope offer some guidance.
00:29:04
So, I think it's it's really important
00:29:07
for a board because people who can
00:29:08
exercise independent judgment are are
00:29:10
really valuable to the organization. And
00:29:13
how do you think boards should balance
00:29:15
data, experience, timing, and instinct?
00:29:18
Well, look, this boards are always
00:29:20
balancing, you know, there's no there's
00:29:22
no limit to this. I I mentioned the
00:29:24
endless meeting, the one that goes on
00:29:26
too long. On the other hand, you don't
00:29:28
want to rush through the agenda. I've
00:29:30
been a chair and board members have come
00:29:33
to me afterwards and said, "You rushed
00:29:36
it."
00:29:37
You know what I mean? This was too
00:29:38
short, actually. You were too keen to
00:29:40
get to the end and I acknowledged that
00:29:42
was so, you know, that simply you're
00:29:45
always balancing. Is there enough data?
00:29:47
Is there enough information here? You
00:29:50
know, in terms you mentioned instinct.
00:29:51
I'm I'm not a great instinct fan. I
00:29:54
mean, instinct I think is fantastic. On
00:29:57
my bike around London, you know, I need
00:30:00
to know what's going on around me. And
00:30:01
if my instinct is this lorry here is
00:30:04
about to turn left in front of me, you
00:30:06
know, that's the kind of thing where
00:30:08
instinct is really valuable. You know,
00:30:10
similarly if one's in danger or whatever
00:30:12
it is. But I mean, you know, most cases
00:30:15
instinct is very animal thing. It's
00:30:17
about us simply responding to certain
00:30:20
kinds of stimuli. And I think board
00:30:22
members need to do a bit more than that.
00:30:24
Yeah, absolutely. I think it's
00:30:26
interesting. I think from some of the
00:30:27
conversations I've been having with
00:30:29
people, we kind of get back to the fact
00:30:31
that we we are animals. We are human.
00:30:34
And yet sometimes we put ourselves in a
00:30:36
box where we think that we are just
00:30:37
invincible and we know everything and we
00:30:39
can do everything. And I guess that
00:30:42
comes back to the self-awareness kind of
00:30:44
piece. Absolutely. And And if I can pick
00:30:47
up another word here, intuition. I mean,
00:30:49
intuition is often regarded rightly as
00:30:52
being a valuable thing to have. And
00:30:55
linking this I would say to my to my
00:30:57
judgment work, I would say if you've
00:31:00
done something 50 times before and
00:31:03
number 51 time comes up, you're in a
00:31:06
pretty good position to think about your
00:31:09
intuition here because your intuition is
00:31:11
actually your accumulated experience.
00:31:13
If you've never done something before
00:31:15
and it comes up,
00:31:17
then intuition is not a good guide
00:31:19
because you don't have any knowledge
00:31:21
about this. It's the first time. And
00:31:24
simply going from the gut, I mean, is
00:31:27
really taking a risk again. I would say
00:31:29
if something comes up which is
00:31:30
completely new,
00:31:32
then intuition is not necessarily where
00:31:35
you should be looking, frankly. You
00:31:37
know, you need to do a bit more than
00:31:38
that because you don't have the
00:31:41
background and the knowledge and the
00:31:43
experience to make that intuition work
00:31:45
for you. Do you think we are reducing
00:31:48
the amount of intuition we have as a
00:31:50
species with particularly with over the
00:31:53
course of time maybe with AI and
00:31:55
whatever else we're relying on something
00:31:57
else as our answer to the to the
00:32:00
problem. And if you take us back to kind
00:32:02
of caveman days, intuition had to be
00:32:04
exceptionally high that you kind of just
00:32:06
felt that camping down somewhere in
00:32:08
particular could actually lead to your
00:32:11
death, your downfall. We don't have half
00:32:13
as many issues and challenges as we did
00:32:15
back then. How do we kind of navigate
00:32:17
that now? Some people have more
00:32:19
intuition than others, I'm sure. I pride
00:32:21
myself on being an expert on one or two
00:32:23
things, but cavemen is not one of them,
00:32:25
I'm afraid. [laughter] So I can't I
00:32:26
can't really comment on that on that
00:32:28
side of things. I I'd find it quite
00:32:30
difficult to say are we relying more or
00:32:34
less on our intuition.
00:32:36
Some people clearly set great store by
00:32:38
their intuition.
00:32:40
And it's part of the way they operate as
00:32:43
individuals. And I'm not saying that's
00:32:45
wrong and somehow that people don't have
00:32:48
no intuition are better than those who
00:32:50
have got lots of intuition as it were.
00:32:52
But what you want with intuition is you
00:32:54
want good intuition. You know, and I'm
00:32:57
saying I think you stack the cards in
00:32:58
your favor of good intuition by using
00:33:01
experience. I mean, going for something
00:33:04
without evidence, without data for the
00:33:07
first time purely on the basis of
00:33:09
intuition is just risky. You know, it's
00:33:12
not the end of the world, it's just
00:33:13
risky. And if the stakes are low, it's
00:33:16
fine. Should I take that chocolate bar
00:33:18
or the other chocolate bar? Well, all
00:33:20
right. It's not the end of the world
00:33:21
here. Should I marry X or Y? Probably
00:33:25
better to get a few facts first, I
00:33:26
think. Absolutely. I've been on a board
00:33:30
before where I highlighted to the chair
00:33:34
that one of the people within that
00:33:36
board, one of the executives, was
00:33:38
definitely not the right person for the
00:33:41
role, put it that way. And kind of
00:33:43
moving more towards something that if it
00:33:46
hit the front-line newspapers,
00:33:48
definitely wouldn't have been something
00:33:50
anybody would have been
00:33:51
happy
00:33:52
with, let's put it like that. A number
00:33:54
of the people on the board after I had
00:33:57
raised factual information about the
00:34:00
challenges that I'd faced, they were
00:34:02
very aware of it. And they thought, oh,
00:34:04
actually,
00:34:05
I thought that, but I didn't Oh,
00:34:07
actually, when you look back. And I
00:34:09
think sometimes people don't necessarily
00:34:12
use that intuition all the time.
00:34:14
And they just cast it aside and just
00:34:15
think,
00:34:17
oh, but it's it'll be okay. It'll not a
00:34:18
problem. Until something comes up and
00:34:20
then all of a sudden the house of cards
00:34:22
falls. And people start to think,
00:34:24
actually, maybe when I piece everything
00:34:26
together, I knew more than I thought I
00:34:28
did or felt more than I thought I did. I
00:34:30
think that's a very good example of when
00:34:33
intuition is indeed valuable. Having a
00:34:35
feeling that something isn't quite
00:34:37
right.
00:34:38
I mean, this for me is part of the
00:34:39
awareness element of judgment. You know,
00:34:41
you just feel
00:34:43
this person doesn't sound quite right or
00:34:46
you know, this email looks dodgy or
00:34:48
whatever it is. And you think to
00:34:49
yourself, wait a minute, what's going on
00:34:51
here exactly? And as you say, the
00:34:54
difficulty then is to say, do you
00:34:55
translate that feeling into a question
00:34:58
on a board? I mean, I can think of a
00:35:00
couple of occasions where I had also you
00:35:04
know, I wish now that I had followed my
00:35:06
intuition.
00:35:07
Because at the time I thought, well, you
00:35:09
know, I'm not sure I'm right there. And
00:35:11
actually it would have been better for
00:35:12
me to speak up. And other occasions
00:35:14
where I did speak up. So it's, you know,
00:35:16
I don't I don't think I've got a sort of
00:35:17
zero score here. But I I do think
00:35:20
there's there is room for intuition
00:35:22
here. But it is
00:35:25
asking the question which is a great way
00:35:28
to do it rather than making a
00:35:30
irrevocable choice on the basis of no
00:35:32
evidence. Can you take us inside a room
00:35:36
where judgment was tested and where that
00:35:40
shifted the decision? So kind of moved
00:35:42
from A to B as a result of being able to
00:35:45
apply some of these things. Yeah.
00:35:47
Yeah, I mean, I can think of it in in
00:35:49
example of of the firm was being
00:35:51
encouraged
00:35:53
by one of the biggest firms in the
00:35:56
industry to take over another firm in
00:35:59
order to safeguard its future.
00:36:01
Now, they wanted to make sure they had
00:36:04
the continuing market available. So
00:36:07
they didn't want to take it over, but
00:36:08
they encouraged us to do that. And it
00:36:11
looked like a sort of very good deal. I
00:36:13
mean, here they they were with the
00:36:16
agreement of the management saying, you
00:36:18
take it over. Now actually,
00:36:21
in the room with nobody only the board
00:36:23
members present, the question then was,
00:36:27
are we at risk here? You know, where are
00:36:30
there things we simply don't know about?
00:36:32
The decision was taken and that was a
00:36:34
very good decision. It would only be
00:36:36
done if this firm doing the encouraging,
00:36:39
the
00:36:40
jumbo firm in the industry, would give
00:36:43
certain kinds of guarantees of certain
00:36:45
kinds. And otherwise we would walk away
00:36:48
from the deal.
00:36:49
And they did give the guarantees and the
00:36:51
guarantees were needed
00:36:53
because this turned out to be a real
00:36:55
turkey.
00:36:56
Wow. I mean, and they didn't know it,
00:36:59
but we we thought, you know, we are at
00:37:01
risk here. It's all very well for them
00:37:03
to say, look, you've got this wonderful
00:37:05
opportunity.
00:37:07
But actually, it's not their money at
00:37:08
risk, it's our shareholders' money at
00:37:10
risk.
00:37:11
So that was I think an example of just
00:37:13
stepping back for a moment and say
00:37:15
because of course everybody was very
00:37:16
keen to do it. It looked like a great
00:37:17
deal, you know, good economically, good
00:37:21
for the share price. Everybody would be
00:37:23
really pleased with it and so on. But
00:37:25
then we thought, wait a minute, what's
00:37:26
you know, what's going on there exactly?
00:37:28
We don't know enough. I mean, we'd done
00:37:30
some due diligence, but we didn't know
00:37:32
enough. So that I think was a good
00:37:34
example of
00:37:35
judgment at work. It can definitely be
00:37:37
one of those things, due diligence. I've
00:37:40
worked in businesses that have gone
00:37:41
through all that sort of process. And
00:37:44
sometimes you come out the other end and
00:37:45
think, okay, I've written many, many
00:37:47
words on a bit of paper about this. But
00:37:49
actually we still haven't got to the
00:37:51
heart of whether this is a good idea or
00:37:52
not. Absolutely. And as I say, as where
00:37:55
we started with mergers and
00:37:56
acquisitions, this is of course is where
00:37:58
the stakes are very high and people have
00:38:00
not done it before and often the
00:38:02
knowledge is not there. You know, I
00:38:04
mean, you don't have all the facts. Are
00:38:06
all these key people going to leave the
00:38:07
firm as soon as it's taken over? You
00:38:09
know, will they cash in their chips?
00:38:11
There's hundreds of different things
00:38:13
that one needs to think about. So what
00:38:15
can boards do in those sorts of kind of
00:38:17
high risk moments where they have to
00:38:19
make a decision quickly? How can they
00:38:20
try and make sure that that decision is
00:38:22
grounded in the best possible roots
00:38:25
essentially? Well, I think this comes
00:38:27
back to the elements of judgment. So
00:38:29
there's the knowledge and experience.
00:38:31
What do we know and what do we not know
00:38:34
and what do we not know that we don't
00:38:36
know? I mean, there's traditional
00:38:38
variation of that. You know, how much
00:38:40
experience have we got in this kind of
00:38:43
work? Do we trust people? Do we trust
00:38:45
the data? You know, can we trust what's
00:38:46
going on? Are we aware of all the
00:38:48
situations that we're letting ourselves
00:38:51
in for? What are our feelings and
00:38:52
beliefs here?
00:38:54
Have we actually looked at all the
00:38:56
elements of the choice? You know, we've
00:38:58
got this or this. Is there a third
00:38:59
option? We could do something slightly
00:39:01
different. And also in this particularly
00:39:03
[laughter] in this case, is the question
00:39:05
of can we deliver? You know, this is the
00:39:07
sixth element of my judgment framework.
00:39:10
And in many cases, it's not a question
00:39:12
of saying, it's great in theory.
00:39:15
Question is, can you actually do it?
00:39:17
Have we got the people? Have the people
00:39:19
got the bandwidths
00:39:21
in order to carry this through? It's all
00:39:23
very well saying, you know, we're mad
00:39:24
keen on expansion, it's absolutely
00:39:26
fantastic. But I can think of of, you
00:39:28
know, one public company, you know,
00:39:30
where which it expanded very rapidly and
00:39:33
they just lost complete control of the
00:39:34
company. You know, it was all very well
00:39:36
having all these acquisitions, but
00:39:38
actually lost control. Delayed its
00:39:40
accounts, share price went down,
00:39:42
plummeted, as they say. You know, these
00:39:45
are the kinds of things. And if our
00:39:47
audience adopts one new habit to improve
00:39:50
their own judgment, what would you
00:39:51
recommend? Look, I'd say it's a question
00:39:54
of
00:39:55
looking at yourself
00:39:57
and saying where are the things that I'm
00:40:00
strong?
00:40:01
Where are the things that I'm not so
00:40:02
strong? And on the not so strong bit,
00:40:06
saying, all right, can I make up
00:40:09
for my relative weaknesses by getting
00:40:12
other people to do this, being advisers
00:40:14
or helping me to do this?
00:40:17
Can I improve myself? We're all
00:40:19
different, and all of us have got
00:40:21
relative strengths and weaknesses. So, I
00:40:23
think it's a question of identifying it
00:40:24
for yourself
00:40:26
and then focusing on that to get
00:40:28
yourself better. And final question, do
00:40:31
you feel that there's a single question
00:40:33
that you ask yourself before making a
00:40:36
decision that might be helpful to our
00:40:37
audience? I'm not sure there's a single
00:40:40
question because even, for example, of
00:40:42
where if you've got to take a decision
00:40:44
quickly, you can't hang around thinking,
00:40:48
oh, you know, have I gone through all
00:40:50
the factors? Do I think If you've got to
00:40:51
be quick, you've got to be quick. It's a
00:40:53
low-risk item, doesn't really matter,
00:40:56
frankly, you know. But I would say, you
00:40:59
know, if you're making an important
00:41:01
choice, I think you need to ask
00:41:03
yourself, even if it's for a fraction of
00:41:05
a second, have I thought about the kinds
00:41:08
of things I ought to be thinking about
00:41:09
right now? You know, have I got to take
00:41:12
this irrevocable decision right now?
00:41:15
Sometimes you have You've got no choice.
00:41:17
You may get it wrong, you know, but
00:41:19
you've got no option. But if you have
00:41:20
the luxury of a bit of time, it is
00:41:23
really worth thinking about the process,
00:41:25
about how you've come to your
00:41:27
conclusion. Andrew, thank you for
00:41:30
joining me on Grit in the Boardroom and
00:41:32
for bringing such clarity and good
00:41:34
judgment and showing us what it really
00:41:36
means for the boardroom. Thank you very
00:41:38
much for having me.
00:41:39
I think there are a number of key points
00:41:42
from the conversation with Andrew today.
00:41:44
I think that he drew on the fact that
00:41:47
intuition is so vitally important and
00:41:50
maybe it's an underutilized skill by
00:41:52
some and something that we can all look
00:41:54
to improve upon. That chairing is an
00:41:58
art. He touched on that himself about
00:42:00
how important it is to be able to get a
00:42:01
good chair and how he decided not to
00:42:03
join certain boards if the chair didn't
00:42:05
appear to be that great and how much
00:42:08
that can lead an organization positively
00:42:10
or negatively. And also around AI, how
00:42:14
important it is for us to, obviously,
00:42:16
use the technology, embrace the
00:42:17
technology, it's fantastic, just as
00:42:19
Andrew said, but we also need to be
00:42:21
really aware that it only understands
00:42:23
and has knowledge of what it has in the
00:42:26
public domain and what it has access to.
00:42:28
So, we need to make sure that we're
00:42:29
always looking at things with our own
00:42:31
independent judgment to be able to
00:42:33
assess whether or not that's something
00:42:35
that we ourselves would want to stand
00:42:37
behind and back. That's it for this
00:42:39
episode of Grit in the Boardroom. Thanks
00:42:41
to Andrew for sharing his story with
00:42:43
honesty and insight, and thank you for
00:42:45
listening. If you found this
00:42:46
conversation valuable, please follow the
00:42:48
show and share it with someone who leads
00:42:50
through complexity. Until next time,
00:42:52
stay thoughtful, stay brave, and stay in
00:42:55
the room.
