‘Harmonic tension’ critical to avoid groupthink in PE

Harmonic tension’ critical to avoid groupthink in PE-backed leadership teams

As hold periods become longer, research suggests that leadership teams face a greater risk of groupthink, where behavioural profiles converge over time, reducing diversity in decision-making. LCap insights reveal the behaviours behind this convergence, and how teams can achieve a healthy balance between conflict and groupthink, retaining ‘harmonic tension’ for the duration of the hold period.

Achieving a high-performing leadership team is no easy task for PE-backed businesses. Faced with inherited leadership dynamics and the need to drive rapid change and value creation, investors and their portfolio businesses must optimise leadership from day one. And once a team is set, the hope is they will work together successfully for several years – particularly as hold periods get longer.

However, what many investors and leadership teams may overlook is that team dynamics are constantly evolving. Our research shows that even a well-balanced, performance-aligned team can develop a greater risk of groupthink the longer they work together. This can cause serious problems, reducing diversity at the top level, where critical decision-making and oversight happen.

So, how does groupthink arise, and how can it be prevented?

Cognitive diversity and groupthink

Balance and cognitive diversity are crucial to building a leadership team that can successfully grow and exit a business. A group of leaders not only needs the functional competencies, domain expertise, and situational experience for the value creation journey but must also balance behaviourally. A team needs to collaborate effectively, but must avoid too many similar behaviours that can lead to groupthink. For this reason, investors and leadership teams should always aim to have a range of perspectives around the boardroom table.

How can groupthink emerge over time?

However, even in a diverse team, LCap research has found that the longer a team of leaders works together, the greater the risk of groupthink. Data shows that over time behaviours coalesce behind dominant voices in the room who exhibit certain behavioural traits; they are low self-monitors, but high on dark triad traits such as psychopathy, narcissism, and Machiavellianism.

Self-monitoring is the degree to which an individual observes social cues and consequently attempts to adapt their behaviour to those around them. A very high score suggests an individual who adapts their behaviour to a large degree. In contrast, a very low score indicates an individual who is relatively unconcerned with how others perceive them. Low self-monitors tend to be more dominant individuals, as their colleagues are more likely to follow their lead, rather than the other way around.

Applying this to PE-backed leadership teams, we notice that CEOs are frequently the lowest self-monitors in the group, often combined with a high score for psychopathy, which is defined by traits such as egocentricity, predatoriness, recklessness, a lack of empathy, and a propensity for manipulation and exploitation. All these attributes can be beneficial in a leadership context, providing CEOs with the clarity, self-confidence, and influence to navigate rapid change, make tough decisions, and operate under intense pressure. However, the risk is that, as the dominant voice in the room, team behaviours start to converge with theirs, resulting in a loss of cognitive diversity and the risk of groupthink.

Resilient diversity

So, what’s the solution?

As mentioned, cognitive diversity protects against groupthink, as the more diverse viewpoints around the table, when enabled and mandated to play a role, the greater the critical thinking and constructive discussion around business decisions, and the less likely it is for behaviours to converge.

However, the critical factor is self-monitoring and ensuring a group has ‘resilient diversity’, with multiple low self-monitors providing contrasting polarities. While this is likely to increase the likelihood of conflict, it can, if managed well, achieve just enough ‘harmonic tension’, which ensures greater accountability and fosters healthy disagreement over business decisions.

Alongside multiple polarities, it can also be valuable to ensure a leadership team includes one or more ‘conscious self-monitors’; individuals who sit somewhere in the middle, with the ability to change their approach to match others when needed, or equally choose not to. These leaders can be essential bridges, where a team includes multiple low self-monitors or leaders who score highly on the dark triad (psychopathy, Machiavellianism, narcissism).

Continued oversight

Finally, the only way to truly prevent groupthink is to ensure sufficient oversight of leadership team behaviours over time, so that any shifts can be addressed through honest conversations and making changes to restore the balance. This is where PACE can be invaluable, enabling investors and leadership teams to monitor behaviours and have data-led, objective conversations about issues and how these can be resolved.

Leadership challenges are never fully resolved, and however well-established a team may be, it is never immune from falling into damaging dynamics over time. Sometimes a shake-up is the only solution. As exit horizons get longer and value creation becomes more challenging, PE-backed leadership teams need diverse thinking and constructive conflict more than ever.