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Inquiring Mindset | Due Governance

We have developed this guide to Trustee foster and enhance their inquiring mindset.

One of the core roles of a Trustee is to provide oversight of the organisation's strategy.  This usually involves interacting with management (both corporate and investment management) experts.  

Asking the Hard Questions

The Australian Institute of Company Directors (AICD) interviewed Leigh Sales for her views on 'Asking the tough questions'.  Given Leigh is a generalist and is still usually able to dig below the surface, we thought hearing her views on the topic would be a great place to start. 

Key take aways from the video

"You build up a bank of knowledge [but]...  the person sitting opposite me always has an informational advantage because I am a generalist, they are a specialist.

I always try to ask questions that a reasonable, average member of the public would want to know.  

If the person is unclear, that says to me most people probably can't understand it either, so I don't hesitate to say 'for clarity could you explain what do you mean by that?''

I think that's quite similar to what Board members do.  Board members tend to be people with general skills, not necessarily specific skills.  I think it's useful to come into something and not be an expert because you bring that outside eye, so you can say that doesn't stack up or make sense.

What I'm trying to get to with my questioning is clarity and a clear explanation of why has something happened - cause and effect and the relationship between things.  

Sometimes people who are experts can get bogged down in detail.  Something is very clear to them because they understand it intimately but they don't understand how much jargon they are using.  So I tend to keep asking the same question in different ways or sometimes I will say 'so if I am understanding you correctly, what you are saying is ...'  I'll just keep trying to distil what the person is saying until it gets to its most basic parts and is clear and then build up from there". - Leigh Sales  

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Other tips to build an inquiring mindset

1. Accept the need to ask 'why'

The 'Five Why' methodology was developed as part of Japan's industrial revolution.  Companies like Toyota and countless management consultants use it.  It's power comes from simply scratching below the surface countless times. 

In this regard generalists often have an advantage over specialists who have taken many of their assumptions for granted.  This advantage only exists though if you have the confidence to keep asking - and that it's okay for that to be your role.

2. Take the time to reflect

The more time you spend on a topic the more you will naturally reflect on it.  While Boardroom meetings don't usually provide the best circumstances for reflection, there is a way to use the process to your advantage.  We call this the '3 Read Process'.

Three Read Process for Board Papers
First Read - cursory

When you first receive your board papers we recommend giving them a quick overview.  This is merely to give your mind a quick snapshot of what topics you can expect to discuss and some sense of what direction the discussion may go in.  It it important to keep an open mind and not form any views at this stage.

The best time to do this is when you first receive your papers.

Second Read - detailed

The next time you read the Board papers will give you an opportunity to sink into the detail.  Again your goal is not to make your mind up about what direction you will take in the Boardroom.

Third Read - cursory

Lastly, with a day or so to go before the Board meeting you can give the Board papers one last cursory read with the confidence that you have already gone through the detail, reflected well on its content and kept an open mind.

3. Focus on the future

Bad things happen.  Poor strategies are taken and sometime bad performance follows even a great strategy.  However action today can at best influence the future - not the past.  You will also find it easier to think with a flexible mindset if you are able to learn from the past but not let it tie you up in knots.

4. Beware of the enemy: Cognitive biases

If it's so easy to ask 'But why?' - why don't people do it more often?  The two main reasons are:

  1. Cognitive biases
  2. Social norms (even around the Board table)

In the next part of this series we deal with overcoming cognitive biases.  As an aside, we think a rigorous but flexible process can be used to help build a culture that has social norms that promote rather than inhibit an inquiring Trustee Mindset   We deal with that in Element 3.