How we think about the work

Governance reform has produced three decades of process. Almost no data. The work this firm exists to do rests on a body of thinking we draw on, contribute to, and publish. This page showcases what we are thinking, and the broader literature that informs the methodology.

Moneyball for Boards

We describe our overall approach to board decision quality as Moneyball for Boards.

The Moneyball insight was not simply that data around baseball players mattered. It was that the data everyone was looking at was measuring the wrong things. Scouts were evaluating players on reputation, appearance, and a handful of statistics that felt important but did not actually predict whether teams won. The breakthrough was identifying the metrics that did predict wins and building selection decisions around those instead.

Boards are at exactly that pre-Moneyball moment. The criteria used to appoint directors — sector experience, prior NED roles, functional background, network standing, current market insights — are the governance equivalent of the wrong statistics: visible, credible-sounding proxies that have never been rigorously tested against the thing they are supposed to predict, namely the ability of the board to make good decisions. Nobody has been able to evaluate prospective NEDs for their ability to contribute to better board decisions because the outcome data around those decisions has never existed. Share price performance is a poor proxy, with so many extraneous factors in play.

In short, there has been no systematic record of which board compositions, under which conditions, made decisions that played out well, and which did not.

The future of board composition is not about finding better individual directors. It is about understanding which combinations of decision-making styles, challenge behaviours, and cognitive approaches produce better collective decisions, and appointing and orchestrating accordingly. A board designed around how its members decide, not just what they know, is a materially different proposition from anything the governance industry currently offers.

The data to answer that question rigorously does not yet exist. Building it is part of what we are doing.

The longer paper

The argument above is set out at greater length in a longer paper, which draws on research from cognitive psychology, decision theory, and the clinical-versus-statistical-prediction literature: Daniel Kahneman on expert intuition, Edward Thorndike and the subsequent literature on the halo effect, William Grove and colleagues on the limits of unstructured judgement, and the canonical work on hindsight bias. 

If you would like to receive the longer Moneyball paper please contact us at info@mxcadvisory.com.