Overview
3 discussion responses with scholarly references:
Initial information: For this discussion, review the Harvard Business Review (HBR) governance article: "Back Channels in the Boardroom: How to Prevent Side Conversations between Directors from Blocking Progress".
Then, choose an unrelated industry that is of interest to you personally or professionally and respond to the following:
- How can side conversations impact your chosen industry in both positive and negative ways?
- How can side conversations impact internal and external stakeholders within your chosen industry?
For responses:
In response to your peers, consider similarities and differences from your initial post and provide recommendations for tools and techniques to leverage positive impacts of side conversations. Remember to cite your resources.
Student 1- In the financial services industry, side conversations among board members or senior leaders can significantly impact decision-making and overall organizational governance. On the positive side, side conversations can foster candid discussions that allow leaders to clarify complex issues, build consensus, and explore innovative ideas before bringing them to the formal meeting table. For example, in a credit union, informal discussions among board members about potential lending strategies or fraud prevention initiatives could lead to more robust policies that enhance operational resilience (Jones, 2020). These conversations, when aligned with organizational objectives, may promote collaboration and streamline the decision-making process.
However, side conversations can have negative implications, particularly when they undermine transparency and inclusivity. In the financial industry, such discussions might lead to the perception of favoritism or exclusion among key stakeholders, eroding trust and diminishing morale. For instance, if certain board members engage in back-channel discussions about investment priorities without involving other directors or senior management, it can result in biased decisions disregarding comprehensive risk assessments. The lack of formal documentation in these discussions may create compliance challenges, especially in an industry heavily regulated to ensure ethical practices (Smith, 2021).
For internal stakeholders, such as employees, side conversations might cause confusion or misalignment, particularly if policies and strategies derived from these discussions are not communicated transparently. Employees may feel excluded from decision-making, which could negatively affect organizational culture and engagement. For external stakeholders, such as members or customers of a credit union, side conversations can impact trust. Perceived lack of transparency or accountability in decision-making could lead to reputational risks, ultimately affecting customer retention and loyalty (Brown, 2019).
To mitigate these risks, financial organizations must establish clear governance protocols and encourage open dialogue within formal settings to ensure that decisions reflect the collective input of all relevant stakeholders. Doing so enhances both organizational transparency and stakeholder trust.
Student 2- Side conversations are informal, one-on-one discussions usually had between colleagues. Side conversations can be good or bad for the team based on how well they are managed. Gardener and Peterson (2019) state that a well-managed side conversation can bring cohesiveness to a team by exerting influence and properly trading information and opinions. However, if mismanaged, it can bring forth dysfunction by isolating members and fostering power struggles and alliances that are not in the company's best interest. The accounting industry is one that I know personally is filled with many side conversations. Side conversations can be positive and necessary when the company's partners or other accounting executives are trying to acquire clients. These executives will have to confer with clients to figure out their needs so that they can relay them to others to build a strategy to serve that client based on their needs. However, to eliminate any negative effects of these side conversations, executives must ensure that everyone on the team knows what the client requires because inadequate details will likely result in conflicting assumptions about the matter and relevant solutions (Gardener & Peterson, 2019).
Side conversations in the accounting industry have a negative and positive impact on internal and external stakeholders. The internal stakeholders affected by side conversations are the employees and executives of companies within the industry, while the external stakeholders affected would be mainly clients of the companies. The positive effect on internal stakeholders is that team members who have side conversations usually build a bond, which means they tend to rely on each other to share information, solve problems, and get their tasks done effectively (Gardener & Peterson, 2019). For instance, in auditing, employees are tasked to work as a team to complete the client's audit. Therefore, having side conversations as a team would be beneficial because employees work together, bond, and get the job done. Employees may discuss how to apply a new International Financial Reporting Standard (IFRS) or how to go about collecting evidence for their tasked section of the financial statement. A positive impact on external stakeholders such as clients is that they get to build a relationship with their accounting professionals, which can help foster trust and reveal their needs and the scope of their work.
However, there are also negative impacts on internal stakeholders in the accounting industry when it comes to side conversations. According to Edmondson (2020), organizations, where crucial matters are only discussed in side conversations, are in big trouble because employees are uncomfortable speaking publicly and feel safer agreeing with the boss or majority in a meeting. In the accounting industry, professionalism matters. Companies and their employees may lose credibility and be considered unprofessional if these side conversations are done around clients. Side conversations can also result in a breach of client confidentiality and misinformation, which can cause errors in financial statements, compliance issues, lawsuits, and loss of client business. The clients would also be negatively impacted since their private information is revealed. It could also cost them time and more money because they will need to switch accountants, which could affect the timeliness of their financial statements and the cost of their audit.
Student 3- The healthcare industry is totally different from what I usually do, but I want to look at it anyway. Because this exercise is about trying to understand how sidetalk might affect a company's board, I'm going to think about what happens when people at the board level in a healthcare company have secret conversations that are not about official board business. Managing these sidetalks is probably as hard as anything else in running a healthcare company. But making sure the board makes good, life-or-death decisions is super important.
Some side conversations are good. They let new ideas come up. People can compromise. This helps build better relationships. It's these relationships that really help the board. But a big problem for healthcare boards is that their meetings are so public. Healthcare boards have lots of people watching them. A side conversation with any board member can become an "open meeting" for the groups that watch the board. Unused board time is like a budget under threat. No board member wants to waste time that could be used to do important board work. (Gardner & Peterson, 2019).
When side conversations in board meetings aren't managed well, they can create all kinds of problems. For one thing, people could end up forming alliances without meaning to. Plus, some board members might not get included in conversations where they should be included. Also, there's a chance that the board could end up choosing between two options, and one of them could just hurt one of the groups we talked about last time. If side conversations are run badly, they can do just that. They can also "muddle" the decision-making process, which is kind of funny because that's how we used to think of having too many side conversations. Now, we might still see having too many conversations as a (or the main) thing that messes up a meeting (Gardner & Peterson, 2019). But poor decisions by the healthcare board can not only hurt their own company, but also have a disastrous impact on the health and safety of the people they are supposed to help.
So, any conversations happening on the side need to be run well, with the right people, and be productive for a good reason. Why? Because they can help or hurt the company and its clients.