Hoppmann, J., Naegele, F., & Girod, B. (2019). Boards as a Source of Inertia: Examining the Internal Challenges and Dynamics of Boards of Directors in Times of Environmental Discontinuities. Academy of Management Journal, 62(2), 437–468. https://doi.org/10.5465/amj.2016.1091
Summary
Traditionally, boards of directors are seen as key agents of change—expected to guide companies through turbulent times with strategic oversight. But this in-depth study of ten major Swiss utility companies during the energy transition challenges that assumption. Instead, the authors show that boards can themselves become a source of inertia, slowing down or even blocking necessary strategic change when facing major environmental shifts.
The study focuses on environmental discontinuities—sudden, disruptive changes in the regulatory, technological, or economic landscape—and explores how boards respond. What it finds is troubling: despite having the authority to initiate or approve changes, many boards lack the internal capacity or willingness to adapt themselves, undermining their ability to guide their firms through change.
Boards must be able to judge strategic issues effectively, and this requires updating their knowledge, processes, and composition in times of rapid change. However, the research uncovers that self-interest, resistance to change, and a lack of internal evaluation mechanisms often prevent boards from renewing themselves. Without self-evaluation and self-reconfiguration, boards risk becoming bottlenecks rather than catalysts for strategic renewal.
Environmental Discontinuities Strain Board Capabilities
The modern business environment is marked by frequent and unpredictable shifts—regulatory overhauls, technological breakthroughs, market liberalizations, and changing customer demands. These are known as environmental discontinuities: fundamental disruptions that challenge the assumptions, competencies, and strategies of established firms. In such moments, boards of directors are expected to step up as strategic stewards—to question the status quo, assess risk and opportunity, and help guide the firm through transformation.
However, Hoppmann and his colleagues discovered a counterintuitive dynamic while studying major Swiss utility companies navigating the country’s energy transition between 2009 and 2015. Rather than leading strategic change, many boards actually slowed down or resisted transformation. These firms were facing an urgent shift toward renewable energy, deregulated markets, and changing pricing models. Yet, boards often responded with hesitation, indecision, or outright inaction.
Why? Because most boards were not structurally or cognitively prepared to interpret and respond to such changes. They were composed of directors with deep knowledge of the traditional utility business model—but with limited understanding of digital technology, renewable energy, or entrepreneurial market dynamics. When the business landscape changed dramatically, these boards found themselves relying on outdated mental models and lacking the tools to make sound judgments in unfamiliar territory.
This mismatch between environmental demands and board capability resulted in delayed decisions, missed opportunities, and—in some cases—organizational inertia that hampered long-term competitiveness.
Boards Must Evaluate and Reconfigure Strategy—But Judgment Is Often the Bottleneck
In theory, boards influence strategy in two fundamental ways. First, they are responsible for strategy evaluation—assessing the firm’s current positioning, reviewing management’s plans, and ensuring the business is aligned with external realities. Second, they are tasked with strategy reconfiguration—approving or initiating strategic changes, such as entering new markets, shifting investments, or modifying the business model.
However, both roles rely on one critical, underappreciated capability: sound judgment. In stable environments, judgment is easier—boards can draw from experience and apply familiar frameworks. But in disruptive contexts, judgment becomes more difficult and more important. Boards must evaluate unfamiliar information, interpret fast-moving trends, and think in non-linear ways.
Hoppmann et al. found that many boards failed at this. In some cases, directors overestimated their knowledge and endorsed strategic plans without critical scrutiny. In others, they avoided risk altogether, vetoing proposals they didn’t fully understand. In still others, they deferred too much to management—failing to provide the oversight and challenge necessary for effective governance.
These failures were not due to bad intentions. They stemmed from a deeper issue: boards lacked the cognitive diversity, knowledge base, and process discipline needed to navigate change. Without relevant expertise or an updated strategic lens, boards could not fulfill their evaluative and reconfigurative roles effectively. Instead of driving change, they inadvertently reinforced the status quo.
Self-Evaluation and Self-Reconfiguration: The Missing Practices of Board Renewal
Faced with such challenges, one might expect boards to adapt—to reflect on their limitations, refresh their membership, and revise how they operate. In other words, to engage in self-evaluation and self-reconfiguration. These practices include assessing board performance, identifying skill gaps, inviting external perspectives, retiring underperforming members, and restructuring committees or meeting formats to improve decision-making.
Yet, the study revealed that these practices were rare. Most boards avoided such introspection. They continued to operate with outdated structures, inadequate expertise, and ineffective communication routines—even as their organizations struggled to adapt.
The key barrier was internal resistance. Board members were often reluctant to initiate or support changes that might reduce their influence, challenge their expertise, or shorten their tenure. In effect, the boards were protecting their own continuity at the expense of organizational adaptability. Without a trigger—such as external pressure from regulators or investors, or strong internal leadership—board renewal simply didn’t happen.
Only in a few cases did boards engage in meaningful self-change. These boards brought in new members with fresh expertise, encouraged open dialogue, and critically reviewed their own performance. Not surprisingly, these same firms were better able to respond strategically to environmental discontinuities. The implication is clear: without internal renewal, boards are likely to perpetuate inertia, even in the face of obvious strategic threats.
The Crucial Role of Leadership and Motivation in Driving Board Change
While the structural and cognitive challenges facing boards were significant, they were not insurmountable. What separated adaptive boards from stagnant ones was often a matter of leadership and intent. Specifically, the presence—or absence—of a board chair or influential member who recognized the limitations of the group and took active steps to improve it.
In boards that successfully renewed themselves, chairs played a critical role. They encouraged critical reflection, raised awareness of environmental change, and fostered a sense of urgency. They facilitated performance reviews, proposed new recruitment criteria, and opened the board to external advisors or evaluators. In doing so, they helped their boards regain strategic clarity and confidence.
In contrast, boards lacking such leadership tended to drift. Without a motivating force, they defaulted to old habits, avoided difficult conversations, and quietly resisted change. The organizational consequence was a gap between external demands and internal capability—a form of governance misalignment that undermined the firm’s ability to adapt.
Importantly, the study emphasizes that boards are made up of people, not just roles. Human factors—such as ego, fear of obsolescence, loyalty to peers, or risk aversion—can distort group behavior. But these same dynamics can be redirected with intentional leadership. When board chairs model adaptability, invite diverse views, and promote learning, the board can evolve into a responsive, future-ready body.
10 Practical Insights for Managers and Business Owners
- Don’t assume your board is always a force for change.
Even well-intentioned boards can become bottlenecks when faced with disruption. - Board expertise can become obsolete.
A board composed of legacy industry experts may lack the insight to evaluate emerging technologies or markets. - Evaluate the board’s ability to judge strategic issues.
Ensure your board is equipped to understand and challenge strategic proposals. - Encourage periodic self-evaluation.
Boards should regularly assess their own processes, skills, and relevance to current challenges. - Push for self-reconfiguration when needed.
Don’t be afraid to propose new members, revise meeting formats, or seek external input. - Recognize that resistance may be personal, not just structural.
Board members may resist change out of fear for their position or influence. - Appoint a proactive board chair.
Change often starts with leadership. A strong chair can guide the board toward renewal. - Treat board development as part of your change strategy.
Organizational change won’t succeed if the board isn’t evolving with the business. - Use environmental disruptions as a catalyst.
Crisis or transition periods are opportune moments to push for board transformation. - Make board processes transparent and learning-oriented.
Encourage open dialogue, strategic reflection, and continuous learning in the boardroom.
Closing Thoughts
Hoppmann et al.’s study delivers a powerful and timely message: boards are not immune to the inertia they are supposed to combat. In times of rapid change, failing to adapt at the board level can undermine even the best corporate strategies. Strategic renewal isn’t just about new technologies or markets—it’s also about renewing the organization’s leadership from the top down.
For firms navigating today’s volatile environments, it’s not enough to have a board in place—it needs to be the right board, with the right mindset, structure, and processes. Board renewal, when done proactively, becomes a strategic lever for long-term success.