What board directors should know and do about organisational culture
The Board’s Role in Leading Organisational Culture – Series Intro
In this series, I will share some key take-aways from my recent roundtable presentation for the Australian Institute of Company Directors on the board’s role in leading organisational culture.
Now more than ever, culture needs to be on the board agenda at every meeting – and must be addressed through rigorous analysis and strategic planning. In the rapidly-changing and increasingly public and litigious business environment companies operate in – along with higher expectations from internal and external stakeholders – it is no longer enough to treat culture as a topic only to be addressed when there is already a problem! To stay competitive and to succeed in business, directors and leaders must make decisions with culture considerations at the centre.
In this issue, I’ll highlight what culture should be to boards, some of the challenges I see in culture in the work I do with medium and large organisations that should be of concern to boards, and I’ll share AICD’s key resources on governing culture.
How Boards need to see Culture
In the words of Commissioner Hayne during the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, companies and boards that are not planning to assess and manage culture are ‘foolish and ignorant’! Yet so many see culture as ‘warm and fuzzy’ and not as the ‘key driver of marketplace success’ that the research shows it to be. In addition, many companies think they are measuring culture, but are instead purely measuring talent and/or engagement, seeing culture as primarily a concern of HR, and maybe, management. (Source: The role of boards in measuring and managing the culture of their organisation, Governance Institute of Australia)
What is needed is a culture ‘strategy’, and a culture strategy that is interwoven with the foundational building blocks of purpose, values, vision and organisational strategy. Then, it is possible for the board to govern culture as a whole, rather than only seeing a slice of culture or only responding to culture in crisis.
Challenges I see in Culture (that should concern boards!)
In my work with boards and leadership teams on clarifying and integrating ‘Who we are’, ‘How we do things’ and ‘Why that matters’ – I have learned that people almost always are proud of their work and want to represent their organisation well… but don’t know how to do that.
Some examples I have seen:
- A CEO says that a successful culture will determine the company’s ability to succeed in the strategy – but staff surveyed reveal 80% are ‘less than clear’ on the organisation’s values and what they mean for the individual or team.
- Different versions of values inductions are conducted in different areas of the business – and while the managers in charge demonstrate passion for certain company values, the experience is inconsistent across the organisation.
- Employees in focus groups say that leaders don’t walk the talk, or they question stated values against current processes and practices on the ground – for example, the value of ‘safety’ versus the felt pressure of fast-paced production.
- In a conference of senior managers in a social services organisation, a board director in her address challenges the audience to name the company values. Most cannot – despite it being a group of very passionate and caring employees, there is no cohesion on ‘what we stand for’ or ‘what defines us’.
AICD’s guidelines on governing culture
AICD states that the director’s responsibility in governing culture includes:
- Setting the tone
- Identifying Culture as a value lever
- Providing effective stewardship & oversight, taking pro-active steps to understand and assess the informal and formal systems of culture and work with management to leverage
AICD’s guidelines for Governing Organisational Culture (2019, Judith S. MacCormick FAICD) provide a good foundation for understanding the role of the director.
In addition, 5 Key Questions for Boards, AICD provides great questions to assess the effectiveness of the board in governing culture (2018, Gabrielle Schroder FAICD).
In this series:
In the next article, I will discuss the challenge of culture governance:
- Why Culture should matter to boards more than ever
- Why Culture is hard to pin down
- Challenges in governing culture
- The modern director’s checklist for culture governance
In subsequent posts, I’ll share more from my AICD roundtable presentation, including ways of examining and leading culture (including the best ones!), and starting points and questions for your board.
Related material
Your Board affects your Organisation’s Brand!
Culture: Top-down? Bottom-up? Why still up for debate?