The Board’s Has A Critical Role In Shaping Culture

Culture eats strategy for breakfast – this phrase is an absolutely reality. Actually, culture eats strategy for all meals – breakfast, lunch and dinner. Culture is a critical enabler of strategy and can make or break an organisation, so culture can’t be simply ignored. Several scandals have hit the corporate sectors in the last few years and is a testimony to the fact that corporate culture has to be taken seriously and should be placed high on board agenda. 

Director’s responsibilities include giving the organisation a strategic direction, protecting its reputation, engagement with wider stakeholder community, ensuring compliance and fit for purpose governance to name a few. 

For the majority of Non-Executive directors, is hard for them to get a real sense of the organisation’s culture. Most of the directors are dependent on management for inputs into culture. In this blog we will highlight some diagnostic tools which will help directors to analyse and improve culture at an organisation level.

Culture is highly topical and the board’s oversight in this area is absolutely critical for corporate governance. Culture is the root cause of most corporates’ failures. Boards need to set the tone from the top to create a culture that’s is aligned with the purpose, values, behaviors and strategy of the organisation. 

Culture is seen as a nebulous concept by many, yet it is arguably the most important factor to drive board effectiveness and overall company’s success. Board will have to create or support a culture that is aligned to the strategy of the organisation with a tone that is set from the top.

The focus on culture in an organisation will largely depend on the quality of board and management team. Putting in place the processes to enable the board to understand and monitor culture is key to achieving this. A well-managed, fit-for-purpose organisational culture aligned to a clear vision and strategy, can make the difference between growth and stagnation in an increasingly connected and competitive marketplace.

Last year we worked with one our clients to contribute towards the developments of a guide – A FIVE-STEP APPROACH TO CONSIDERING ORGANISATIONAL CULTURE. This HOW TO guide highlights the steps which directors can use as a starting point to understand their board and organisation’s culture. 

The Five-Steps to analyse and improve organisational culture are:

  • Assess the Current Culture
  • Evaluate its Effectiveness
  • Define the Target Culture
  • Identify Gaps 
  • Close Gaps 

The organisation’s Mission, Vision and Values will be at the centre of the spectrum while considering the steps.

The guide provides five lenses through which directors can get a sense of the organisation’s culture internally. 

The five lenses are 

  • You (an individual in your organisation, most likely a board member or a management team representative, who will view and assess its culture through a personal lens)
  • Board
  • Management
  • Operations 
  • External Shareholders 

The focus by lens and the tools that can be used are as follows:

You 

  • Personality Types –  Myers–Briggs Type Indicator tests personality assessments through individual feedback from colleagues and friends
  • Question your Assumptions – Ask yourself tough questions. Anticipate and face challenges you will encounter during your assessment.

Board

  • Review of strategic planning process to ensure cultural alignment is core
  • Board evaluations and related reports 
  • Social media reports on the organisation and the board 
  • 360˚ individual board member evaluation feedback 
  • Board focus group on organisational culture 
  • Review of board policies and minutes 
  • Review board competency and skills matrix

Management 

  • Senior management team behavioural survey 
  • Listening to external stakeholders – customer, supplier, regulator, and investor feedback. 
  • Commission a culture audit of the organisation 
  • Review management performance appraisals 
  • Review exit interview reports 
  • Review the reward structure (does it reward behaviours and not just outcomes?) 
  • Assess the correlation between objective achievement and staff satisfaction
  • Review internal audit findings for instances of management override of internal controls or policies

Operations

  • Employee focus groups 
  • Employee trust or sentiment surveys 
  • Review exit interview reports 
  • Review dignity at work and speaking up reports (anonymised)
  • Review results of customer focus groups and other sources of customer feedback 
  • Review internal audit findings for instances of breakdown in operational internal controls or non-adherence to policies

External Stakeholders

  • Surveys of external stakeholders – customers, suppliers, regulators, investors and others 
  • Review media coverage about or including the organisation 
  • Review how the organisation is portrayed on social media 
  • Undertake external stakeholder focus groups or interviews 
  • Review customer complaints reports 
  • Carry out market research into the organisation’s profile and reputation
  • Review regulatory inspection reports

To learn more about the steps download the How To guide from Chartered Accountants Ireland Governance Resource Centre

One of the HBR articles has described Culture as –  Culture like the wind. It is invisible, yet its effect can be seen and felt. When it is blowing in your direction, it makes for smooth sailing. When it is blowing against you, everything is more difficult.

It is high time for directors and boards to understand their oversight duties in relation to culture and work in tandem with the management team to make the culture appropriate and aligned to the strategic objectives of the organisation. 

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David W Duffy FCA is the Founder and CEO of the Governance Company and the author of “A Practical Guide to Corporate Governance” published by Chartered Accountants Ireland.

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