If you want to build a company culture that delivers results - according to Board Leadership in Corporate Culture, a Board Agenda study undertaken wit
If you want to build a company culture that delivers results – according to Board Leadership in Corporate Culture, a Board Agenda study undertaken with professional services firm Mazars and Paris-based business school INSEAD last year, you need to bring the focus from the very top. In other words, whilst an urge to build a company culture might come from HR, it needs to be delivered from the board level.
While culture was cited as a top-three priority for company boards, only 20% of 435 directors and board members across Europe reported spending the time required to manage and improve it. Although 62% of respondents felt they were primarily responsible for setting their organisation’s culture, a similar proportion either did not consider culture as part of their formal risk assessment, or failed to routinely consider their culture’s associated risk.
Ways to build a company culture: Get a board understanding of culture
Did you know: Just 1 in 5 CEOs spend time addressing cultural issues
While believing that the culture of business can be influenced from the top, particularly through the role of the chief executive officer, only one in five board directors believe they are spending the right amount of time addressing cultural issues. In fact, almost two-thirds of directors say that their boards either do not consider culture as part of their formal risk assessment or fail to routinely consider the risk associated with their corporate culture.
When asked why culture matters, some 40% of CEOs say that their initiatives to improve it was to better align culture with the agreed strategy, but an equal number (41%) say it was to enhance employee motivation and productivity. Only 16% say it was to address an ethical problem in the business while a similar number say it was to address market concerns on corporate culture.
Half of these board directors say they are “reasonably clear” on the desired culture of their business, but only a fifth say that their boards fully consider the desired culture of the business. Almost one-third are not very clear or say there is no discussion at board level about the desired culture of the business.
Half of these board directors say they are “reasonably clear” on the desired culture of their business, but only a fifth say that their boards fully consider the desired culture of the business
Ways to build a company culture: Research first
According to the report, three sources seem to predominate when assessing actual culture: far in front is feedback from employees, for example from surveys and staff dialogue, followed by customer complaints and satisfaction surveys, and risk events such as rule breaches, HR issues and compliance-monitoring. Interestingly, far less attention seems to be paid to information emerging externally, such as social media and newspaper comment or from investor engagement; and only a quarter undertakes an internal or external audit of their culture. We would expect these are areas to be of far greater importance to boards in future.
Around 85% of the value of leading businesses take the form of intangible assets, most of which are linked to people, reputation and brand—and all of which are critically influenced by organisational culture.
Therefore, many boards need to assess whether their information on cultural issues is sufficiently comprehensive, structured and subject to independent scrutiny to meet their current and future needs.
Ways to build a company culture: Get culture on the table
According to Erik van de Loo, professor of organisational behaviour, and Jaap Winter, visting professor of corporate governance, INSEAD, incentives sre misunderstood and aren’t a silver bullet for change.
Boards often assume that having some experience with corporate culture (like with leadership and change) is sufficient to navigate and supervise issues of culture. But it is not the same as expertise.
“A misunderstood area is the impact of incentive schemes on behaviour and culture, both at board level and in the corporation at large. Despite the increasing awareness that tone at the top matters, it is rarely translated into effective new board practices. Board evaluations are a case in point: they do not include the required attention for culture and behaviour. Corporate culture starts with the board and the board space: what kind of interactions, behaviours, language, and data does one observe? How packed is the agenda with technical content, or too many topics to discuss? Many board meetings prevent, by design, engagement in meaningful conversation. Can the role and behaviour of the CEO and chairman truly be discussed, as they are the key players driving the functioning of the board? Few boards possess explicit expertise in this domain. Boards often assume that having some experience with corporate culture (like with leadership and change) is sufficient to navigate and supervise issues of culture. But it is not the same as expertise. That assumption is a naïve self-serving illusion. Appointing a single board expert will not work if the other board members do not understand the language and distinctions that seek to address issues of culture. Executives and non-executives need to up their game in corporate culture and be open to learn and develop.
Culture isn’t a HR initiative
The report quotes Alexandra Schaapveld, independent director, and chairwoman of the Audit & Internal Control Committee, Société Générale, who has said: “It is clear from this interesting report that culture and leadership need to be addressed by boards. Culture must be removed from an HR remit and made visible to all, into the front office. The board must be highly responsible for the tone at the top and make a clear interlinkage with culture to strategy.”
How to improve culture
The report offers a variety of takeaways on how to improve culture, including the following tips.
The report states that their research into corporate culture confirms what had only previously been seen as anecdotal: while board directors acknowledge the importance of culture, and are thinking about how it can impact on the business, these thoughts have not been translated into actions. There is a worrying lack of time dedicated to culture in boardroom discussions, and even when it is discussed, it is done so in internal terms rather than fully incorporating external views.