Sunday, March 8, 2015

The Culture-Savvy Board

12:00 AM  Pearl Zhu  No comments

The board has to pay more attention to the culture, which will "eat the strategy" otherwise.

The board plays a significant role in advising & overseeing corporate strategy and taking governance practices for strategy execution. Culture is the most invisible, but the powerful element which directly impacts how effective the execution could be, should board also oversight the culture, and how to build the culture-savvy board?

Culture governance is an important practice which is being part of strategy execution governance discipline: Culture and brand are the most important "soft" element that a company will make since they will define how the company interacts with its various stakeholders. The strategy defines what they will do, with whom and how they will be successful if objectives are achieved, but this will mean nothing if the underlying culture does not focus on values and a culture that are aligned with the strategy and facilitate success. In a simple, yet quite profound way, one of the best explanations of the meaning of culture in an organization was simply to say "This is the way we do things around here!" Anyone can understand that. So the two expected governance practices include (i) auditing culture, assuring to the board, and what that would look like; and (ii) the board reporting on culture to shareholders and other stakeholders.

The consistency or discrepancy between behaviors and practices on one hand and stated values, vision, mission, strategy and risk appetite on the other, is what should be audited: The totality of behaviors, practices, values, vision, mission, strategy and risk appetite is the definition of culture. The consistency or discrepancy between behaviors and practices on one hand and stated values, vision, mission, strategy and risk appetite on the other, is what should be audited. Culture and brand are the most important "soft" element that a company will make since they will define how the company interacts with its various stakeholders. The strategy defines what they will do, with whom and how they will be successful if objectives are achieved, but this will mean nothing if the underlying culture does not focus on values and a culture that are aligned with the strategy and facilitate success. Culture should not be seen as some superficial phenomenon, "is everyone happy, we have a fuse-ball table and wear jeans to work" but rather, more profoundly, what are the ideas within our walls that derive profitable action and collective confidence. That's the key: culture should be based on what gives collective confidence and make a positive influence on surroundings.

The board has to pay more attention to the culture, which will "eat the strategy" otherwise: "What comes first, strategy or culture?" Many pick strategy; the company needs to determine its direction, and then assure that the culture supports that strategy. Many of us also like Drucker's witty quote: Culture eats strategy for breakfast! It means the way things are done and allowed to be done every day. It is reflected and influenced by policies, practices, rewards and incentives. often, executives and the board assume that these things are correct, but employees know they are not and can tell you what gets in the way. When culture is "working" it can unlock powerful synergies that drive performance..... especially in today's world that relies so much on collaboration and teamwork. Many say boards do not pay enough attention to the culture within the company. since the culture can undermine strategy, they certainly should be concerned and seek assurance that the culture is aligned with the strategy and that the values that form the foundation of the couture are aligned with the expectations of customers (part of the risk assessment).

Culture is part of the corporate brand, the board should oversight it. Culture is the beating heart of an organization. It determines what the place feels like, how people behave, whether people feel empowered or not etc. The ideal culture is one of vision-driven leadership coupled with the empathetic listening of valued employees. A healthy corporate culture is very important as a determinant of business performance. Among other considerations, it stands as a key factor not only in attaining organizational goals but also in the attraction and retention of desirable employees, creating a public image that is positive and building respectful relationships with stakeholders and within the organization itself. On the flip side, if the corporate culture is toxic, expect high employee turnovers, an organization faced with ethical issues that detract from a positive public image, and a total disregard of stakeholders, and probably chronic bullying within the organization. Corporate culture should be a business 'app', in that if you can rally an entire organization around operationalized brand positioning, everyone can apply it each day as part of business performance.

The culture is the most important element to an organization achieving their strategic goals in today's VUCA digital age. The people at the top must set the tone and be both culture conscious and culture cognizant, as maintaining and developing the culture of the organization is the most important task for the senior leadership team. A culture savvy board can walk the talk and become the culture master.

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