Discussing the culture of your organisation is no longer an option. There are increasing regulatory requirements for reporting on the culture of organisations, and people like me now write and present on organisational culture more than ever before. But what role can the Directors and Board of an organisation play in the culture of the organisation? A huge amount. The Australian Institute of Company Directors (AICD) have produced an excellent guide for directors regarding how to govern culture (find it here), which every board should download and work through.
The AICD are very clear that how the leaders at the top of the organisation act sets the tone for the rest of the organisation. The behaviour of directors and the decisions they make directly affect the CEO and other senior management, which in turn influences the rest of the organisation. And research shows that where there is a positive culture, organisations face lower risk, greater resilience and customer satisfaction, and higher employee morale. All this leads to enhanced productivity and performance. And what organisations don’t want that?
The guide delineates three key areas that the board sets cultural direction and expectations for:
- Behaviours and decision making
- Reinforcing those expectations
- Testing that those expectations have been met.
To assist boards with these key areas, the AICD have developed a four quadrant approach for directors. The guide expands on these quadrants, and includes some excellent examples of what directors need to be thinking about and discussing in each area. I highly recommend you read the document in full, but a list of the four quadrants and some examples of the red flags for each quadrant are as follows:
- Quadrant 1 – Board processes and board agenda
- Little succession planning
- A checklist approach to policies
- Rushed board meetings
- Quadrant 2 – Board reporting
- Poor bad news flow
- A focus on ‘what are the outcomes’ without regard to how they were achieved
- High-performer preferential treatment
- Dominance of short-term business decisions
- Poor board papers
- Quadrant 3 – Board dynamics and director dynamics
- Excessive collegiality and relationship prioritisation
- Risk reaction rather than risk pre-emption
- Insufficient constructive challenge
- A boardroom that feels ‘comfortable’
- More priorities being driven by management than the board
- Quadrant 4 – Board sensing and director sensing
- Low culture references in committee work
- Excessive or deficient collegiality
- Poor work/life balance environment
- Reluctance to challenge the status quo
To conclude, the document also has a great series of questions to stimulate directors as to what to ask within the board to reflect on culture. There questions (and there are quite a number of them) are grouped in the following categories:
- The Board-management relationship
- People and risk
- Innovation
- Remuneration
- Workplace health and safety
- Intra-board dynamics
This is a very useful tool for all directors and boards that want to get serious about the culture of their organisation, and being proactive in its development.
Dr Warrick Long, Senior Lecturer and Leadership Postgraduate Studies Coordinator, Avondale Business School