Culture: What’s the Board’s Role?

I originally wrote today’s post for CMSWire. It appeared on their site on June 21, 2022.

Culture is such an important part of your business. It really is the foundation. It’s best defined as core values + behaviors, and it’s often referred to as how we do things around here. It truly does eat strategy for breakfast. Culture before strategy. Lots of data points exist with regards to that.

A customer-centric culture – or whatever type of culture you’re aiming for – is deliberately designed to be that way, and it requires CEO commitment to do and to be just that. It doesn’t happen by accident. Well, actually, you get the culture you design or the one you allow. You decide. I’d rather have the one that I design, namely, a customer-centric culture.

In order to get that culture, the CEO (and the entire executive/leadership team) must be committed to – and aligned on – bringing the customer voice into all they do and sustaining and maintaining a customer-centric culture. The leadership team must communicate to employees (a lot) what it means to be customer-centric, what their roles are, how it impacts the work they do, and what it means for customers and for the business. That also means that they must lead by example and model customer-centric behaviors. Leaders are not exempt!

Duke University’s Fuqua School of Business did some research a couple years ago. One of their research papers, Corporate Culture: The Interview Evidence, is based on survey responses from  1,348 CEOs and CFOs and in-depth interviews with executives representing 20 percent of the U.S. equity market capitalization. The findings are quite interesting, as they uncovered the link between culture and both business successes and business failures. There is a clear link between culture and performance – which, by proxy, tells me, “culture before strategy.”

Two of their (many) findings that I was interested in with regards to writing this particular article were:

• Culture is set by the CEO.
• The Board doesn’t drive culture but can influence it through their choice of a CEO.

I’ve always thought about culture the same way, i.e., set by the CEO and influenced by the Board only in that they select the CEO.

I set out to see if others felt differently, or if the Board truly only affects culture based on the CEO they hire. If culture is driven from the top, by leadership, then shouldn’t the board be more involved than “simply” selecting the right CEO to set the culture? Doesn’t the board have more skin in the game?

In an article on BoardMember.com’s site (a Chief Executive Group Company) titled, The Board’s Role In Solving The Culture Puzzle, three ways that the Board can shape culture were proposed:

1. In order to ensure culture is elevated to driver of results, the Board has to be involved in defining and developing the desired culture. Culture needs to be on the Board’s agenda, as well as on the executive dashboard used to monitor progress on strategic priorities.
2. Just like the executive team must model the behaviors they expect, Board members should do the same. The Board should also be living the core values.
3. The Board shares the responsibility of getting the culture they design, so they must be accountable for the culture as well as the impact of the culture on business performance.

To close out that article, the author states, “the role of the Board gives it an advantage in defining, nurturing, and monitoring the culture that’s needed to achieve the company’s objectives.”

Software provider BoardMaps offers up six ways that Boards can be more actively involved with regards to corporate culture.

1. Lead by example. Model the behaviors that are becoming of the desired culture, and call out those leaders who don’t fall in line.
2. Balance culture with the bottom line. Realize that a strong and healthy culture helps to sustain business success, through good times and bad.
3. Transparency and accountability are two components of a healthy culture, and the Board must ensure these flow out of every aspect of the business.
4. The Board should educate employees and vendors about the culture, about the expected behaviors. And those behaviors must be embedded in their actions and integrated into all aspects of the business.
5. Determine how to measure culture and identify relevant metrics that can be used to evaluate the strength and health of the culture.
6. Make the connection between core values and performance incentives. Rewards should align not only with the behaviors that reflect the desired culture but also with the purpose, the strategy, and the business model.

And one final perspective from Protiviti on Board oversight of organizational culture. They noted that the Board must do the following.

1. Assess the alignment of the culture with the organization’s vision and values.
2. Understand and monitor the culture through site visits, conversations with personnel, and observation.
3. Measure culture. Track how values are lived, including through hiring, firing, promoting, decision-making, and developing policies and processes.
4. Be curious enough to probe on culture issues. How are they monitoring behaviors? What are employees talking about out on social media? Why are they doing what they’re doing? How are culture concerns identified and escalated?

As the article notes, “In light of recent events and the attention that they have drawn to culture oversight, it is imperative that the Board and management are inquisitive — plausible deniability regarding a flawed culture carries little weight.” When you look at companies like Uber, WeWork, Enron, Uber, Activision Blizzard, Wells Fargo, and others and the challenges they had internally, it makes you wonder where their Boards were or why they didn’t nip the bad behaviors in the bud before they got out of hand. Why didn’t they question their CEOs and leadership teams? Clearly, Boards need to be more involved when it comes to corporate culture, especially with regards to oversight.

In general, as I read various articles and perspectives on the Board’s role in driving culture, there was general agreement of what they need to do – keep it on the agenda, measure it, monitor it, and make sure that they live it and model it, as well.

As such, the Board is not necessarily going to be involved in the day-to-day of the business and of maintaining the culture. But by making it a priority on their agenda and by keeping tabs on the health of the culture, they can ensure that the culture doesn’t stray and that it continues to remain strong and healthy, ensuring employees want to work for – and customers want to continue to buy from – the business. Culture drives performance, and that must be impetus behind the Board’s role in culture.

The only thing of real importance that leaders do is to create and manage culture. If you do not manage culture, it manages you, and you may not even be aware of the extent to which this is happening. ~ Edgar Schein

Image courtesy of Pixabay.