How Can a Board of Directors Successfully Oversee Company Culture?
Erasing the “Buzzword” Stigma
Let’s get the elephant out of the room before going any further: Yes, the term “company culture” has become something of a buzzword.
Too many organizations bandy the term about with reckless abandon. There isn’t much thought into what it means. It’s known to be something that executives are “supposed to say.”
However, just because this term is thrown around with little regard, doesn’t mean it’s not without immense meaning and impact to a company.
Plus, whether the company itself has a grasp of it or not, culture is going to cultivate and grow no matter what. Whether it’s a positive culture is an entirely different question altogether.
Thriving Company Culture Comes from the Top
Fostering a positive company culture comes directly from leadership.
Meaning, instead of merely discussing company culture, board members and other executives must dedicate themselves to adhering to and teaching its core principles.
Really, what it comes down to, is if the board of directors is filled with passionate, empathetic, and motivational people, it has a net-positive trickle-down effect.
Furthermore, this culture must emanate throughout the processes and overall functionality of the organization. As integral as the products or services are to a company’s success, so is it’s culture.
So, how can boards of directors ensure its cultural values are absorbed into the lifeblood of its team?
Before answering that question, let’s look at a working definition of company culture:
Defining Company Culture
Establishing clear parameters of company culture, in a corporate sense, allows everybody to get on the same page.
Here are a couple of critical components of a company’s culture:
- Combines values, attitudes, and behaviors that manifest during operations and relations with stakeholders
- Shareholders, employees, customers, suppliers and the wider community and environment impacted by a company’s conduct are all stakeholders
Six Components That Help Board’s Oversee Successful Corporate Culture
Lead by Example
Board members must practice what they preach. Or else, any directives about company culture will fall upon deaf ears.
Part of this notion means stepping up when top-level management and other non-board leaders aren’t embodying the desired culture. It’s up to the board to ensure that a thriving company culture emanates through every facet of the organization.
Don’t Underestimate Company Culture
It’s all too easy to get caught up in the bottom line and what kind of profits are coming in. And, unfortunately, it is possible to make money as a company with a less-than-stellar culture.
Focusing too much on the bottom line is short-term thinking at its finest. Whereas company culture is something that can help sustain success for years to come. Also, when something’s rotten within the state of an organization, eventually, it’ll come to light with disastrous consequences.
Maintain Transparency and Accountability
Two significant signs of positive company culture are transparency and accountability.
Boards with sound governance practices will focus their efforts on strategies that ensure those two concepts emanate throughout every facet of the business.
This kind of openness will be on full display when companies conduct business, as well as when they interact with and report to stakeholders.
Educate then Integrate
It’s unfair to expect employees and suppliers, alike, to display the corporate culture of an organization if they’re unaware of its specificities.
Boards need to teach these behaviors and establish firm expectations. Successfully doing so necessitates HR, internal audit, ethics, compliances, and risk function teams being empowered and equipped to integrate and continually assess culture productively. Furthermore, these departments should have a more distinct voice in the boardroom.
Find Ways to Measure Culture
The only way to accomplish the desired outcomes is through indicators and metrics. These should be aligned with goals and objectives within the company.
Primarily, the board must focus on developing an insightful grasp on behaviors within the company. This expertise helps them pinpoint value-based discrepancies.
In a nutshell, the board should be willing to spend significant time and money on developing relevant metrics so that culture can be efficiently evaluated and reported.
Incentives Should Reflect Values
The board is responsible for explaining to shareholders, employees, and other stakeholders – in-depth – about the connection between its values and performance incentives.
Reward systems and other such mechanisms must promote actions that align with the company’s purpose, ethics, strategy, and business model.
It’s this manner of consistent messaging that positively reinforces the culture into the mindset of a workforce. When employees aren’t given a pat on the back for good practices, they’ll get discouraged and become a negative cultural force.
How much impact does your board of directors have on the company culture?
If the answer is “we could do more,” then hopefully this blog has given you enough information to put you on the right track!