Boards and Culture

The Banking Commission's work in Australia makes for fascinating reading. Seemingly a systemic failure, characterised by Boards of Directors who seem a long, long way away from what is actually going on in their organisations. Culture is so important. In most organisations it's a core competitive advantage. But why do Boards of Directors so commonly seem to fail to "lead" culture?

Why bother? Way before Australia's banking crisis, the expression "culture eats strategy for breakfast" was commonly talked about. In simple terms, it doesn't matter how good the strategy document is, if you haven't got the organisational culture right you won't get out of the starting blocks.

Boards grapple with culture, or rather fail to grapple with culture for a number of reasons (and being a bit provocative to make a point).

Many board members just don't get culture. If you don't understand something, then it is all too easy to spend the time and the board meeting on the things that you do understand. Think audit reports, legal opinions and so on.

Too many boards couldn't define the company culture, and not in a way that is linked to any direct experience. Health and Safety legislation has forced many directors out of the board rooms into workplaces, however, too many director walkabouts are stage-managed and fail to give directors real visibility as to what is going on in the organisation.

Furthermore, directors all too often are very shy about the governance/management divide and more paranoid than they need to be about not treading on management's toes. Yet, increasingly the best boards do really invest time finding out about not just what the business does, but how it does it… who does it, how they feel about the business… how their customers feel and so on….. And, yes this may be beyond what some directors feel is their role, or beyond the time they feel they should allocate.

Culture is notoriously difficult to measure. Climate surveys can help to a point equally there is no substitute for a good listening ear and a few enquiring questions.

Human resources skill sets are rarely seen in the boardroom. Surely every board does not need a human resources expert on the board however, given the importance of culture, it is curious how few would have human resources on a skills matrix used to appoint board members and a real understanding of culture.

Remuneration committees are all too often consumed by remuneration (it's tangible, numbers related, people get it) and less on the softer aspects around culture. What makes the most difference to the long term?

I had the pleasure of attending a programme with IMD in Lausanne in June. Prof Didier Cossin, one of the leading thinkers on corporate governance, emphasised the role of boards in stewardship, and of the board in leading culture in a very proactive way.

Culture is hard. But getting it right is everything. Well almost everything!

Peter Kerridge


A couple of links to Prof Didier's work are below. Worth a look.