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Boardroom grows corporate culture

Perception of a company key to success

Fall is the time to say goodbye to golf and hello to hockey and (American) football. But, did you realize these sports are actually "cultural icons" with their own rules that dictate the way both players and observers must act? For instance, the often-vigorous cheering we find at a closely fought hockey or football game just wouldn’t be accepted by an audience trying to enjoy the symphony orchestra or a ballet. In fact, I am sure you would be escorted out of the building.

The same goes for the way we dress for various events. We tailor our dress to match the cultural code of our activities. Most of the time, these cultural codes are unwritten, so people learn the code by doing and/or asking around to a more experienced person. Many events publicize the nature of dress they expect. Failing all that, others in attendance will certainly let you know. However, most often, when you look around at the gathering crowd of attendees, you just know whether or not you are dressed appropriately. None of these so-called "rules" are posted on the walls of a sports arena, they are the "unwritten rules" of how a game is played and/or what is accepted as appropriate behaviour at various events.

What I’ve described is a simplistic view of what we call organization culture. Yet, this phenomenon is very real and very powerful. It outlines an organization’s expectations for behaviour and includes the values, customs, beliefs and attitudes that are shared by all who work in and/or encounter the organization as a customer.

It’s the way leaders engage in everyday business, it’s how decisions are made, who has authority and how new ideas are developed and implemented. Organization culture is closely related to how employees are treated, and it relates to all of the typical human-resource practices — such as attendance, punctuality, training and development and discipline. Overall, organization culture acts as the framework for its social and psychological work environment. In other words, it’s the personality of an organization.

Whereas all organizations have a "culture," you might now be asking two questions, "How is organization culture developed?" and "Who is in charge of creating the organization culture?" Let’s start with smaller entrepreneurial organizations. In smaller, new-growth organizations, the culture often starts off as very informal and is based on a founder’s personal values and practices. Culture just evolves. However, as the organization grows, it starts to formalize the culture, defining it and teaching it to ensure a deliberate approach to values and practices. In that situation, the founder is in charge.

But, what if the business becomes a much larger corporation, is sold and is now managed by a board of key stakeholders, a chief executive officer and a group of senior managers? Whose responsibility is it to define and build the organization culture? Does the board have a role?

The answer to that question is a strong yes. However, the understanding of culture and board involvement in overseeing the development of organization culture has been lacking. According to research, this may be occurring because the CEO has traditionally been seen as the "owner" of culture, and so, boards have taken a back seat, expecting cultural issues to be raised only when an issue arises. As well, whereas board members are distant from the day-to-day operations, they often don’t have the same vocabulary to describe the culture and/or a clear perspective of just what the organization culture really is. Finally, in many cases, many boards do not have a clearly defined role for the board when it comes to cultural oversight.

At the same time, most leaders know that organization culture can make or break the best-planned strategy. In fact, there are two common phrases "culture eats strategy for breakfast" and "culture always wins" that summarize this phenomenon.

With this in mind, researchers are saying boards do need to be more involved in defining their organizational culture and providing appropriate oversight. Boards set the tone of an organization, and they must work to ensure that organization culture is aligned with their business strategy. This requires developing a framework to make it happen. The framework should include the following elements:

Defining the current organization culture: Keeping in mind that culture represents the unwritten rules, the board needs to work with the management team to determine just what the organization culture consists of. How do employees envision this culture? How do customers, vendors and key stakeholders envision the culture? This is typically accomplished through employee surveys and/or facilitated group sessions where participants are asked to describe what they see as culture and how it impacts their view of the leadership as well as their own productivity. Standardized computer surveys are also available that can compare one organization to another.

Evaluating culture versus strategy: There’s plenty of research that shows strong financial growth when culture and strategy are aligned. Therefore, the board needs to examine and evaluate what behaviours, values, attitudes and actions are required to support the strategy and determine how to measure them. The examination will help identify areas of risk. Next, discuss culture at length during your strategy retreat.

Define the ideal culture: The board needs to play a key role in defining the organization culture, determine how this will be implemented and how it will be assessed on an ongoing basis. Once defined, current communication messages must be evaluated and newly aligned ones created. Leadership training programs and management meetings must include the concepts of culture building, how this is built and sustained. Change-management training is also key. Reports to the board must be ongoing.

Assess supporting structures and practices: Management needs to take time to examine the current leadership, operational structures and practices and determine whether they support the culture or not. They need to plan how to make the appropriate changes towards a new culture if required, and when this will occur. This review is absolutely critical, especially in organizations where an established culture is so entrenched that change will take several years. Sometimes drastic decisions, particularly with leadership, must be made.

Make culture an agenda item: As with any board-managed organization, if an item is not on the agenda, it will not get discussed. Make this a standard item. As change occurs within the organization, always ask how this will impact the culture and where is the evidence of continued alignment? Be sure to continually be aware of the organization’s ability to change, and the perception of people held by your management team. It is well-known that you can have all the technical skills possible on the management team, but if they lack a positive attitude toward people, there will be challenges for your organization.

Today, corporate culture is accepted as one of the key "levers" in creating financial success and shareholder value. And it means boards need to be more involved than ever before. What is your board doing?

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