Culture begins with the board
November 13, 2017
Culture is a complex and broad phenomenon that needs to be better defined, understood and researched in the board context.
One needs to differentiate between culture in visible and invisible phenomena (artefacts, norms and values, assumptions and behaviours) and all the factors shaping and explaining culture (incentive schemes, rules and regulatory context, group dynamics, cognitive biases, individual characteristics, etc.).Common traps when confronting culture issues are to do so either superficially (reducing its complexity) or too technically (changing culture via rules, regulations, policies). It is an illusion to think that a board can implement a chosen culture in a disciplined way.
Tone at the top
Understanding and impacting culture is more than articulating corporate norms and values, conducting cultural surveys, or organising workshops or programmes—though one might need elements of those. A misunderstood area is the impact of incentive schemes on behaviour and culture, both at board level and in the corporation at large. Despite the increasing awareness that tone at the top matters, it is rarely translated into effective new board practices. Board evaluations are a case in point: they do not include the required attention for culture and behaviour.
Corporate culture starts with the board and the board space: what kind of interactions, behaviours, language, and data does one observe? How packed is the agenda with technical content, or too many topics to discuss? Many board meetings prevent, by design, engagement in meaningful conversation. Can the role and behaviour of the CEO and chairman truly be discussed, as they are the key players driving the functioning of the board? Few boards possess explicit expertise in this domain.
Naïve self-serving illusion
Boards often assume that having some experience with corporate culture (like with leadership and change) is sufficient to navigate and supervise issues of culture. But it is not the same as expertise. That assumption is a naïve self-serving illusion. Appointing a single board expert will not work if the other board members do not understand the language and distinctions that seek to address issues of culture.
Executives and non-executives need to up their game in corporate culture and be open to learn and develop. That is a challenge; the ability to truly learn is not easily triggered in boards. Board members feel pressure to be seen as knowledgeable—and the assumption that everyone is on the board because of previous achievements and expertise often creates an environment that is hostile to true learning.
Acknowledging limited understanding is the first step for boards to open up to developing their knowledge of corporate culture.