Accordingly, accelerating the talent agenda and activating culture as a strategic asset should be one of a board’s top priorities in 2019.4
There are five key ways to help boards challenge how they govern culture and support management in realizing culture’s value.
1. Oversee how culture is defined and aligned to strategy
Many leaders struggle with defining and operationalizing the culture that is right for their business. A corporate culture that clearly aligns with a company’s purpose and strategy enables and accelerates that strategy. When alignment isn’t there, culture can drag the organization down. It is difficult to accomplish new things with old ways of working. As a first step, leaders should spend the time to define attributes of culture needed to both realize what the strategy calls for and engage their people.
As companies develop a blueprint for their purpose, vision, mission and strategy, they should include the cultural attributes needed to achieve the company’s overall strategic objectives. Does the strategy call for putting quality first and prizing precision? Or does it call for putting the customer first and empowering local leaders to optimize customer responsiveness? Or is the key priority encouraging innovation and seeding disruptive ideas? To make it real, how do these translate into everyday decisions and behaviors in the company?
While leaders want their company to be great at everything, a company’s strategy will call for a specific orientation in the market (e.g., the innovator, the best brand, the most efficient), and the culture should be intentionally designed by management in the context of that orientation. Doing so will help shape decisions and behaviors, e.g., what kind of people are hired, what workplace policies and processes are put in place, what behaviors are rewarded.
Five culture archetypes: Modernizing the DNA of the company
Research shows that companies generally fall into one of five culture archetypes that defines who they are. Given innovation’s urgent role in creating long-term value in today’s disruptive era, many leaders are focused on properly calibrating their risk tolerance to cultivate a more innovative culture. Awareness of these archetypes may help boards ask better questions around how management is defining and shepherding the culture that best fits its business.
We are entrepreneurial, focus on anticipating market needs, encourage and recognize ideas, and support prudent risks.
- Brand: We build and protect our brand.
We build strong commitment and pride in our products and services while operating with integrity and respect.
- Customer: We make it all about the customer.
We gear everything we do to the customer, are relationship -based and empower our people locally to drive success.
- Efficiency: We are efficient.
We optimize and are productive through a formal structure, defined roles and effective organization-wide coordination.
- Quality: We focus on quality first.
We strive for precision and excellence through continuous improvement, collaboration and a long-term view.
Boards play a pivotal role in overseeing that management teams have defined their corporate culture in the context of their strategy. It should do more than sound good; it should actually fit well with the company’s current ambitions. Management should be able to articulate the organization’s desired culture, gaps that may exist and how the gaps are being closed. The board should oversee how management defines and harmonizes the culture and strategy, and help provide that culture modernization and evolution is an ongoing priority.
2. Create accountability for how culture is communicated and lived – internally and to key external stakeholders
Everyone in the company contributes to culture. Each person is accountable for how she or he shows up every day. It only takes one event or sometimes one person to disrupt harmony, prompt a wave of employee turnover, damage client relationships or impact share price. Organizations should clearly identify the right behaviors, manage performance against those behaviors and reinforce them with incentive structures. They should also be aware of and address the challenges of building a cohesive, “borderless” culture in a global organization, where desired cultural attributes may conflict with local norms (e.g., speaking up in a culture where hierarchy and politeness reign) and language barriers may compound challenges. Just as important, leaders at every level should “set the tone at the top” by modeling desired behavior. So, there is a system around behaviors in an organization to provide that the right ones are lived. If the system is weak or broken, sometimes unhealthy, divergent behaviors happen.
The board can play a role in supporting this system, including by aligning executive compensation, including senior executive performance metrics, to the behaviors/culture the business needs. Boards should discuss how the current incentive structures might impact behaviors and what changes might be required to align incentives to the desired behaviors. Including cultural indicators in performance metrics can also help to incentivize the executive management team to embed the values and behaviors throughout the organization.