Published in, CU Times

By Stuart R. Levine

In the many conferences attended this past quarter, from the NACD’s Global Board Leaders’ Summit “RE:defining VALUE” to the List Sell Negotiate 2017 in Sydney, Australia, the themes of leadership, people, innovation and culture were top of mind. How to cope with the oncoming tsunami waves of change had threads of similarity whether addressing the new roles of board leaders or the how to prepare the top real estate agents in Australia. Continuous learning and building cultures based on values that engage people to innovate and strategically drive change were key.   Winning the hearts and minds and building agile teams of people to develop and execute, recruit and retain talent, and continually innovate to meet the changes of our evolving world and customers.

The NACD Blue Ribbon Commission Report on Culture as a Corporate Asset was the work of a blue ribbon commission made up of 35 experienced governance leaders and directors who focused on the board’s responsibility of corporate culture oversight — defined as one of the top governance imperatives of every board. Culture, described as “the sum of the shared assumptions, values and beliefs that create the unique character of the organization” is a hard issue, not a “soft issue”.   “If culture is left to change, it can absorb precious energy and put the handbrake on the organization achieving its purpose and strategic goals. But if led and managed well, culture is the rocket fuel for delivering value to stakeholders.”

The Commission reported the following top 10 items that directors should monitor to ensure a strong and effective organizational culture:

  1. Clarity on values and culture
  2. Proactive approach to culture oversight
  3. Monitoring of culture as full board responsibility
  4. Review of whole board and key committees to optimize board
  5. Is the Chief Legal Officer and other key risk management officers supporting appropriate culture
  6. Integrate board discussions with management on strategy, risk and performance re: meeting of goals
  7. Qualitative and quantitative info internal and external on culture
  8. Culture should be criteria for selecting and evaluating CEO and throughout organization by senior leaders in leadership and succession planning
  9. Recognitions and rewards that reflect desired culture
  10. Communication with shareholders how culture is being monitored

Qualitative and quantitative information attained from both internal and external sources is required to execute its oversight responsibility. While acknowledging that board members’ time is limited, it is essential that directors should hear directly from employees, customers, and other stakeholders having relevant information on culture.

This norm should extend throughout the organization, to select senior leadership and be used as criteria in succession planning. Boards should get to know the senior leadership succession candidates to ensure the cultural fit and their values as well as their ability to lead and their development plans for the future.   Since a healthy culture starts at the top, culture should be an essential criterion for boards in selecting and evaluating the CEO.

Companies with a healthy culture have more satisfied employees. This satisfaction enables higher earnings, the ability to outperform the competition and surpass industry benchmarks for higher shareholder returns. In Daniel Coyle’s book, The Culture Code, he states that good cultures add an extra 765% in net revenue over a 10-year period. Business is becoming a “culture contest”.

Building trust and ensuring inclusion are repetitive themes in the discussions on culture. Ensuring safety to express diverse opinions and share information with candor, leads to the ability to innovate and execute effectively.   As Laszlo Block, the head of Google HR asks, “Tell me one thing you want me to keep doing and one thing I should stop doing.” Now that’s open communication as a leader. Healthy cultures enable employees to work together to drive strategies and they become recruiting weapons for their organizations. They create greater customer loyalty by innovating with new products and services and better ways to meet their needs.

Effective, high-performing boards and leadership teams are becoming increasingly attuned to their company’s culture.  When faced with disruption, an organization’s ability to adapt and grow will be largely determined by its culture. A healthy culture can provide stability for employees to listen, learn, communicate and be productive, while innovating and adapting to new technologies and opportunities.   Culture as an asset means active investment, management, and cultivation by senior management and the board. In the preparing for a future of disruptive change, your culture may not just drive enhanced financial return; it could make the difference in survival itself.