How to start leveraging culture as a strategic opportunity at Board level?
In a recent article published in the Australian Financial Review, Patrick Durkin reports on a new trend in Australia showing that Boards are increasingly focusing on culture. Angus Armour, CEO of the Australian Institute of Company Directors testifies that “the ability to manage culture is now as critical for a board as the ability to manage the P&L”. This has certainly been my experience in the conversations I facilitated between Boards and their executive teams. Nearly every time they revolved, at least partially, on the cultural transformation that would be required to enable the business strategy.
There are, however, two notable areas where I find the article wanting:
First, it doesn’t reflect on the actual experience, and its challenges, of having the right type of conversation about culture at Board and executive level. Such conversations are in a stage of infancy and as result, they are not easy nor natural to have. Developing that ability and making it meaningful takes time and can’t easily be improvised.
As the issue of culture emerges from the background and comes into focus it’s evident that Boards often lack the frameworks and indicators to guide and challenge their executive team through it. When it comes to culture the time horizon, rhythm, pace of action and the evidence of progress differ significantly to those applicable to managing a P&L. I have witnessed Boards unconsciously apply mechanical mental models to cultural conversations that were detrimental to the depth of insights and the quality of decision making. It is healthy for Boards to venture into this new territory so long as there is a shared awareness between them and the executive team that it requires a different type of dialogue, posture and frame of reference.
Secondly, the article that seem to portray the emerging focus on culture as being mainly driven by risk mitigation. The article talks about “culture audits to stamp out potential problems”, about incorporating “firm culture into its risk-based surveillance reviews”, or about Boards being “conscious of the tremendous damage it [conduct & behaviours] does to the brand, and therefore their share value if their activities or their service is misaligned to the reputation they would like to have in the community”.
My experience of the culture conversation is one of opportunity rather than risk. It recognizes that culture is an asset and that it may well be the most powerful one to unleash the organisation’s potential and implement the boldest of strategies.
An example of one such opportunity is innovation. It ranks high on most Board’s agendas and the consequent realisation is that beyond processes and methodologies, innovation is primarily a question of culture. More broadly and in an increasingly uncertain environment, Boards need to foster a culture of agility and accountability to ensure their organisation even has a future, let alone a bright one. The opportunity for Boards is to look at culture as a strategic driver and potential differentiator leaving behind the defensive considerations about ‘conduct & behaviors’ that should be discussed lower in the chain of command.
When the wind of change blows, some people build walls, others build windmills.
- Chinese proverb -
When Executive teams launch a transformation program with a strong cultural component, they often underestimate that the cultural transformation starts at Board level. It is healthy that the topic is now welcome in the board room. The next challenge is to ensure we are having the right conversation about it, in the right way.