How active is your board in discussing culture?

//How active is your board in discussing culture?

What’s the connection between the Play School concert we went to on Saturday and the Australian Institute of Company Directors (AICD) Essential Directors Update I went to at the fabulous Sydney International Convention Centre on Monday morning? I’m not sure there’s much in common between the well respected careers of Graham Bradley (main speaker for the AICD update) and Alex Papps (Play School actor), but there certainly were some interesting learnings from both events. Both enjoyable, clearly in very different ways!

At the AICD event Graham Bradley spoke of the implosion of trust in the corporate world, largely driven by the impacts of corporate cultures that have led to a series of scandals, damage to reputation and put at risk the social license to operate – think CPA, CBA, Seven and the list could go on. I need not say anymore, these are well covered in the media. Bradley and the AICD advocate that boards and Directors should exercise more active oversight of their culture. Before tackling this issue in terms of what this means in practice and how to achieve it, we need to deal with some definitional issues – what is culture?

For the purposes of this article let’s define Culture as ‘the way people think they have to behave in order to fit in, succeed and at times simply survive.’ It’s important that we understand that culture is much more than ‘how people feel’ at work. The concept of employee engagement and climate is a truly important one, however it is a more narrow subset of culture. For example, you might have really high employee engagement, i.e. people love coming to work and their jobs, but then have a series of failures in terms of process, technology and systems. Think Enron. Culture is the way in which things get done in your organisation, particularly when no one is watching. Implicit in this statement is the role that structures, processes, technology, systems, organisational and job design, incentive schemes and leadership play in culture.

Ok, so let’s take the AICD position as a given for now, that boards need to play a more active role in the oversight of company culture. What does this mean in practice? How do Directors do this in practice? How does a CEO or senior executive do this? Why would they do this? Why does culture matter? What evidence is there for the impact of different cultures on various different outcomes? There is a lot of evidence that states that certain types of culture correlate with certain types of performance and behavioural outcomes. There are causal factors that mediate those correlations. That’s a whole other article and I won’t go into it in any detail, other than to say if you’d like to have an academic debate and talk through the evidence I’d be delighted to over coffee when we have plenty of time…

Assuming that I’m right in my assessment of the evidence, the question for a Director is, are you crystal clear on what type of culture your organisation wants, needs and actually has? How will your culture support your strategy? For example, if you’re in a fast moving environment where innovation is crucial survival, does your culture support innovation and the ability to move and respond quickly? Context is crucial to understanding the ideal or preferred culture based upon your industry, strategy and organisation. From the perspective of a Board Director you need to be asking questions about what your organisations ideal culture versus its actual culture. What is the impact of the current culture on your strategy and ability to operationalise or implement it? The old Peter Drucker saying of ‘culture eats strategy for breakfast’ reflects the fact that even if you think you have a sound and differentiated strategy that will win in whatever market you are in, if you don’t have a culture to support its execution then it isn’t worth the piece of paper it’s written on.

I bet you’re wondering where on earth Play School fits in, it does don’t worry. So a quick summary of the Play School concert – it’s in a big hall thing with Alex and Emma the two main people on stage with trusty Jim on the piano accompanying. It’s not a big fancy production like the wiggles, it is authentic, engaging, fun and the kids love it. It captures their attention for a full 45 minutes (well for most kids, until there is an altercation when someone stole Humpty Dumpty from someone else). That’s a fair effort in the age of the iPad where attention spans are the length of a Peppa Pig episode at max. How is it that Play School has managed to survive all these years? It’s a very simple formula that has survived more than 50 years with high quality talent and characters we love, have grown up with and have survived the generations – think Noni Hazlehurst from 1978-2002, Big Ted and even the clock! I have no insight into the culture of Play School other than what I see from the outside. Alex Papps said at the 50th anniversary of Play School;

“It’s now become this kind of cultural heirloom that people feel confident about putting their children in front of it.

They know that they’ll be entertained, but they know that they’ll be exposed to some really sound values around respect, acceptance of difference and cooperation.

Who you are is not only enough, but it’s fantastic, Play School invites everyone to celebrate that.”

Should you let your culture ‘evolve’ organically or should you actively shape it? One view is that passive evolution could mean, it’s all a bit too hard and we don’t want to have to have those really hard discussions about the current way we operate as they are a bit confronting, might upset the status quo and disrespect our history and it might be risky. Another view is that evolve might mean a slower pace of change where culture is transitioned at a pace that is sustainable. All of those points are valid and the evidence does say that culture change is hard and that you really want to be sure that it is in the best interest of the business before progressing.

Time horizon when assessing ‘best interest of the business’ is very important. If you have a short term view focussed on earnings or other short term metrics, then I doubt that a cultural change program will stack up in any objective measure. However, over the medium to long term it is an entirely different story. The only sustainable and defendable competitive advantage is the culture of your organisation. I think that culture should be actively managed, carefully cultivated and be a cornerstone of your business. I doubt that Play School passively let its culture evolve in a haphazard way – I suspect that people like Alex Papps, Noni Hazlehurst, Justine Clark and other presenters and producers actively considered the desired elements of the Play School culture (whether they used the language culture or not) and worked to shape that for the benefits and joy of the Australian children, and parents for that matter, so thank you Play School team!

So, culture is important to creating strategic value, in any context or industry, and in order to actively shape culture you need to understand your ideal and actual culture. The question is how do you go about influencing your culture? We’ve talked about evolution. What’s the alternative to the evolution, is it revolution? And what does revolution actually mean in terms of what leaders, CEO’s and Directors do? Revolution evokes for me thoughts of leaders sacking people left right and centre who ‘don’t align with the values or culture’ and upending everything in the organisation to achieve ‘cultural fit’. We’ve all seen this play out and no doubt have our own thoughts and learnings. Given that culture encapsulates so many factors across your organisation, climate, behaviours, process, structures, systems, technology and skills where do you start and how do you start?

I think of boards and Directors as the guardians of the culture of their organisation. The role of Directors is to ask questions, probe management and support them to make decisions (often tough ones) that are in the best long term interest of the business and move closer towards their desired culture. CEO’s no doubt have a crucial role in leading their team to deliver upon this desired culture. This involves setting expectations, role modelling behaviour, building capability and ensuring systems, structures and processes are reinforcing mechanisms. What is the role of the HR or People department in all of this? What about other senior executive roles, for example a Chief Transformation Officer, Chief Innovation Officer or Chief Operating Officer? There is no one right way to actively shape or influence your culture or lead change. There are however lessons to be learnt from those who have gone before us. I’ve captured some of the lessons I’ve picked up along the way below:

  1. The connection between leadership and culture – there is no escaping the critical importance of leadership capability in supporting the development of a constructive culture. Leadership can be developed and constructive cultures support leadership development, it’s a symbiotic relationship and it starts at the top with the Board, Directors and CEO. Make culture a priority. Don’t let it drop down the board or executive agenda and don’t pass it over completely to your HR function to run as another initiative. As a colleague said to me recently, “Nick, you need to maintain the rage about your desired culture”. What he meant by this was it’s so easy to be sidetracked by other urgent issues or more comfortable topics (e.g. financial performance), and ‘culture’ can be seen as a soft measure and drop off the radar. Maintaining the rage is about giving what is important airtime making sure that Culture is firmly in the remit of your board, CEO and leadership team and is a discussion actively being pursued.
  2. You need broad engagement – the desired culture and leadership needs to be scaled and permeate every aspect of your organisation. For that to happen you need broad engagement from across all parts of your business.
  3. The importance of measurement – the old adage, what gets measured gets managed and what gets managed gets done. You can measure organisational culture, both in terms of your preferred and actual culture, allowing you to track and measure progress.
  4. Culture change takes focused commitment and effort over time – it is unrealistic to expect that culture change will happen quickly in all contexts and settings, not to say that it doesn’t happen because it has and does. Typically though culture change takes a significant commitment (manifested through investment of time, money and effort) in order to gain a sustainable competitive advantage through culture. In this age where we are being disrupted by technology and business models are being upended over night by new offerings the only truly sustainable advantage is via culture and the people in your business.
  5. Ultimately it comes down to individual awareness, mindsets and choice – individual people, whether it be directors, the CEO or other leaders will ask questions, including of themselves, to create awareness of the existing culture and actively work to shape the culture towards a brighter future. It starts with an inward facing journey and personal change first, before an external journey of change. Ask yourself, what is my sphere of influence? What can I do to shape the culture of my organisation in a positive way? What else can I do? There is always something more.

Nick founded and leads Chrysalis Advisory, providing Governance, Strategy, Leadership, Culture and Business Development Advisory.

If you would like to have a talk about how Chrysalis can support your board or leadership team to actively shape your culture please get in touch.

2018-06-01T09:31:49+00:00October, 19th 2017|