Culture drives success: The board’s role

A board has many responsibilities, but nurturing the culture of the organization might be the most important one of all

Boards must ensure that they nurture, measure, and manage the cultures that drive their organization’s behaviours for many reasons but perhaps the most important one is that the vast majority of failed business initiatives derive from misalignment between culture and strategy. More than 75 percent of strategic initiatives fail because of cultural barriers – as many as 90 percent according to a 2022 Forbes study.

Culture is tangible: when you walk into ana office or a plant, you can feel it, hear it, and see it. Culture is how things get done, how people speak with one another, and how people are rewarded and is comprised of pervasive mindsets, beliefs, and values that drive how people behave – and behaviour drives business outcomes. 

Culture is not the same as engagement – which measures how an individual feels about their work and their team.

One way to think about the difference between culture and engagement is to consider the passengers on the Titanic on the evening of April 14, 1912. They were completely engaged: the setting, the music, food, and champagne were fabulous. It was the culture of White Star Lines – the owner of the Titanic – that caused so many deaths that night. White Star Lines’ culture prioritized passenger enjoyment, i.e., profit, over safety. Too few lifeboats were on board, lookouts had no binoculars, and the materials used to build the ship were sub-standard.

Because boards are responsible for strategy and its execution, every board member has a role to play in supporting a positive and constructive organizational culture.

But what does that look like in practice?

Why is organizational culture important?

Maintaining, supporting, and amplifying the culture of an organization is foundational to success. If what leaders talk about, what they value, and how they behave isn’t consistent with stated goals, then the strategy will not be executed.

Workplaces where bureaucracy, lack of trust, harassment, discrimination, poor leadership, and low productivity persist will never produce the best work.

In contrast, a strong culture plays a key role in attracting and retaining employees and in supporting a responsive and inclusive work environment. Employees today are much more willing to change jobs or quit quietly, and younger people are very clear: they want to work in an organization whose values they can embrace. 

Increasingly, we see a direct correlation between inclusive, healthy workplaces and positive outcomes: productivity, retention, employee engagement, and financial success.

If the organization doesn’t have a culture built on entrenched positive values – and the metrics to track their strength – leadership will struggle to reach strategic goals and risk losing the employees they’re counting on to reach those goals.

Moreover, regulators and investors are beginning to hold organizations accountable for their cultures as they evaluate and track risk, compliance, EDI, and ethical behaviour. Of note is the fact that internal auditors increasingly are carrying out engagement, culture, and EDI audits.

What role does the board play in overseeing culture?

Boards are rightly reticent to interfere with day-to-day operations. But their role includes strategy and risk oversight. Boards are, therefore, entitled not only to have a sound understanding of the organization’s culture, but also to demand changes if there is a risk that strategic objectives will not be achieved because of cultural barriers.

While boards have been encouraged to think of their roles as “nose in, feet out,” increasingly, this looks more like “shoulders in.” While not interfering in management decision-making, they should be asking forward-looking questions about employee turnover, the employer brand, whether company values are being lived – all questions related to organizational culture and its ability to advance strategy.

What can you do?

Boards are most comfortable dealing with hard metrics related to performance and risk. Interestingly, many of the factors associated with culture can be measured and tracked. For example:

• Boards should require leadership to identify values —and to define how those values will be actioned in the workplace—to ensure that they contribute to the organization’s success. More specifically: What behaviours will be encouraged or discouraged? How do they want people to communicate with one another? How will suppliers, partners and customers be treated?
• Boards should insist that management has ways to track whether behaviour reflects their espoused values, and that incidences of harassment or exclusionary behaviour are reported and dealt with effectively.
• Boards should measure and monitor employee turnover, engagement, diversity, and other talent metrics on a regular basis and tie these results to executive accountability. For example, the organization should conduct exit interviews with employees who departs voluntarily, and this intelligence should be related to the board regularly. Similarly, all incidences of wrongdoing or harassment should be reported, along with statistics around closure.

Monitoring the culture in tandem with progress on strategy should be on the agenda of every board meeting

Measuring culture directly is also possible. For example, the Barrett Values Assessment is a highly reliable, independent, third-party tool to measure the health of organizational culture. The Assessment asks three straightforward questions of every person in an organization: “What are your personal values?”, “What are the values you see in the organization currently?”, and “What values would you like to see expressed in the future organization?”

Put simply, the extent of the “distance” between personal values, what values are being lived today, and aspirational ones for the organization provide a measure of unproductive work: what is called “entropy.”

Measuring entropy, combined with in-depth qualitative investigation, enables leadership to define the current culture and pinpoint where challenges exist – by department, tenure, age, and geography—and to compare their results with other organizations in their sector. Armed with these insights, a roadmap for improvement, involving employees at many levels, can be defined, providing the board and leadership with tangible platforms to carry out open and ongoing conversations about cultural health.

MNP advisors are highly skilled in helping organizations define and evaluate the state of their organizational culture with broad and deep buy-in. Our professionals can assist in helping senior executive and boards institute methodologies and practices to instill and foster values that will drive organizational success.