Author's Name: Mark Schultz
Date: Sat 21 Oct 2017

Organisation culture – why it is so important.

The word “culture “ has been bandied around a lot today, from referring to an organisation as having a “ toxic culture” to claiming a football club has a “ winning culture”. The fallout from the behaviour of the Commonwealth Bank has been considerable, with many Australian leaders blaming an inappropriate culture as the cause of most of its woes. I suspect on many occasions it is a superficial and popular way to explain a complex environment, however there is little doubt that culture does play an important role in the creation and maintenance of a successful organisation. For a non-profit business, (or any other type of business for that matter) governed by an independent non-executive board of directors, where does culture sit on the responsibility and management chart?

A definition

Firstly, what is the definition of culture? A google of the word will send your mind into a spin, so a simple definition may help set the baseline for a discussion around the board’s responsibility in relation to corporate culture. Culture can be defined as “the way things are done around here” or “how people behave when no one is looking”

Unlike fixed assets or products, culture cannot be readily identified; however it has been determined to be the single most important components of organisational success and sustainability. Why is this so?... a competitor can readily replicate products and services, can easily understand and copy a marketing strategy, steal your customers/clients through various means and poach your best staff through offers of wealth and glory, however your culture is yours and yours alone and cannot be copied or stolen. Culture is innate; it’s understood by all and managed by all in an organisation. It is how people behave as a matter of course because “that’s the way things are done around here”.

From a board’s perspective, the creation and maintenance of the “right” culture starts with individual and collective behaviour

The board’s role

Peter Drucker, one of the 1st great thinkers and writers on business and management, made this observation - “culture eats strategy for breakfast.” Given that a board of management/directors is responsible for the viability and sustainability on their organisation, detailed below are a few ways in which a board can contribute to creating and maintaining the right culture and therefore fulfil one of its primary responsibilities:

  • Develop, articulate and live according to an agreed set of values and principles – all board behaviour, both individually and collectively, should be consistent with these values. There is no “ opt in, opt out” clause when it comes to accepted behaviours and standards and the board must set the benchmark in this area;
  • Appointment of the CEO – as this is the only appointment that the board makes, the person the board choses for this role must be aligned with the culture that exists (if it is the right culture) or be the right person to create a new culture as defined by the board. The behaviour of the CEO will set the benchmark for those who both directly and indirectly report to this role;
  • Reward and recognition systems – what a board rewards will be what an organisation focuses on – chose carefully, for the reward and recognition system will underpin and drive behaviour and therefore must be consistent with the values system;
  • Leadership v Compliance – Leadership is about doing something because it is the right thing to do whereas compliance is about doing something because it has to be done. Both achieve the same outputs ( ie a risk management plan, a performance review, ) but very different outcomes. Leadership provided by the board in terms of best practise, values based decision –making and integrity in the way business is conducted will provide every clear and unambiguous direction to the whole organisation in terms of behaviour and culture.
    External behaviour – a director cannot have 2 sets of standards, ie behave one way when a board member and another when an ordinary citizen in another environment. If there is a conflict between roles for an individual board member, then a choice must be made, for nothing destroys culture quicker than conflicting behaviours and mixed messages by the leadership group.
  • Monitoring & evaluation - whilst an organisation’s culture may be something that cannot be readily identified, this does not mean that the board does not or cannot take steps to monitor performance in this area. Simply taking verbal advice that “all is ok” is not acceptable as I’m sure these comments have been uttered in past organisation “train wrecks”. Therefore the board must put in place evidence based systems that enable it to assess alignment between what is articulated as the preferred culture and what is actually happening on the ship floor. Surveys, focus group, advisory groups, individual and collective meetings are just a few ways that can assist a board assess actual performance and provide some comfort that the right culture is being promulgated and delivered throughout the organisation.

In summary, board members in non-profit organisations are generally part-time, non-executive leaders. They carry considerable responsibility and accountability, both individually and collectively for the long term success of the organisation they govern. If we accept the premise that culture is a key ingredient for viability and sustainability, then the board must play a leadership role in both the creation of the right culture and the maintenance of that culture during their custodian period as a board member. Culture is as important as financial management, strategic planning and performance management, so if your board does not have a handle on your establishment’s culture, then action should be taken, sooner rather than later, to elevate culture to its rightful place in the governance’s practices of your organisation.

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