Inside Out Culture

Steering Corporate Culture: The Critical Role of the Board of Directors

• Inside Out Culture • Season 1 • Episode 12

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The board of directors has a crucial role to play in the cultural health of an organisation. Culture is - after all - the way that a company delivers against its targets and yet, boards are still too passive when it comes to culture.

Recent high profile culture failures at the CBI, Post Office and Prince Edward Island University demonstrate the role that boards have in not only ensuring that the health of employees is paramount, but that they safeguard company reputation and results too.

In this episode we discuss the role of boards in relation to culture and talk about the actions they need to take to ensure that value is continually developed to prevent their culture from making it into the media.

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Join us as we reveal strategies to close the gap and craft a workplace where values are not just spoken, but lived and breathed, paving the way for a more authentic and engaging organisational culture.

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Colin:

Welcome to the Inside Out Culture Podcast, where we look at insides of working culture and provide ideas, insights and actions for you to take on the outside. I'm Colin Ellis and I'm Cath.

Cath:

Bishop, and in each episode we'll examine a different question or a different organization, and we'll use case studies, research and our own insights and experiences to help you change the way things get done in your world.

Colin:

We hope you enjoyed today's episode. Please like, subscribe and, of course, let us know what you think.

Colin:

Hello everyone, welcome to another episode of the Inside Out Culture Podcast, and today we're examining and talking through the role of the Board of Directors in upholding culture.

Cath:

It's another big topic, isn't it of culture? That is one of those areas for us to delve into. That is changing. I think it looks different.

Cath:

The question of culture on a board agenda perhaps wasn't even there 20 years ago. Hopefully it's there, although actually research suggests it's still not always on the agenda of all the top boards but certainly the quality of those discussions, the responsibility, the measurements, all of that is in a very fast evolving stage. I've actually come today from being six hours of sitting on an oversight board specifically looking at culture, and this is becoming a concept that is occurring in places where there's been a culture crisis, if you like. That, actually, because of the depth of trying to address cultural issues, shift direction. It can't be done in 20 minutes within a wider board agenda, and so particular attention is given. That means you start to look more deeply at this issue and, yeah, it's something that we see cropping up and you know, whenever there's a crisis, we have to then look at the board's response, because the buck stops there and suddenly they start to realize that we haven't evolved as we should have with this subject. Where have you been seeing it recently?

Colin:

well, I, you know, Catharine I, as part of the research for for my next book. I went because I really wanted to call, because toxic culture is the biggest risk to organizational health in terms of financial health and also, you know, employee. I went and had a look and ernst and young do reports on board imperatives and and almost a third of boards that they interviewed never talk about culture, like just never talked about it. It wasn't even a thing.

Cath:

That's incredible, isn't it?

Colin:

Yeah, it is incredible and, you know, I'm kind of hoping that's changed. In fact, I think it was a fifth. A fifth of them didn't even see culture as a risk, which is crazy, which is absolutely crazy. And then there was a really good paper that I read by Fiona Hawthorne, who was the chief executive and co-founder of Women on Boards, and she really made the point that companies have really got to think, well, how do we get the voice of the employee onto the board such that they can see what's actually going on? And I think a couple of case studies that we'll talk through today, not least the Confederation of British Industry or the CBI, is they didn't have that voice of the employee and really the board is not only the CEO's conscience, but they're also and you said it exactly, it's their job to make sure that they hold the CEO and the senior leadership to account for the culture that they create on their watch, right.

Cath:

So there's an issue about whether culture is on the agenda. There's actually, of course, an issue about the culture of the leadership team, the competence to discuss issues of culture, the composition of the board and whether that qualifies them to understand culture from different perspectives. So there are a number of different layers at which it impacts how a board operates. I was looking up for yeah, where is the sort of the Bible on this or where are there some good kind of frameworks within which to situate our discussions and to think about examples like the CBI, and I found myself turning to the Harvard Law School Forum on Corporate Governance and there they're sort of defining, if you like, what corporate culture is, and they say a healthy corporate culture is a valuable asset, a source of competitive advantage and vital to the creation and protection of long term value. It is the board's role to determine the purpose of the company and ensure that the company's values, strategy and business model are aligned to it. Directors should not wait for a crisis before they focus on company culture.

Cath:

I think it's quite interesting that they put that sentence in we know that that's clearly aimed at quite a few particular organisations and then goes on to say that the board has a responsibility to understand behaviour throughout a company and to challenge where they find misalignment with values or need better information.

Cath:

It's really good. It's quite a brief summary from the report. We'll include a link to it in the notes, but I thought that was quite useful to actually also say the board needs to understand behaviours throughout a company. Now would a board receive information to tell them that? That's a big question. I think the boards are asking themselves what data are they getting and what data do they really need, and that has a big impact on you know, then, the work of the leadership team and how they're. You know how they're tapping into it, how the directors, how the chief executive is leading on culture, but you really want to make sure that is set from the board rather than something that the chief executive is just nudging the board to go. Everything's okay. Actually, the board needs to have a responsibility and a say in that, which I think hasn't always been the case at all.

Colin:

Yeah, no, it hasn't, Cath. And I'm interested that the Harvard piece included the value creation and protection. For me, that's usually why businesses exist, even in the public service. It's still about value creation for customers, community stakeholders, all of these kind of people. And I still think that boards just sit back and wait to be told what's going on rather than take an active interest. The behavior piece is really important.

Colin:

There was a relatively high-profile case in Australia with James Hardy where the board removed the CEO, jack Trunk. The board removed him because of allegations of behavior. Now why and for me I found this interesting and why I found this interesting is in the past, what would have happened and it still happens today is that the CEO in these kinds of environments where there have been allegations of poor behavior, I mean this wasn't anything particularly nasty, he just wasn't a very nice human being. You know he had a culture of fear, those kind of things. There weren't any specific allegations that he did anything heinous, but it was still a really toxic culture that he led and the board sacked him.

Colin:

And what still happens is these guys get paid off with like millions of dollars and then there's some tepid statement put out about a parting of ways and we wish you every success for the future. And employees are sat back going. Hang on a minute. They presided over the worst culture I've ever worked in. But the James Hardy one was really interesting because the board were extremely decisive and actually sacked him based on the culture that he created. And that's one of the first times I really read. I was like, ah, here's a board who really understood its role, aligned to that Harvard paper to safeguard the culture for the many, not the few.

Cath:

And actually that message that you give to the company is very clear that we're upholding the values rather than just moving someone along or aside or shuffling them or actually sometimes taking them onto the board in some places to move around. I mean, I think the board acted pretty swiftly in the case of Tony Danker with the CBI, the Confederation of British Industries, which acts as the voice of British businesses. It used to say it represented 190,000 businesses and is the voice of business to government. It's a very prominent organisation that then suddenly had these stories, allegations around a toxic culture and directly involving the CEO. That was pretty headline news came absolutely out of the blue for the board and suddenly they had to pivot entirely to looking at culture and really have had to do that for the last six months, and you could argue they've had to do that because previously they haven't been putting the time in. So one of the things that Harvard Law School report also says is that boards should devote sufficient resource to evaluating culture and consider how they report on it. And the resource for me is is you know, time as well as money, and you know board time is very, very precious. These are often people with lots of demands on their time and so there can be a tendency then if you can't fit everything on.

Cath:

Previously, culture has sort of fallen off a bit. It's really hard to make decisions about culture quickly because it's quite a deep topic. How do you sum up a company culture which will have all sorts of different strands within it, of people who are thriving or people who are struggling, or people who are being excluded? There are struggling or people who are being excluded. There are so many angles that I think it also takes a board a while to get into a rhythm of feeling competent, around, that they've got the right data, and then to think about what can they discuss if they can't discuss all of it? How are they going to, over time, cover different aspects of culture, maybe looking at values one time, maybe looking at behaviour another time, maybe looking at inclusion another time? How are they going to really delve into that subject continually?

Cath:

So they're building their knowledge all the time. It's a much more infinite part of their agenda, whereas other things will be very time-bound and finite. You know a decision we make, you know whether we're going to acquire a company, or you know on the next sort of growth, goals are going to be set, and that mindset is often where they've been really highly trained and that's sort of what they've been promoted for, that's what's got them in the boardroom. But you need a different mindset. You need what I think of as an infinite mindset, or a human mindset, to be thinking about culture which you can never sum up in a set of figures and which you will never have finished evaluating or understanding. And so I think that's where the language, the competence, the understanding, the rhythm of how a board discusses it can often be quite undeveloped, underdeveloped.

Colin:

And I think, to add to that, Cath, the boards that figure this out. I'm going to come back to the CBI in a minute. The boards that figure this out are the ones that, or educate them to not figure it out. The boards that educate themselves will be the ones that will see the growth that will see their reputations enhanced, that will see their reputations enhanced, that will become known for valuing employees in the way that they should do.

Colin:

Brian McBride so he was or is he probably still is the president of the Confederation of British Industries, cbi. I think it was about this time last year. He penned this open letter because the board were asleep you know on all issues here. But he the you know the board were asleep, the you know on you know on all issues here. But he said you know, once the allegations in the Guardian were surfaced, as a board and a leadership team, we felt our corporate culture was among the very best. It's like, you know, when I'm reading this, I'm like well, why did you feel this? And then he went on. I've got it written down here somewhere. Here we go, here we go. In retrospect, we now know we were complacent.

Colin:

Well, yeah, you were and we made mistakes right. And he said we failed to filter out culturally toxic people during the hiring process. Well, often culturally toxic people don't show themselves in the hiring process. In fact, what we do is we put our best face on and we tell the people who are interviewing exactly what they need to know. We fail to provide proper cultural onboarding of staff. Well, you didn't actually define your culture as Confederation of Risk Industry, so you couldn't really provide a cultural onboarding except give them a leaflet on the values.

Colin:

Some of our managers were promoted too quickly, but I guess the point that I want to make here is every organization's doing this and, from a board's perspective is how do you get the voice, or how are you getting the voice of the employee onto the board? And this is, for me, is one. You know, I did a presentation to boards in Sydney a few weeks ago senior board members and it was great, because here was a bunch of people and this one person said I don't understand what culture is. Can we start there? And it was to their credit that they actually said that, and that goes back to the first episode that we recorded. Kat is why I don't. Senior leaders understand culture, and I think for boards, that's where it's got to start. You've got to educate yourself on what culture is, and then you've got to make sure that around the table is a representative of the employee voice that isn't the head of HR, because they're just going to tell you what they think the CEO wants you to believe, rather than what's actually happening on the ground.

Cath:

So I think that's a really interesting point Also, this sense that culture is everyone's responsibility, which is sometimes said as a bit of a cliche but not lived, and there is a sense that HR are responsible for culture and even that the board would look into the HR and sort of say, this is your issue, rather than actually we're setting, as part of the strategy, the values alongside the purpose and we're role modeling how it's lived and we want to understand how the company is developing that and investing in that and improving in those areas. Yeah, I think it's interesting that letter. I wanted to give Brian McBride some credit for being very, very transparent.

Cath:

They were trying to sort of say, yeah, we've been caught, and sometimes in a crisis like coming clear sort of gets you a few brownie points. I mean, frankly there's no point covering up at that point because they've been so exposed. But I think you're right. There's a real naivety that comes across in his letter around their understanding of culture. Exactly that point around recruitment and onboarding, and as if it's just about what happens in the first two weeks, as if actually the toxicity may well have developed since the people arrived because of the environment.

Cath:

So if we go back to our discussion on the Met Police and our talk about the fruit bowl, what's happening in the fruit bowl that enables the apples to go off quicker? It's that sense of seeing culture as purely about sort of a few bad individuals we need to remove, rather than the environment that is letting those individuals thrive and bring others into that direction. So there's a fundamental lack of understanding of what culture isn't and that's a real issue. Who's the person who's going to spot that? Because if the president isn't at that level, isn't in a way culturally competent, then that's worrying't it for others, because it's gonna be quite difficult for anyone else who sees it to sort of bring them up to speed, and the danger is that then it just isn't a topic at the board or it's not talked about with real in-depth understanding.

Cath:

So I think there is a kind of challenge, isn't there around? You know, how do we educate throughout an organization and how do we make sure that there is that competence within a board? Who's checking that? And I guess that's why these sort of oversight committees are set up. One of the things the CBI has done, as well as refreshing their values very, very quickly, doing quite a few surveys very, very quickly, is to create an external expert advisory committee on culture, which I think has the director from the Institute of Business Ethics. So I guess they're trying to bring in almost that absence of knowledge and experience. But it raises a big question, isn't it? Why haven't you invested in this? Why haven't you seen this as a key capability within your strategy and within the development evolution of the company? You've really kind of had a blind spot here. And what is it that needs to be done to make sure that future board members are brought in with greater knowledge of this?

Colin:

Yeah, the CBI is an interesting case study because, on the one hand, I applaud the fact that they've actually responded to the review that was done. I think that's a you know. At least they've taken action. But they've taken a cookie cutter approach to it and kind of made some of the same mistakes. Their values that they've, you know, refreshed aren't values, they're just single words integrity, respect. You know integrity, respect. They show up in so many people's values and it's just like. Well, you know largely their behaviors.

Colin:

I always say integrity is the thing that you get when you demonstrate the values, which is the thing that we talked about in the last episode. Yes, there's an element of speed in response. We want to demonstrate that we've done this. But for me, where's the continual commitment? How much are you spending on your culture every year? What are you doing? That's different. That's gone before, and this is the thing that I think that all boards need to learn is that culture requires continual investment. Now, if you've never done this before, there's an element of fear. There'll probably be a bit of it saying this sounds like a lot of money. Well, it can be a chunk of money, but the alternative is that you appear in the media for your toxic culture. You lose great people, you lose business, you kind of lose value, kind of what do you want?

Colin:

And I think that a big part of that is, as I said, that start boards educating themselves on what's different, what's new, what's changed, the UK Corporate Governance Code, which kind of sets the tone for how business should be governed. They said that the board should actively assess and monitor culture and that they need to ensure that policy, practice and behavior so like the Harvard paper are aligned to purpose, values and strategy and it should continually seek assurance that the organization is taking corrective action continually, not once a year in an engagement survey or a report. And you know, for me this is a critical change that they need to make. And In my book I call for your internal audit to actually be the ones that monitor culture, not HR.

Colin:

Hr too often is found to be lacking. Also, it's not their responsibility. So I want to do both sides of that. It's not their full responsibility. They're there to make sure there's a program in place, but also they've been found wanting so many times to actually safeguard corporate culture. So this is the challenge for boards is you know, know, because often they're made up of late gen x people, so people probably my age 55 and above whose time at work wasn't spent discussing emotional things. Uh, purpose wasn't really a thing for them, so they have to educate themselves. Um, and I think, if you know to get more, to get some younger people on boards who really value culture and understand why it's so important, could be a first step forward.

Cath:

I was actually at a meeting the other day where I was listening to someone who'd been part of the youth collective at the body shop, where they have brought young people's voices onto the board and it was quite a radical thing to do and met with some resistance, actually thinking about how can you create a board meeting where a young person can come in and not feel intimidated by all these people in suits and talking in a certain way in these sort of long, complex, abstract sentences with lots of additional supplementary subordinate clauses and how can we actually listen to their voice? It was really interesting, very sort of pioneering young woman who'd been really leading it, who worked at the EA to the chief exec, but how powerful that was. But quite a lot of culture change needed within the board to enable that voice to come in. It wasn't just about let's bring the voice in the room. We have to change the room, we have to change how we behave, we have to change things to enable that voice to then be heard.

Cath:

I think you find some organizations are bringing in people from the front line, people on the street, to make sure there's a post office worker sort of on the board making sure, and having shadow boards as well set up. So there are lots of examples now of how you can do different things. But it's important that it actually is taken into the decision making. It's not a sort of token thing. We'll set up a youth board over here to pretend they're a board. You actually need to make sure that they can feed into the decision making and that can feel scary to those traditionally in the board who think, well, they haven't got the qualifications I have and they haven't come the route I've had through the company. But what they bring is such an important different perspective on our fast changing world, on the future of the company, and I think it is really essential. But it's interesting how much the board themselves have to change, I think. Sometimes I just think let's add another seat at the table. No, no, no, that is not enough for that to work.

Cath:

So with all of these things, there's a shallowness and a depth question for a board how deep do you want to understand your culture? Are you happy with an engagement survey? Because that's very shallow and it doesn't really tell you anything. What it gives you is some indications of areas you might want to find out some more information. But back to my favourite topic of metrics that distort us from understanding culture or prevent us or don't give us any insights. We can't understand culture only with numbers. That's my sort of first point. You know we need stories and so we need qualitative information. Of course, that feels very dense, that feels much harder to put in a board pack and to sort through, but frankly, I don't care how difficult it is, because that's the only way we understand it. So we also have to really change our data processes, our means of understanding qualitative data, all of which should actually become easier with AI. But if you're not getting qualitative data regularly, then as a board, I don't think you're getting anything that's helpful at all. To really be able to take a temperature check on where the culture is and understand it in terms of lived experience, is and understand it in terms of lived experience, beliefs, behaviours, that will give you a sense of if it's in, you know, within the boundaries you've hopefully set within your strategy and values, and that you know if you've got clarity of that to start with.

Cath:

So there are questions for boards how deep are we willing to go, you know, and the timescale in which we want to operate? Because I think again. In a way I think the CBI had a choice Do we really look at this as a two-year project to get some deeper change or do we try and do it in six months? And they went for the latter. And of course they felt pressure because companies were leaving them and they felt they needed to really shore things up because there was a big gaping hole in the hull of the CBI boat. But I fear that means you know they've done it at quite a shallow level.

Cath:

As you can kind of see when you read the values, most of the information they've done has been through survey.

Cath:

I think that can be really quite limiting. I mean, my fear is if they're not now backing that up with a much deeper you know set of you know work that needs to be threaded through the way management is happening, the conversations, the line management, and the board needs to be much sort of closer in themselves, taking part in some of that, then I fear that hardly anything will have changed and then you're sort of just going to go around the loop again at some point. So I mean, I guess that's the other thing for me. Is that a board? I don't think you can sit in your boardroom to assess data, even with good qualitative data. I think you've got to have had a feel, you've got to have sat with some teams, been out there, been on the field. That is also a change of commitment, of the style of being a board member. So I think that's something that companies need to think about as well. You know the sort of terms of reference, what it looks like to be a board member these days.

Colin:

If we're going to take culture seriously, yeah, the session that I did in Sydney and someone said, okay, well, what are some recommendations? And I said, listen, the concept of a board in a board room is very 1970s. You're all sat around drinking whiskey, smoking cigars. It's very 1970s. The board should be front and center of the business. You should be out talking to employees. It's like often when the CEO does these all-hands meetings where they bring people together once a month to talk about what they're doing, and culture should always be on that agenda. It's like it'd be great to see the board there interacting with members of staff. They have to recognize that the world has fundamentally shifted. Boards have to recognize that they are on the hook for culture. No more can they just sit back and wait to be told stuff. You know we saw this with the post office scandal, with ed davy as the post office minitor and I remember, gosh, yeah he said you know, we failed to see that through the post office lies.

Colin:

It's like well, no, you didn't ask the right questions, you weren't boots on the ground, you didn't go and speak to postmasters. You should have done that. And that really speaks to how the world has changed, how our view of culture has changed and the skills required to be a board member are no longer what they were. They have to take an interest in human factors, because that's where their reputation and their legacy is now made.

Cath:

I think it's a really exciting opportunity.

Colin:

Yeah.

Cath:

I like to let's finish some more optimistically. I like to think that, if boards can really grasp this, there's an opportunity to accelerate the rehumanization of our organizations, to make sure that there is a slightly longer term view of, uh yeah, creating value, and so, yeah, I like to think there's a real opportunity and that and that boards will will start really grasping this and reaching out and wanting to educate themselves and seeing this as a way of creating greater competitive advantage and securing the future of the company. So there's a huge opportunity here for boards as well.

Colin:

Yeah, I agree.

Cath:

Right, we've reached that point.

Colin:

But before we get to that point, Cath, I know that the second version of your book is coming out, so we should totally just plug that before we do our three takeaways. So this if you haven't read Cath's book, it's called the Long Win. I read it not so long ago and it's absolutely brilliant and actually it talks about why a longer term investment in culture is crucially important for consistent kind of success. So tell us a little bit about the second edition, Cath.

Cath:

Yes, so it comes out on Tuesday, the 21st of May, and it is a refresh of the stories, the content, plus an extra chapter in which I talk about the long winners.

Cath:

So a range of long win leaders from across education, sport, business, public life, which are the sort of different worlds in which I explore how we define and pursue success and how we should find some better, longer term ways to do it. And, yeah, it's really to help us think about that vision piece, the culture as part of that. You know, the board's responsibility for defining success of the company in a way that has clarity of meaning. That means we're constantly evolving and that we are really humanizing the connections, the relationships that are part of our organization. So, yeah, it's absolutely got culture at the heart of it, and I really wanted to bring out a second edition with my publisher because it feels that it's still helpful. It's a conversation I keep having. People keep finding it, and so, yeah, the other books inside my head are just kind of on hold for a bit. I'm really keen to reach some more people and continue to have these conversations about how we can redefine success to help us thrive over the long term.

Colin:

Perfect. So if you haven't read it, go and buy it. Second edition out end of May. Right, three takeaways from today's podcast Cath. What do we want people, or what should people do?

Cath:

Yeah. So our action one is to make sure, first of all, culture is on that board agenda. That's actually a sort of mini first step. The second one is to build the quality of that discussion. So it is constantly evolving, deepening and making sure that it's a meaningful culture discussion. And go and work out what that is. If you're not sure what a meaningful culture discussion is, start having that discussion as well. So second thing is getting curious.

Colin:

Well, I think boards should get curious about the metrics coming their way. You mentioned this, Cath. Yes, the engagement score. It's very good having that number, but for me, what sits behind that number? What's the real story, what's the commentary from staff? And the board should get really, really curious about what are the themes that we need to be aware of and then, potentially, what's the action that we may need to take.

Cath:

Yeah, it's a good one. Yeah, getting curious about those metrics and whether you need some different information.

Colin:

Yeah, yeah, that's right, yeah, ask for more. Yeah, yeah, yeah.

Cath:

And, yeah, let's uncover how our boards currently are understanding culture and understanding their responsibility for culture. So again, a kind of two-parter on that one. Let's uncover at the moment, what do our board understand of the culture of our organisation and even themselves, what's their sort of competence to understand culture and how do they see their responsibility and how they're going to enact their responsibility for culture. So really sort of digging into what does it mean that our board has got culture as something it's responsible for. Let's really understand where they're at so we can then move it on.

Colin:

Fantastic and I think we should finish on a positive. I want to reiterate. What you said, Cath, is this is a fabulous opportunity for anyone who sat on a board to really educate themselves and become the board of the future that we need as a real culture focus. Fascinating discussion, Cath.

Cath:

Thank you so much. I enjoyed it. See you next time. Thanks for listening to today's Inside Out Culture.

Colin:

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Cath Bishop

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Colin D Ellis

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