“It’s just the way we do things around here” is what is often said to explain away the culture of an organisation.
Culture may be a broad concept, ambiguous and to an extent intangible, but it is critically important.
Increasingly, we are seeing financial regulators like ASIC take an interest in culture and its links to conduct and compliance. Culture has become central to discussions of how business operates, particularly in light of a number of recent governance failures to hit the headlines.
Earlier this month, ASIC Commissioner Cathie Armour GAICD spoke at our Directors’ Briefing in Darwin on the importance of a healthy organisational culture and why directors and executives alike should move beyond a “checklist approach” to regulatory compliance, to one that addresses an organisation’s purpose and behaviours.
Armour, along with panellists, Megan Lawton GAICD, 2015 Telstra Business Women’s Award Finalist, John Cossons MAICD, Chair, People’s Choice Credit Union and Professor Ruth Wallace MAICD, Director, Northern Institute at Charles Darwin University, shared their expert insights on nurturing, maintaining and tracking culture.
Key messages for boards and executives included:
Find your culture
Culture is not one-size-fits all. For culture to flourish it first needs to be defined, agreed upon and its implementation planned.
It is important to mould your culture around your organisation’s fundamental purpose and its mission. For those re-evaluating their organisation’s culture, identify if there is any discordance between the currently prevailing culture and the desired culture.
You need to know what you are doing, why you are doing it and how you are going to get there.
Make the right cultural choice
One of the principle ways the board sets the tone of the organisation is through the recruitment and appointment of the CEO. It is critical that the newly appointed CEO is chosen because their values align with the culture of the organisation.
Protocols – while not exclusive to ensuring good culture - are important in setting the cultural direction of the organisation, so that everyone understands what you stand for.
Convening a nominations committee, for example, creates an objective process into something that can become awfully subjective. It forces candidates to clearly spell out their knowledge, skills, attributes and values and for recruiting organisations to check these against their own values.
Ask the right questions of your organisation
The board’s role is to not only set the tone of the organisation but to also oversee its culture.
For non-executive directors in particular, it may be challenging to know what’s really going on in the day-to-day. Spot red flags like inconsistencies and decisions that clash with your stated values by asking the following questions:
- Is culture a regular feature on the board and audit committee agenda?
- Has the culture of the organisation been independently assessed? What were the results?
- Do the organisation’s stated values actually stack up to the experience of customers and employees?
- Has the board heard from key employees besides the CEO?
Find a full list of questions posed by ASIC chairman Greg Medcraft in his 2016 speech, Tone from the top: Influencing conduct and culture.
Consider ways to monitor and measure
The business of monitoring and measuring the cultural health of your organisation is multiplicitous.
Establishing a code of conduct, compliance program and a range of other policies and procedures, while recommended, does not spell the end of measuring and monitoring culture. Similarly when using employee surveys, customer complaints and audits – it’s what you do with the data that counts.
Walk the talk
Finally, for good culture to stick, boards and senior executives should lead by example.
Boards should carefully consider how they conduct business and make decisions: what it says, what it does and what it expects from the organisation sets its cultural tone.
Similarly, senior management are responsible for creating and communicating strong organisational values so that all employees are empowered to ‘do the right thing’.
Read Cathie Armour’s speech on Improving business through compliance: A regulator’s perspective.