United States: Corporate Culture And The Board Of Directors' Strategic Role

"Corporate culture can no longer be considered as a soft issue by management and boards. Its strength or weakness has a lasting impact on organizational performance and reputation. The oversight of culture must be a key board responsibility, as it is inextricably linked with strategy, CEO selection, and risk oversight."

The NACD Blue Ribbon Commission Report on Culture

In today's global and transparent world where companies are under a microscope more so than ever before, leaders must forge a delicate balance between confidence and vulnerability, express hope and optimism, and get engagement back on track to succeed. Boards and company leaders who are focused on the strategic growth of their enterprises have a responsibility to create and foster innovation, engagement, and profitability, yet they often focus on only one or two of these with any real commitment. To create balance and achieve success in all areas, companies must create and promote a healthy corporate culture.

The Culture Imperative

Creating a healthy, inclusive, diverse, and respectful corporate culture is imperative for companies that want to be competitive in today's and tomorrow's market. Millennials have surpassed the Baby Boomers as the largest working generation, accounting for 33 percent of America's workforce. By 2020 that number will increase to 50 percent.

This shift in workforce composition and generational power means corporations must change how they define success. Millennial professionals are not only pickier about what companies they will buy from, but also more selective about what companies they are willing to work for. This new working generation values corporate social responsibility, diversity and inclusion, and work-life balance more than their predecessors. Studies suggest they are even willing to give up thousands of dollars in salary to work at an enterprise with a culture matching their values.

Be Intentional About Culture

Many boards refuse to recognize cultural challenges as being too far down the food chain to merit their oversight. But it is essential for leadership to recognize that a strong corporate culture can unify and reinforce the elements of the strategy and business model, while a dysfunctional culture will undermine the model and pose a risk to the future success of the enterprise. Healthy leadership and a shared vision of well-communicated values, starting at the top, is a key driver of culture.  

According to the National Association of Corporate Directors (NACD), corporate culture should be viewed in the same way as product quality or R&D. Essentially, culture is an asset, and adequate time and attention must be given to the development and maintenance of all assets, human capital or otherwise. A robust corporate culture forces engagement, which is at the heart of collaboration and teamwork and is essential to success. Organizations should appoint, empower, and define the role of a chief engagement officer who can focus on the purpose and passion of the most valuable asset of the enterprise: its people. This new "CEO" can help enterprises navigate the ever-changing social values and attract and retain the younger generations who will become the future leaders of the company. 

Building a New Dialogue

Boards and leaders today are over-focused on risk management and under-focused on opportunity recognition and the importance of an actively engaged culture. As the NACD pointed out, directors and company leaders should take a more proactive approach to cultural oversight to achieve a level of discipline that is comparable to the management and control of risk.

To increase engagement and approach cultural change head-on, leaders must first start with an honest reexamination of their management styles, and recognize that some change is critical for a successful future. Today's leaders who foster and inspire engagement and innovation must also embrace humility, admit errors, and be willing to share the limelight. Leaders (and employees) need to recalibrate expectations and adjust to the new realities of the marketplace and the workspace. A new dialogue needs to be established. Fear, ignorance, and ambivalence often act as a catalyst for complacency and disengagement. A company stuck in the past, and unwilling to adapt to today's demands, will not succeed.  

One of the essential roles of the board is to weigh in on the company's goals and objectives and hold the leaders accountable for the achievement of these plans. Asking the right questions can help boards better understand the current situation and better position themselves for evaluating future possibilities. "Culture manifests itself in many different ways and places around an organization [and] the boardroom is the natural place where all those threads come together" (NACD report). The productivity of each employee team is directly aligned with the clarity of the strategic direction, which leaders should communicate on a regular basis.

Culture Provides Human Element in an Uncertain Future

In the coming decade, artificial intelligence (AI) and robotics will likely play an even larger role in the workforce; boards and leaders who are unable to recognize the future changes will struggle to create and maintain a human element in their culture, and will fail to attract eager and engaged employees. The strategic direction of an enterprise must be flexible and open to future changes and technological advances, for those that are unyielding will snap under pressure.  

When it comes to the future of the enterprise,  including changes brought about by technology, leaders must be direct, honest, and genuine; tell the truth and tell it often. If you don't know what the future holds, say so. Honesty, at all levels, allows for quicker, more-informed decisions. Be committed to building a culture where truth-telling is a core value, both externally and internally. Honest governance opens truly new ground that holds profoundly important potential and which can significantly impact employee engagement and loyalty.

In today's dynamic environment, capable corporate governance is every bit as much about superior leadership and people as it is about sound judgment and inviolate ethics. Healthy boards lead to healthy leaders, which in turn will foster and maintain a healthy culture and engaged workforce today and tomorrow.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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