By Johnson Manyakara

Increasingly, questions are being asked about whether Boards have a role in the management of organisational culture. One view is that their focus should strictly be on exercising an oversight role in the achievement of financial outcomes such as revenue growth, profitability, share price, return on capital employed, etc., and, for service organisations, service delivery. The other view is that Boards’ oversight role should be exercised, in equal measure, to organisational culture outcomes such as organisational adaptability, innovativeness, customer centricity, ethical ways, teamwork, employee engagement, etc. I subscribe to the latter view. Around the world, interest in organisational culture right now is very high. Why? Because organisational “culture touches every aspect of the organisation:  strategy, business processes, employees – it’s in everything” – Human Synergistics International

Organisational Culture Defined

Organisational culture is a combination of values, attitudes and behaviours manifested by an organisation in its operations and relations with its stakeholders. Aristotle said, “We are what we repeatedly do”. What employees at all levels in the organisation repeatedly do is informed by the expected behavior that has been woven into the fabric of the organisation’s culture. As role models, Board members must demonstrate leadership as far as an organisation’s culture is concerned.

How Organisational Culture Plays Out

According to Human Synergistics International, organisational culture plays out not only in the organisation’s day-to-day operations but also in the boardroom.

In Day-to-Day Operations

Typically, organisational culture plays out under the situations below:

• When someone deals with a customer
• When mistakes are made
• When problems arise
• When priorities need to change
• As information flows around the organisation
• When decisions need to be made
• When unsafe work practices are easier than the safe approach
• As we handle people who are “different”
• When one wants to get noticed
• As we treat our suppliers
• As we treat each other

In the Boardroom

• The relationship between culture and strategy as the former drives the ability to execute the latter
• How executives behave when attending Board meetings
• How effectively Board papers are prepared and how helpful they are to Board members
• How Board members behave during Board meetings
• Communication (written and face-to-face) between executives and Board members

Role of Boards

The role of Boards in organisational culture can be summarised as follows:

Demonstrating Leadership 

Board members must embody the desired culture, embedding this at all levels and in every aspect of the business.

Recognising the Value of Organisational Culture 

A healthy organisational culture is a valuable asset, a source of competitive advantage and vital to the creation and protection of long-term value. Boards should not only determine the purpose of the organisation but should also ensure that the organisation’s values, strategy and business model are aligned to it.

Being Open and Accountable 

Openness and accountability matter at every level. Good governance means a focus on how this takes place throughout the organisation.

Embedding and Integrating 

The values of the organisation should inform the behaviours which are expected at every level of the organisation. The voices of human resources, internal audit, ethics, compliance and risk functions should be strengthened in the boardroom.

Assessing, Measuring and Engaging 

There is an old saying, “What gets measured gets managed”. Boards need to play an oversight role in assessing and measuring organisational culture and engaging the EXCO in any gap closure interventions. Indicators and measures used should be aligned to desired outcomes and be material to the organisation.

Aligning Values and Incentives 

The performance management and reward system should support and encourage behaviours consistent with the organisation’s purpose, values, strategy and business model. Boards are responsible for clearly explaining this alignment to shareholders, employees and other stakeholders.

Exercising Stewardship 

Effective stewardship by Boards should include engagement about organisational culture and encourage better reporting.

The era for an obsession by Boards with exercising an oversight role strictly on financial outcomes and service delivery is, clearly, over. Due regard should now be given, in equal measure, to Boards’ oversight role on organisational culture outcomes, enablers for financial and service delivery outcomes.