Corporate culture: It’s time for boards to dress for success
Sponsored content by Diligent
Debates about regulating organisational culture are frequently dogged by the assertion that it’s impossible to define good culture, let alone prescribe it.
That’s like saying there can’t be rules that people must wear clothes because everybody is a different shape or size. They need to be dressed and it’s easy to see when they’re not. Everything else is a matter of judgement.
Whether an organisation’s culture leaves it exposed is harder to discern. One size clearly doesn’t fit all, but strong cultures still share much in common including a foundation in respect, integrity and trust.
Improving corporate culture is a major priority for boards. More than 90% of directors say their boards are trying to change their organisation's culture, according to a recent survey. It’s hard to imagine any other area where the drive for change is so widespread. But that’s where agreement often ends.
Regulators including ASIC and APRA are making it clear that boards and management are responsible for embedding and monitoring a positive culture.
News that ASIC is having a behavioural expert observe board meetings at 21 major Australian companies has sparked intense discussion, but it’s not entirely surprising. APRA reviewed the governance, culture and accountability self-assessments of 36 financial institutions and found boards and executives were often positive about their own performance despite identifying significant organisational weaknesses.
Boards that are happy to set the tone from the top but confine their oversight to lower levels will face greater scrutiny from regulators, shareholders and the community.
Greater consequences are also likely to follow, with ASIC adopting a ‘why not litigate’ approach to enforcement. APRA has imposed additional capital requirements on organisations displaying governance and cultural shortcomings.
Boards who aren’t actively involved in setting, monitoring and improving their organisation’s culture will find they’re emperors who need new clothes.
Diligent’s report offers practical advice and specific examples of how directors can improve organisational culture based on our unique Culture Compass model:
Join in (red)
Model every aspect of culture in the board’s own operations and behaviour.
Look out (dark red)
Monitor information from beyond the management team and outside the organisation.
Get down (blue)
Go into the business to find out what is happening and connect with a mix of people.
Follow up (grey)
Take swift, decisive action when warning signs are identified.