Building a Culture of Resilience: Insights from IGLC
In a thought-provoking keynote presentation at the GIA International Governance Leadership Conference (IGLC) on August 28, 2023, Professor Julian Birkinshaw, Vice-Dean & Academic Director at the Institute of Entrepreneurship and Private Capital, London Business School, delved into the persistent issue of executive misconduct and corporate fraud. Drawing from his extensive 25-year career dedicated to understanding corporate wrongdoing, Birkinshaw underscored the critical need for cultivating a culture of resilience within organisations to combat this never-ending problem.
The session, chaired by Simon Berglund, Senior Vice President and General Manager, APAC, Diligent, commenced with a candid analysis of the drivers behind executive misconduct. Despite the advancements in governance structures post the Global Financial Crisis of 2008-2009, instances of corporate wrongdoing continue to surface, necessitating a deeper understanding of the psychological underpinnings. Birkinshaw identified there are many reasons for bad behaviour such as having a compromised moral compass, turning a blind eye and genuine ignorance. Ultimately though, all reasons can be categorised into two primary motivators: fear or greed.
Central to Birkinshaw’s presentation was the assertion that while enhanced governance frameworks are crucial, the ultimate solution rests in nurturing a culture of “resilience.” This culture empowers individuals across all hierarchical levels to internalise the long-term objectives of the business and make choices aligned with these objectives. Birkinshaw highlighted the significance of individual accountability and ownership as essential components of this culture.
At the heart of his approach was the integration of the “goal-framing theory,” which posits that individuals have three fundamental goals – hedonic (immediate pleasure), gain (resource enhancement), and normative (behaviour aligned with expectations) goals. Birkinshaw emphasised the necessity of prioritising normative goals to encourage ethical behaviour while suppressing the influence of fear, greed and immediate gratification.
Birkinshaw outlined a dual-pronged strategy for fostering this culture of resilience:
- Operational resilience; and
- Strategic resilience.
In terms of operational resilience, he elucidated how highly reliable organisations exhibit attributes like building cross-functional relationships to enable learning, deference to expertise and the absence of oversimplification. These attributes collectively contribute to an environment where ethical considerations are prioritised.
Shifting the focus to strategic resilience, Birkinshaw presented four key attributes for organisations to consider. These include sensitivity to a changing context, a clear sense of identity through a well-defined mission, sound financial practices and a tolerance for unorthodox perspectives. He advocated for a move away from bureaucratic structures toward meritocracy and adhocracy, which encourage experimentation, innovation, and direct engagement with customers and partners.
Addressing the question of how to measure and report on organisational culture, Birkinshaw stressed the need for a balance between support and trust on one hand and stretch and discipline on the other. He underscored that an effective high-performance culture emerges from this duality. Moreover, he suggested that cultural assessment should be differentiated by organisational levels, asserting that a consistent culture across levels translates to better organisational performance.
The keynote presentation provided attendees with a comprehensive understanding of the multifaceted issue of executive misconduct and corporate fraud. Birkinshaw’s insights emphasised that while regulatory and governance structures play a crucial role, the bedrock of sustainable change lies in the development of a resilient culture that aligns individual behaviour with long-term business goals. As the keynote session came to a close, attendees left armed with actionable strategies to foster such a culture within their organisations, signalling a step toward a more ethical and accountable business landscape.
If you would like to learn more about how to enhance your organisation’s culture of compliance, register to attend Diligent’s upcoming event, Diligent Connections, taking place on 19 October in Sydney. The premier event provides GRC professionals the opportunity to hear from industry leaders and technology experts on a range of engaging governance, compliance, audit, risk and ESG-focused topics. The event is certainly not one to miss!