How to get proactive on corporate culture

How to get proactive on corporate culture: a governance education guide to one of the most crucial aspects of leadership.

Corporate culture—that invisible operating system of your organisation—sounds like a soft topic to many. Unfortunately, those people have never seen the fallout for when corporate culture fails completely. When that happens, “soft” is the last word you’d choose to describe it. 

Realistically, culture is a primary driver of risk and value. For boards and executives, culture is a core part of fiduciary duty. They need to demonstrate a functioning culture to shareholders and support it among employees. 

The sad fact about culture is that too many organisations are still thinking reactively. In other words, “we’ll sort a problem when and if it arises”. This doesn’t usually end well, and it underlines the necessity of thinking proactively from the moment you start making key organisational decisions.

Culture can seem convoluted when you start to think about the many factors feeding it, but at its core, it’s the sum of written and unwritten rules which govern how your company behaves every day, especially when no one is watching. From this, it should be obvious that bad culture creates a serious risk.  

Globally, regulators often make it clear that poor culture is the root of misconduct, financial misstatements and operational failures. They also stress the fact that culture is absolutely an accountability item for boards and executives. In other words, the people in charge expect you to be proactive about it.

High-performing companies have strong, deliberate cultures. Culture directly impacts:

• Talent: It dictates your ability to attract, retain, and develop top people. This varies as job markets grow and shrink, but the underlying principle remains that people will always seek to avoid or leave bad cultures. 
• Strategy execution: Even a brilliant strategy will fail if the culture is not aligned to support its execution (e.g., a culture that fears failure will never innovate).
• Reputation and trust: In the age of instant communication, one cultural failure can erode decades of brand building

It’s crucial because a reactive approach is always too little, too late, and obscenely expensive – not just in terms of money, but trust as well. 

Waiting for a major incident means you always start addressing culture in damage-control mode. This is a mode fuelled by panic amongst stakeholders, ill-informed decisions, and a lack of control over any public narrative that develops. 

A proactive approach, however, turns culture into an asset:

• It provides an early warning system. You can see elements of your culture that may likely cause a problem. 
• It aligns behaviour with strategy. Adhering to cultural principles when all is going well sends a powerful message to employees and other stakeholders. You’re committed in principle and not just because there’s a problem. 
• It demonstrates leadership and diligence. For regulators and investors, genuine, proactive effort on culture is seen as a hallmark of robust corporate governance. It shows the board is truly in command.

You cannot manage what you have not defined. Stop using terms like “integrity” without being specific, because someone will eventually call out its vagueness otherwise.  The board and executive team must collectively answer: “What specific behaviours and values must define us to succeed strategically and ethically?” 

When they do, they should come up with a tangible strategy to turn principles into a working reality. Boards and executives often miss this step, thinking that once they’ve defined the principles, they can pride themselves on a job well done.

Go beyond any annual surveys or other feedback methods. While they’re important, they don’t address the need for culture to be a day-to-day task. 

Practical tips include:

• Start using cultural metrics as a regular dashboard item that features on boardroom and management agendas. These include barriers delaying core tasks, employee capacity assessments, personal check-ins and follow-through on complaint procedures. 
• Thoroughly analyse voluntary turnover rates. Zone in on things like departmental frequency, tenure and performance measured against job descriptions.
• Get to the bottom of compliance failures: Not just the number, but the type of failure, which often indicates poor underlying control culture.

As with most boardroom hot topics, you should never treat culture as a side project. It must be a formal item on your agenda and fully integrated into your strategic plans. How do other elements of strategy affect it, and how does it affect those other elements? 

It’s cyclical and deserving of proper integrated oversight.

The fastest way to erode culture is to reward bad behaviour. If you promote a top salesperson who cuts corners on compliance, you signal to the entire company that performance trumps integrity.

The best way to avoid this is to constantly review performance and measure it against values as much as you do against targets.

Some of the above points might seem specific and outside the board’s or executive remit, but the critical thing to remember is that culture starts at the top. If the board and executive team do not model the desired principles, no one else will.

A passive stance on corporate culture is a ticking clock. It places your organisation at unacceptable risk, handicaps your strategic agility, and undermines investor trust. For corporate governance professionals, moving to a proactive, data-driven approach is the most critical strategic move you can make today.