When corporates fail, it’s not generally because they have no governance structure, procedures or internal controls. What’s often lacking is the right culture – a culture of challenge, accountability, independence and openness.
Culture is King. It always has been but the recent global downturn and the string of high profile corporate blunders mean that organisational culture has never needed to be in sharper focus. And it’s board culture that should set the tone from the top and drive the culture in the rest of the organisation.
Broadly, there are four broad types of board based on how challenge and support figure in their culture. The goal is the Engaged Board where there’s a healthy board culture with highs level of both challenge and support in the boardroom.
The benefits of being an Engaged Board are clear: better decision making; early and rigorous discussion of challenging situations strengthening risk management; greater success in innovation and new ventures; and setting the right example for the rest of the business.
Alas, not all boards are engaged.
Some are “cosy” where board members are reluctant to engage with difficult issues or to challenge the executive which is likely to lead to problems building up before they are tackled. Others offer a low level of support to the executive team that is likely to result in a blame culture emerging and defensive behaviour by it limiting board involvement on important issues – an “Us and Them” board. And arguably the worst of all is the Semi-detached Board which with its failure to provide either sufficient support or challenge is in effect on autopilot with the corresponding lack of checks and balances on the executive team and missed opportunities to help them develop the business successfully.
Many boards consider they’re engaged. But is this positive view based on a robust analysis of the key drivers of engagement? Are boards spending enough time assessing what type of culture they have in practice? Are they asking themselves the tough questions – and being honest with themselves when answering?
So, what should happen? Boards should assess their culture, either through discussion at a board meeting or by means of an internally or externally facilitated board review. Where board members have different views the underlying reasons for them should be explored. With views settled, the board should prepare a timelined action plan to implement necessary improvements.
Culture definitely is King. And long may it reign.