The importance of tone at the top in times of uncertainty

Whether a business achieves sustainable success for the benefit of its stakeholders and wider society is critically influenced both by the board’s decisions and, also very importantly, by how board members act in the boardroom.

Boardroom behaviour has a crucial impact on corporate culture since how the executive and non-executive directors treat each other reverberates across the organisation.

Four types of board culture

We have identified four different types of board culture based on a 2×2 matrix that considers the degree of support and challenge respectively that exists in the boardroom. Ideally, there will be an ‘engaged’ board with high levels of both, but alas the three other options are also found in practice and in their different ways each will hold the business back from achieving its full potential: the ‘cosy’ board with high support and low challenge; the ‘us and them’ board with low support and high challenge; and, the ‘semi-detached’ board offering neither challenge nor support.

four types of board culture

1. The ‘engaged’ board

There will be strong degrees of openness and trust between board members on an ‘engaged’ board with high-quality information made available to the board and its committees in a timely fashion. There will be no issues ‘off agenda’ and challenging situations will be discussed at an early stage of arising with the collective intelligence of the board being brought to bear in determining the best way forward. Board meetings will be well-structured with time allocated for discussion and clear decisions taken after. In addition to dealing with regular board issues, time will be set aside for an annual ‘away day’ to provide an opportunity to review progress towards achieving the longer-term strategy and to consider other issues requiring significant time for reflection and discussion. The board also needs to know when it would be helpful to have external advice to assist in making decisions possibly, for instance, on issues related to cyber security or wider aspects of technology.

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Board Culture: When Soft is Hard

In the blog, “Culture is King”, I introduced the concept of an “Engaged Board” where a healthy board culture contributes to high level of both challenge and support in the boardroom.

Achieving an appropriate blend of formal structures and processes that will contribute to a healthy board culture is perhaps the area most frequently discussed in governance codes. They help ensure the right issues are on the agenda at the right time with the right information available for discussion and decision-making.

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Culture is King

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. (more…)