Thought Leadership

Boards and Company Culture

By Jim Woodrum

One of the most difficult things for a board to assess is the culture of the company. After all, when board members visit the corporate headquarters, they generally spend their time in the boardroom listening to well-choreographed presentations from a select group of senior executives — not exactly the best way to get to the bottom of things, culture-wise.

Culture is a key factor in the success or failure of any enterprise. And there are two types of critical assessments that board members need to make with respect to culture:

1. Do we have the right culture to take on the issues the company is currently facing? A culture that is very high on interdependence and collaboration is great in most circumstances, but may not be right for a company that is facing an existential threat. On the other hand, a culture that is highly focused on results can lead to shortcuts (and even accounting fraud) if not monitored carefully. Understanding the culture in the context of the company’s current position is extremely important.
2. Does our culture allow for — or even encourage — misbehavior? In our social-media driven world, it is increasingly possible for the bad acts of one executive to do irreparable harm to a company, and this is especially true when it can be proven that individuals within the company were scared to speak up or looked the other way.

So, given the nature of how board members interact with the company and its executives, how can you get the information you will need to make a proper assessment of the company’s culture? Here are three places to get started:

1. Get a copy of the most recent engagement survey. Ask the HR head when the company last conducted an engagement survey and whether you may have a copy of the results. If no survey has been conducted recently, ask why it hasn’t.
2. Look at the whistleblower information in a different light. Most companies — often through the audit committee — will review the calls to the whistleblower line with board members. Given the environment, it is appropriate for board members to ask many questions about any incidents that surface and to use those incidents as raw material to construct a picture of the company culture. Being told that harassment claim A came up at facility B and has been addressed is no longer good enough.
3. Look for the little things. Are there minor infractions of company policy that seem to be tolerated? Side comments made by executives that are a bit disconcerting? This can be a sign that the culture has toxic elements. After all, if you notice things when the executives — and everyone else — are on their best behavior, then you should probably be concerned about what happens the rest of the time.

Assessing culture is, to say the least, an imprecise science. However, looking at the above information through the frame of culture will help you determine whether your company’s culture is an asset — or a liability that needs to be addressed.

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Jim Woodrum is a clinical professor at the Kellogg School of Management and Academic Director of the Corporate Governance program. As Managing Director of Executive Education, his focus is on designing and teaching in courses for senior executives and board members.

Effective board members bring to the table skills and capabilities that differ distinctly from those of management and other corporate leaders. This corporate governance program paves the way to mastering the skills required to govern successfully.