The Role of the Board in Developing Culture

It is my view that culture is fundamental to the long-term sustainable success of any organisation. It is who you are as an organisation (which imay be different to who you say you are).

“Culture is what people do when no one is watching …” (Hayne). This phrase is usually used when describing Integrity which shows the close link between Culture & Integrity. Culture does not just refer to how people are treated internally but plays out (good or bad) in the engagement with how all stakeholder groups (customers, suppliers etc).

You cannot claim to have a good culture unless those standards are universally applied. You can pollute over here and offset carbon emissions over there (planting trees or whatever) but when it comes to culture, and the treatment of people you can’t treat some poorly and offset this by treating others (perhaps your own staff) exceptionally well.

The board has a key role in setting the tone, which will include aspects such as expectations around behaviours and decision making, which will define who a company is and that means the board has a key role in setting cultural direction and ensuring that this is widely disseminated.

1.     Policy Intervention Underpinning Culture

 Some eight years ago when it was announced at a national conference that I had been appointed as the Chair of Konica Minolta in Australia. When asked to come to the stage and address the audience, of team members and channel partners, the first statement I made was to say “I want us to all work together to build a company that cares. That cares about the people who work here, that cares about our customers and that cares about our community”.

This was a statement about the culture that we would build, and who we would become as a company, and it framed our decision making for the entire time that I was Chair.

 The new policy development that took place aligned with this vision.

Internally, a leading parental leave policy (that I was invited to speak at the UN in NYC on), a domestic violence policy and policies on respect at work and how we should treat each other.

Externally focussed policies such as showing respect to prospective suppliers in commercial negotiations, supplier contracts with fair and reasonable terms, paying invoices within terms etc. Ensuring the safety and wellbeing of employees in our suppliers’ supply chains eg. being paid a living wage and working in good conditions. One example is when a typhoon hit the Philippines and we were using an external call centre there, we checked on their staff in the same way that we would have shown a duty of care to our own people.

Anti-bribery and corruption policies are another reflection of culture. If you refuse to participate in these illegal practices, even if it impacts commercial outcomes, it says a lot about your culture.

2.     Governance and Culture

i). In the Boardroom - board processes / board agenda.

Board composition is an important consideration. Attracting legal, financial and governance competencies are the foundations of most board recruitment but along with these skills and this knowledge these people also need to have developed ‘right brain’ thinking and emotional intelligence to fulfill the needs of a board that sees culture as squarely in its domain. Or several board positions need to be held by people recruited against a different skills matrix. Perhaps we need one or two Social Scientists on our boards?  

We are talking about a new way of thinking here, a new way for boards to operate. Boards will be required to deal with more behavioural issues that are more abstract and nuanced and more amorphous in nature.

Hence at Konica Minolta, and other boards I have been involved with, we would ensure that people were at the heart of what we discussed. Customers and our teams had to be on the agenda and top of mind in policy formulation.  When Gael Kelly first joined the Singtel Optus board she listened intently for the first hour before politely asking if she could make an observation. She said, “I haven’t heard the customer mentioned yet”. Another hour passed and she repeated her observation. Well into the board meeting the customer started to be mentioned when each board item was discussed.

The rhythm of the board, or how the board conducts its meetings, will also be an indicator of culture. At Konica Minolta we always ensured that quieter people, less likely to jump into a conversation, were invited to give their opinion. We had two Japanese directors, and we were ever mindful of cultural sensitivities (eg. they would never challenge the Chair). We ensured people were not talked over the top of (particularly women). Robust, respectful conversations were encouraged. Our mantra within board meetings was to speak up and raise any issue no matter how contentious.

ii). In the Organisation – board reporting

The culture that has been espoused by the board, both formally in policy documents and informally in how the board is seen by others within the company to be performing and behaving. Dysfunctional behaviour eg. Chair in conflict with CEO etc, soon becomes a topic of conversation across a business) will determine the effectiveness of communication flows between the business and the board. The more visible the board is to the people at the coal face the more open and honest the flow of information will be.

While at Konica Minolta I visited each of our state branches over a one-month period with a pre communicated agenda to ask women across the business what it was like to work here. So, as well as ‘town hall’ style meetings with all staff I held a separate meeting for female team members only. I was surprised how open and trusting they were (but of course trust is earnt and is an indicator of culture). One common theme was that everyday sexism still existed despite pronouncements by me in speeches and emails, about our expectations. They were simple examples such as a meeting breaking up and all the men leaving the room with the expectation that the women would take coffee cups to the kitchen. Nonetheless they were a litmus test of there being more work required.

The extra step of physically showing a presence was vital to informing a board that thought our policies were sufficient to embed standards. All these indicators need to be reported on and discussed at board level, not just OH&S issues around safety and accident rates etc. Performance against the company’s values must make it into every board report.

3.     Red Flags

There are indicators of weaknesses within a system that are likely to produce dysfunctionality. Some of these are:

A lack of a clear definition from the board of who they want the company to be.

A lack of courage. It’s a lot easier to avoid these more abstract aspects of a board’s role.

Apathy or free rider syndrome in board meetings. These kill momentum.

A board removed from the pulse of the business day to day.

Ignoring the duty of care to everyone across the business.

A focus on one stakeholder group eg. shareholders and their dividends, at the expense of longer-term responsible decision making, is short-term thinking that is never the characteristic of a high performing board.

Putting the CEO or senior executives on pedestals because they are good at making money (rainmakers) and ignoring indiscretions, particularly of a moral or ethical nature, is a dangerous practice and a recipe for disaster.

Culture begins with honesty so recruitment both for board roles, and by the board for the CEO, needs to place character very high up on the list of qualities being sought.

Fair weather versus turbulence – does the board always hold to their standards? When a business hits a storm eg. Covid, economic downturn or whatever, it must not compromise on its culture of honesty and integrity or how any stakeholder group is treated.