Better Board Oversight
Updated: Feb 16, 2021
“No organization, small or large, can sustain success in the long run without energized employees who believe in the mission and understand how to achieve it. Sustainable success and reputation starts and ends with the Board!”
There are two kinds of Boards.
The unprepared are often caught napping, while prepared Boards are proactive and forward looking. The unprepared Board faces the task of finding a new CEO without a succession plan and must rely on a stream of executive recruiters pushing the same set of re-tread candidates. Early on the prepared board set in motion a development plan for internal candidates as well as linking their strategic plan with the leadership capabilities required for the next several years. The unprepared board is content with rear-view mirror data that is often 2 quarters old. The prepared board constantly looks forward for new insights into economic trends, strategic shifts, supply chain sustainability and the potential risks in their corporate culture. And Board oversight of corporate culture is becoming part of the regulatory regime in the UK. In the US, large institutional investors are pressing for Board oversight of culture. The CEO of State Street Global Advisors sent a letter to 1,100 companies globally suggesting a 3-phase framework of Board oversight of culture:
conducting a comparative (or gap) analysis to assess the alignment of the corporate culture and long-term strategy
implementing mechanisms to impact and monitor the corporate culture,
reporting on (or otherwise communicating) the board's role in influencing and monitoring the company's culture.
Currently, however, few companies bring culture oversight into their Board meetings, and even those few that do are let down by traditional corporate culture surveys and HR statistics. Most culture data is derived from Employee Engagement surveys, which score how employees feel about company benefits, working conditions, their supervisors and management, and of course the overall work culture. The question of “Would you recommend your friends and family to work here” is an anchor question for many culture surveys. According to the consultants who conduct and analyse this data, there is a strong correlation between employee engagement and company performance. But are Employee Engagement surveys an adequate proxy for corporate culture? I’m not so sure. Employee engagement is important, but not sufficient to understand the impact of culture on business performance. Start with Why Employee engagement surveys capture how people feel about work, but not WHY they feel that way! It does make sense that if an employee is not happy with their work, supervisors or co-workers then they will probably give less than 100% effort, and certainly not go “the extra mile” to improve things. But WHY are they unproductive and not engaged? Most culture assessments and employee engagement surveys focus on employee behavior and actions, and even ask about their beliefs concerning work and the company. But in my view, these are outcomes of the culture, not the culture itself. In other words, employees may not be fully engaged, but what specifically in the culture is influencing this undesirable outcome? Our experience shows that it is not just one element, but a combination of several organizational policies, processes, reporting relationships, management and supervision, compensation and social dynamics that together influence the level of employee engagement. Corporate culture should be more accurately thought of as a system of organizational causal factors that interact in a networked system to influence employee behavior and business results.
By identifying and using internal company data and information, as well as survey data from management, leadership and employees, it is possible to create a visual system map of the current culture that can easily point out the weaknesses, risks and blockages to improved business performance. Yes, one of those is employee engagement, but there are often numerous other culture drivers, such as hiring profiles, on-boarding, recognition systems, quality of management, leadership engagement, compensation policies, meeting structure, peer pressure, cumbersome work processes, IT system outages and others. All of which can be measured and mapped. We believe board oversight of corporate culture should be proactive and a key part of the responsibility an effective Board of Directors.