Why culture must be driven from the top?

Over my career, I have seen firsthand the profound impact organisational culture has on the working environment and the organisation's success. The term culture can sometimes be a buzzword and seen as a tick-the-box exercise to appease internal and external stakeholders.

The Cambridge Dictionary defines culture as "the way of life, especially the general customs and beliefs, of a particular group of people at a particular time." It will impact how decisions are made, if innovation is supported, employee engagement and satisfaction and relationships with stakeholders.

Over the last 12 months, the media has reported and criticised some corporations for their poor organisational culture. Issues include command and control behaviour, lack of awareness of risks outside of safety risks, lack of value to the importance of stakeholder relationships, do as I say, not as I do, and poor or inappropriate people management.

In a recent webinar run by the AICD, the facilitator asked the participants if the culture in their organisations had improved in the last 12 months because of board initiatives. 19% indicated there had been an improvement in culture across the whole organisation, 61% said there had been some improvement, however there were still pockets of concern, 14% said there had been no change, and 6% reported the organisational culture had worsened.

Establishing culture is not a set-and-forget process. Boards need to reflect on and address their organisation's culture continually. Recent changes to legislation and regulatory requirements for boards, such as their duties to prevent sexual harassment and avoid psychosocial hazards in the workplace, have forced boards to monitor some components of organisational culture. 

A strong and supportive culture can lead to:

• Attracting and retaining talent – staff feel valued and aligned to the organisation's values.

• Drives performance – staff believe in the organisation's purpose, respect the work environment and are motivated to perform. 

• Builds trust – fosters a culture of transparency, accounting and relationships (internally and externally).

Alternatively, a poor or toxic culture can lead to:

• Poor performance – staff unaware of expectations or unwilling to perform/ deliver.

• Poor decision-making – fear or blame culture that scares staff from making the wrong decision or being innovative.

• Lack of trust – internal and external stakeholders losing confidence in leadership.

• High staff turnover – staff disengaged, unhappy, unsafe or undervalued. 

While CEOs and executive teams are key in setting and driving culture, the board must drive the organisation's culture. Unfortunately, you can sometimes see two cultures occurring within an organisation, one at the board level and a second at the operational level. Other times, you can see pockets of an alternative organisational culture. 

Boards and the CEO must work together to implement culture. However, the board must ultimately recognise and accept responsibility for the organisation's culture. They must also model this desired culture through individual and collective behaviours and decisions.

To drive organisational culture, boards can:

• Embed culture in governance practices: regularly review their cultural metrics at committee and board meetings.

• Set clear expectations: define and communicate the organisation's values, ensuring they are reflected in policies and practices. Staff must also understand there are consequences for not complying with these values.

• Ask the right questions: challenge management on how culture is nurtured and whether it aligns with the desired state.

• Design and/or support a recognition system that acknowledges those displaying behaviours that align with the organisational values.

• Mandatory cultural training: ensure the board and executive staff receive cultural training to understand and execute a strong positive culture.

• Design remuneration programs that consider culture: ensuing remuneration structure that rewards those who are culturally aligned and not those who are not.

• Ensure performance management is not avoided: challenges management and assess staff surveys to ensure poor performance is effectively managed throughout the organisation. 

All organisations should have poor organisational culture listed on their risk register. As a result, culture is being regularly monitored and assessed by the risk committee and the entire board.

While there is great value in having an external company/consultant come in and undertake a point-in-time cultural review, it is just that—a point-in-time assessment. Boards need to consider how culture will be continually monitored.

Ways boards can continually assess culture include:

• Staff engagement surveys

• Staff turnover rates, particularly of the staff you don't want to lose as opposed to those not aligned with the desired culture

• Exit interviews

• Data on the usage of sick leave, and unpaid leave

• Data on mental health workcover claims

• External stakeholder feedback

• Customer feedback reports

• Feedback from semi-regular casual catch-ups with staff

• Reviewing whistleblowing reports

In closing, culture is not a nice-to-have; it's a strategic imperative. A strong, healthy culture will help organisations perform better and become organisations where people wish to be involved. Culture does not just appear; boards must intentionally create, lead, and support it.