3 ways for the board to better understand culture
Many of the conversations I have with non-executive directors are about how they struggle to really understand the culture of a company. They know culture is important but they don't know how to engage with it. While I’d love to give them examples of companies that are doing it well, the truth is I don’t think there are many. We’re all trying to figure out how to have better discussions about culture in the boardroom. But there are three things I think you can do to take your boardroom conversations about culture to the next level.
1. Admit you don’t know
There are no easy answers when it comes to culture so it’s okay to feel out of your depth. It’s a rapidly evolving space and most people working in people and culture are struggling to keep up. So, it’s understandable if you have more to learn about culture. But to learn more you’ll have to get comfortable asking uncomfortable questions. Think of it as an opportunity to build a new muscle at the board level.
The goods news is you’re not alone. Many executives are also struggling to wrap their arms around what their organization’s culture is and where they want to take it. As a director, you need to create the space for management to have that conversation with you.
There are different ways that you can do this. Dr. Tatyana Mamut’s model of culture risk is particularly useful at the board level. It directs the board’s attention to five strategic risks around culture and helps you identify which is the most important to focus on at a point in time. For example, if the board thinks there’s an issue with stagnation risk but the executive team is worried that they can’t retain people, there’s a mismatch about which risk is strategically most important. You can then have a conversation at the board level about which risk the company should address first.
Initially, this approach may feel reactive but eventually you can get ahead of the curve. That’s because the model opens up conversations about what changes you need to make in your organizational culture today to be successful tomorrow. Rather than saying you need to grow faster so your culture must be more aggressive, the model helps you talk about the risks of that approach. This enables a conversation about the type of culture you need to make the organization as successful as possible.
2. Include culture in standard reporting
Many companies don't report to the board on culture at all. Those that do report on culture may have one slide about headcount at the end of the finance deck or alternatively a report with every metric ever collected. Neither of these helps the board better understand the organization’s culture.
As a director, you should ask for a standard reporting deck on people and culture metrics. This should deliver the key metrics you need to understand what is happening in the organization and where its culture journey is going.
The challenge is that it’s quite hard for the organization to know what the right information is. Other fields provide a roadmap, but even then it’s taken a long time. Take sales as an example. Boards understand what drivers are important to meet the organization’s sales objectives - whether that’s sales pipeline coverage or meeting quota. This is because they’ve had many conversations over time about what the key metrics are and how they’re measured. In people and culture, we don’t often have longitudinal conversations around which metrics we can record today to tell us whether we’re successful tomorrow.
To start this conversation, the board needs to ask the executive team to identify the metrics that the board should know about. A good example is Reddit’s People and Culture Health Dashboard. Katelin Holloway, VP of People and Culture at Reddit, has identified the metrics that she believes her board needs to know.
At Culture Amp, we have a dashboard that shows our key health metrics. There are some standard ones, like headcount, while others reflect what’s important to our business. For example, as a fast-growing company time to fill is important to us. These metrics help the board understand our business and we’ve had some interesting conversations off the back of them.
I’d like us to eventually report about culture in the same way companies report on product - with a roadmap. The culture roadmap could show what the organization is doing today, when those initiatives will be shipped and where will they take the culture in the future. For example, if you’re investing in training hiring managers, the roadmap should show what impact that’s expected to have on hiring decisions and in turn the company’s culture. If this is measurable, then what results you are expecting should also be shown. This framework could then help the board think about the decisions they’re making now and how they may affect the culture of the organization in the future.
Creating a culture roadmap has its challenges, but it gives the board the opportunity to be fully invested in where the organization is placing its bets for the future.
3. Make culture part of your committee structure
Most boards have committees that focus in on specific areas. Rather than creating a new committee for culture, look at whether you have a committee that’s already making decisions that affect the culture of the organization. This is a natural evolution that’s happened many times in the past. For example, audit committees were traditionally focused on finance but they’re increasingly becoming audit and risk committees. By adding risk, the role of the committee has expanded to look at security, cybercrime and other areas.
In the same way, discussions about culture can be brought into an existing committee. The compensation and benefits committee is a good place to start. That’s because many assumptions around culture are actually baked into remuneration - remuneration both creates culture and mirrors it. This committee could have conversations about what type of culture you want to build and what behaviors you want to reward. Ask questions like “what culture are we creating by paying people this way?” and “Is our remuneration model aligned to the type of company we want to be?”
The committee then becomes a place for the board to start coming to grips with the organization’s current culture and to begin the conversation about what culture the business wants to have in the future.
More directors now realise that they need to have these discussions because the board is responsible for every aspect of the organization and that includes its culture. Recently, we’ve seen how the wrong culture can give rise to the wrong behavior - look at what’s happened in the financial industry in Australia. Boards are being held to account for the culture that commission schemes created. As a result, I think we’ll see more boards ask what culture they need to be successful and what do they need to look out for.
One area where this has worked well is around safety. Australian boards I’ve been involved in have had well-developed views about the importance of safety and how to create a culture of safety throughout the organization. This was partly because directors were personally liable if someone got injured, so there was a level of scrutiny about safety at the board level. I believe we’re already starting to see a similar ethos around culture.
To begin this process non-executive directors need to understand what the organization’s culture is now. It can be hard to understand the culture when you’re not in the business all the time.
But boards can form an opinion by asking the right questions. For example, what are managers being asked to do? How are their results measured? What responsibility do managers have for culture within the organization? Who is involved in the decision making process?
These questions can start to give you a sense of what type of culture you’re dealing with. Once you know what type of culture you have you can start to think about the risks of that culture and what might need to change.
Boards must take accountability for the culture that exists within their organization. But to take accountability, you first need to truly understand the culture today and then create a clear vision for where you want to be in the future. This is not easy, but by giving people the tools and putting in place the right structures you can start having those difficult conversations.