Most leaders like to talk about their organizational culture, as it exists in the workplace, the boardroom or organization-wide. They know it’s important, but often have a hard time defining it, describing it and identifying ways to improve it.
There’s a little “Potter Stewart” at work here-culture is tough to put your finger on, but you know it when you see it, and you know it when you don’t.
And that’s a little too amorphous, a little too elusive, a little too “squishy” an approach for it to actually work in today’s pressure packed business environment, especially when it comes to the boardroom, and its critical fiduciary pressures.
That’s why the new report from the National Association of Corporate Directors (NACD), “Culture as the Foundation: Building a High-Performance Board,” is so significant.
There’s long been an appreciation for the role of collegiality amongst and between board members in facilitating open, frank and respectful board dialogue. It’s just never been spelled out in detail not only as to its importance, but also as to how best to accommodate that role. The NACD report seeks to fill that gap by its “call to action” – to explicitly use culture as a means for promoting effective governance.
The premise of the NACD report is that boards perform most effectively within a framework of shared values, beliefs, assumptions, experiences and expectations that, in turn, drive boardroom behavior and influence board norms and processes. Traditional board practices are less important in an environment where greater board agility is required; an agility that can be achieved best “when boards focus as much on their culture and conduct as on their protocols and provisions.”
Thus one of the great contributions of the NACD report is its articulation of both the benefits of strong board culture, and of the risks that can arise from a dysfunctional culture.
The benefits include binding directors in the common pursuit of good governance; providing clarity on the explicit and implicit ground rules for the conduct of board business; activating all board voices in support of constructive discussions; helping the board withstand stress and discord within the context of disagreement; setting clear expectations for directors; reducing the risk of director misunderstanding and/or misconduct; and helping attract and retain top leadership talent.
The risks include perfunctory collegiality, including a “go along to get along” attitude in the boardroom; undue reliance on the views of so-called “expert” directors; the persistence of board silos; culture-fit bias in recruiting and onboarding; the negative implications of emphasizing consensus over divergent views; boards slipping into management territory; and management skepticism of board effectiveness.
When viewed from these two perspectives, NACD’s “call to action” is more understandable. And that “call” is manifested in ten specific recommendations that fall within three major categories:
The first category includes steps to assess, define, monitor and maintain board culture. The second category includes steps to reinforce board culture and behavioral norms. The third category includes steps to address major cultural fault lines, such as areas that can divide the board.
What should be particularly appealing to boards is the NACD report’s inclusion of a “toolkit” (including discussion guides and other supporting materials) intended to help boards implement its recommendations. The “toolkit” is consistent with the report’s projection that the development of a strong culture does not require dramatic, far-reaching change, but rather a meaningful commitment from the board to address unwanted behaviors.
None of this is to suggest that the process towards building a better board culture is a simple, stress-less process. It’s not. But it is to suggest that unlike before, there exists a clear pathway for moving forward with culture building as well as a principled case for doing so. And as a first step, the report suggests that the board reflect upon the qualities and shortcomings of the current culture.
As NACD President Peter Gleason has noted, the report was prompted by three specific trends and developments that impact public, private and nonprofit boards across industry sectors. These include the efforts of investors (and other third parties) to more deeply assess board effectiveness; the state of transition in which many boards find themselves due to aggressive, deliberate turnover in recent years; and an overarching climate of “relentless change” that demands a strong, curious and engaged boardroom culture.
Culture has long been a “soft issue,” addressed only around the periphery of governance “best practices” compilations. The ultimate value of the report is that it treats culture with the seriousness it deserves.
Indeed, the report is the first substantive effort from a recognized board development organization to address how culture impacts effective governance. “Plain English” translation: it’s an important step forward in the development of useful governance principles.
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