Boards - how focusing on culture can enable performance

We know culture eats strategy for breakfast.  We also know culture can drive innovation, business performance, corporate ethics and staff engagement and retention.

Do boards spend enough time on it? Almost certainly not.

In a world where boards face a polycrisis of inflation, dramatically changing financial markets, bank failures and a shifting geopolitical landscape, culture can easily take a backseat to business performance, risk management and the strategic agenda. This is a missed opportunity.

How can boards focus on and address culture effectively?

First, recognise that culture, staff engagement and Glassdoor reviews can be improved by each executive - not only the Chief People Officer.  Every executive – from the CTO to the CFO has the power to positively influence culture – within their own functions and across the wider business.

Second, focus on metrics.

Regular culture surveys are important but they may not reflect the true attitudes of employees across the organisation. This is particularly true if staff feel disengaged and participation rates are low. Survey participation in itself can indicate staff engagement - and low participation results can act as a warning to leaders and board members. 

In reviewing the output from regular surveys boards can watch for improvements as well as deterioration in particular areas – from the proportion of staff that support the business strategy, to views regarding collaboration across teams and functions as well as responses regarding how long staff intend to stay with the company.  These are all indications of morale and engagement. Low levels of either will not drive business performance.

In addition to regular culture surveys, boards can set and track specific people and culture metrics including:

1.    Staff turnover – for the Group but also by division and function – specifically measuring and tracking voluntary churn / regretted leavers;

2.    Sick days by department/division - including both total sick days taken by all staff in each department/division as well as average sick days taken per person. This will help identify functions or departments with low morale or engagement. It can also indicate areas that may be suffering from toxicity such as bullying;

3.    Diversity, equity and inclusion - including pay gaps across gender and ethnicity to ensure fairness as well as the ability to attract, retain and engage the best talent.

By setting, reviewing and discussing these metrics the board can ensure that the executive team continues to focus on the metrics as well as the underlying drivers and actions that will improve them.

It is also helpful if non-executive board members spend time in the business, speaking with staff in different divisions and functions and at different levels of seniority. This will enable them to better understand the distinct challenges faced by teams and individuals as well as the challenges executives may have (resources, budget, board alignment) in addressing key issues that. may affect morale and engagement within the division or function.

Lastly, executives need to be brave, empathetic and human but also set the tone from the top and visibly demonstrate the culture they want to see. This includes making tough decisions: if there is a ‘no jerk’ policy and the highest performing salesperson is a jerk, executives face a difficult choice. They can replace the jerk top performer with a non-jerk top performer and accept the short-term impact or, keep the high-performing jerk in place and accept the impact on trust and morale. It may feel like a stark choice but in reality, it’s simple: one person or the culture the business has been building. It is easier to develop or replace a high performer than address low engagement, high turnover and/or lack of trust.

A strong company culture where staff are aligned behind the business strategy, engaged and collaborative can have a significant and positive impact on profitability, innovation, integrity and customer outcomes.  By focusing on improving even a few key culture metrics boards can ensure that culture, staff engagement, and retention remain priorities for the executive team.  After all, culture eats strategy for breakfast.