Gauging corporate culture

Corporate culture—what a company does, and how it does it—permeates virtually every aspect of an organization, from strategy, innovation, risk, and compliance, to business processes, employee performance, and long-term value creation.

It’s clear that corporate culture continues to climb higher on board agendas—not only as a risk, but as a fundamental driver of long-term performance. Yet, as reflected in our survey of nearly 300 U.S. directors, senior management, and internal auditors, assessing and monitoring the company’s culture pose formidable challenges.

The survey findings highlight five key takeaways:

Recognize that tone at the top is easier to see than the mood in the middle and the buzz at the bottom.

Directors are generally satisfied that the board understands the risks posed by tone at the top; but the board’s view is far less clear further down in the organization. Focus on the risks posed by pressures and incentives at the middle management level and below—and use all the tools available to gauge those risks.

Understand the company’s actual culture—and whether it’s driving the strategy.

The corporate values posted on the breakroom wall often don’t reflect how things get done day-to-day (the “unwritten rules”). Understanding the behaviors that are essential to execution of the strategy, the incentives driving those behaviors, and whether those behaviors are actually happening are essential to leveraging culture as a source of competitive advantage. Yet, slightly less than half of the directors surveyed are confident that the company’s actual culture reflects its stated culture.

Keep culture front and center in the boardroom.

Culture often makes its way into various boardroom discussions—about customer and employee feedback, compensation, health and safety, etc. But having “culture” as a regular agenda item keeps it front and center, sharpens the focus, and sends a strong message to employees, customers, investors, and other stakeholders.

The ways to gauge culture are expanding: use them all.

Employee surveys, visiting facilities, input from auditors, and whistleblower hotlines continue to be the most common ways to spot red and yellow flags; but customers, vendors, social media and other sources can help provide a fuller picture. Consider creating a dashboard with leading and lagging indicators of the company’s culture.

Take a hard look at the board’s own culture.

Overall, directors view their boardroom culture favorably; yet sharing independent perspectives and avoiding groupthink is a concern.

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