Mostly, companies don’t fall prey to a business drama because of poor products or services. Instead, it’s often because of how people behave: decision-making, problem-solving, and collaboration. In other words: the organization’s culture.
Business dramas always follow a similar pattern: while the (short-term) results seem fine, the drama germinates, unfolds slowly and suddenly becomes clear in full size. Whether it is about accounting scandals (Imtech, Vestia), corruption scandals (Ballast Nedam), or harassment in the workplace (Talpa / The Voice): such dramas have been in the making for years. When we learn about them in the media, it is often an apotheosis of long-term development. Business dramas powerfully underscore how much the organizational culture is relevant to a company’s long-term success. This begs the question: what are the possibilities for an organization’s non-executive board to supervise culture?
Culture is complex but decisive
It is easier to manage costs or cash flow than culture or behavior because culture is more complex and often more elusive than financial figures or key performance indicators. Culture also goes beyond compliance. For example, a non-inclusive organization, where leadership only promotes certain people, could still be fully ‘compliant’ with the applicable rules and regulations. The lack of inclusiveness could still backfire, for example, because its reputation in the labor market deteriorates. Or because lack of inclusiveness reduces the agility of the organization.
Often, organizational culture is considered a given that is hard to change. It goes so far that leaders often regard culture as an obstacle to change. For example, a study under 85 ‘Fortune 1000’ companies showed that the use of Big Data and artificial intelligence does not yet lead to expected improvements. For the fifth year in a row, ‘cultural barriers’ were the main obstacle. And that is peculiar because culture is pre-eminently a long-term factor that directors and supervisory boards can monitor and influence.
Moreover, culture can be made specific. It does not lend to hollow rhetoric because employees always test the preached values to the actual behavior in an organization. Behavior contains information for supervisory directors to act upon. Because it always reflects the values that truly matter in the organization. For example, consider an organization where ‘Teamwork’ is a significant value. When management consistently promotes those who profile themselves at the expense of others, it is clear that the actual value is more something like: everyone for themselves.
It’s the culture, stupid!
One of the Bill Clinton election campaign pillars in 1992 was the US economy. Internal communication constantly pointed this out: “It’s the economy, stupid!” This phrase eventually became the campaign tagline that contributed to Clinton’s victory. This one-liner, somewhat rephrased, is equally suitable for long-term supervision of organizations: It’s the culture, stupid!
A culture is a long-term object of board supervision
There are national codes for good corporate governance. It is the responsibility of supervisory boards to monitor whether actual behavior reflects this code well. It can relate to the quality of directors, their vision on reality, cooperation, and the (informal) balance of power. But also to behavior that they observe elsewhere in the organization. Whether that behavior aligns with the criteria and long-term business interest becomes clear through dialogue, observations, and verifying information. Non-executives are ideally suited to test whether an organization’s culture serves its long-term interest. An organization’s culture can be more explicit subject to supervision. It requires an effort by supervisory boards, which will pay dividends in the long run. That is because solid cultures are the pillar of unicity and change capacity of organizations. The same applies to allowing a culture that is not in line with the long-term business interest: that also pays itself in the long term, but in a negative sense.