There is no easy answer. We all know good culture when we are part of it. However, as Philip Crutchfield recently pointed out, non-executive directors are not in the business. They have a governance and oversight role. Their formal role is limited to board and committee meetings which often vary from 4 to 12 meetings a year (depending on organisation).
So it is not as easy to ‘taste’ the culture. While management are running the business on a day to day basis, the board sees prepared presentations and choreographed site visits. Even fireside chats with senior executives will not necessarily provide a clear answer on the culture out on the shop floor.
Financial information is tangible and can be audited. Culture less so. Culture is people. The way they behave. The way they are encouraged to behave, permitted to behave and rewarded for behaving. So how do boards get comfortable that the culture they desire, or aspire to, is embraced by employees and contractors? And being demonstrated by senior management?
The answers is information. And contra indicators. What are the signs of culture – both good and bad?
As boards attempt to get their arms around this issue, those in the forefront are demanding culture dashboards that can highlight the good the bad and the ugly. What can these look like? The old employee engagement survey undertaken once a year is not enough.
Data on voluntary attrition of employees, especially high performers, combined with themes from exit interviews broken down by business lines or senior management’s teams can highlight good and bad culture. Combine this with trend data on personal leave and unplanned absences, employee tenure and employee complaints and a more detailed picture may appear. Combine this with information on disciplinary action taken against employees (and the events giving rise to those actions), broken down by severity (from the most serious to those of a more process nature) and the actions taken (warnings, counselling, dismissal).
In customer-focused organisations, add in customer satisfaction surveys, customer churn statistics, customer complaints (both number and data on the speed and satisfaction of resolution). Again by business line or area of senior management responsibility. This information by business line should identify whether the company’s culture is consistently reflected across the organisation. Link this with items highlighted in each enterprise’s risk plan and progress towards addressing them.
This information should be presented to the board quarterly. And the data should be shown over time so that trends (both good and bad) can be easily identified.
And compiling and presenting the data is not enough. The data needs to be interrogated. Management’s reasons for certain trends need to be tested. Over time.
High levels of employee turnover and dissatisfaction can happen during periods of change and transformation. Breaches of policies and practices tend to peak once they start being rigorously enforced (or once new systems are implemented to monitor compliance). Complaints about behaviours and practices will increase in a culture where ‘speaking up’ is encouraged. So not all trends in data are bad. But persistent trends in the data over time should highlight areas for deeper questioning. A broader range of measures in the form of a dashboard also allow different parts of a business or different business leaders to be compared. And questioned.
Addressing issues, whether they are cultural or process driven or systemic, that reduce voluntary employee attrition and unwanted customer churn should not only help improve culture but have bottom line benefits for an organisation (in the form of reduced recruitment and on boarding costs and the revenue disruption that can be caused by customer churn). This is where non-financial targets can blur with financial outcomes. Having deeper data will allow Boards to better question management (and potentially better interrogate performance against measures that result in incentive payments). Knowledge is indeed power where ignorance is, from a board’s perspective, dangerous.
The emergence of artificial intelligent systems that can scan social media, internet sites and even an organisation’s email traffic can also help to ‘test‘ the story being put to the board around culture.
As expectations regarding board oversight of culture grow, it is time to ask yourself whether your board is properly armed?