Governance is not just the role of the board any more. In 2016 AICD has partnered with the Australian Human Resources Institute to raise awareness of the relationship between the board, the executive leadership team and HR directors, and to examine the big issues facing organisations. First up: culture.
Culture is a key asset for good governance. You can’t have a culture that ignores governance, or governance practices that ignore the organisation’s fundamental values.
Culture has the power to determine success or failure during times of organisational change. Getting culture right is incredibly powerful, helping to drive strategy and boost performance. Getting it wrong, however, is crippling.
We see toxic cultures manifest themselves in many different ways: constant staff turnover, low levels of staff engagement and consistently stunted productivity and profitability. In the worst cases, it has led to high profile corporate collapses.
The good news is that organisations are starting to take note. In the 2016 Deloitte Human Capital Index, which surveyed more than 7000 HR directors across 130 countries, 82 percent of respondents see culture as a “potential competitive advantage” for business success. It also lists culture as a “key trend” in 2016, along with ‘organisational structure’ and ‘leadership’ – both integral to creating and maintaining a good culture.
The bad news is only 28 percent of respondents think they understand their organisations well, while even fewer, 19 percent, believe their organisation has the right culture.
In August, the Australian Institute of Company Directors (AICD) and the Australian Human Resources Institute (AHRI) convened a roundtable of 20 leading HR professionals from organisations across the professional services, banking, manufacturing, infrastructure and resources industries.
"We see toxic cultures manifest themselves in many different ways: constant staff turnover, low levels of staff engagement and consistently stunted productivity and profitability.
AICD’s Managing Director and CEO John Brogden AM FAICD and AHRI National President and Chairman Peter Wilson AM FAHRI opened the session. What followed was a stimulating discussion on the merits of good culture and strategies organisations can use to enforce it. The conversation covered several key questions:
What defines a good culture?
There are a range of behaviours that can foster good organisational culture. Employees look to their leaders to create an environment where they feel psychologically safe, respected, valued for their contribution and feel like they belong. A good culture is one that is consistent, where public image and internal behaviours are congruent.
What is the difference between good culture and the right culture?
While there are common ingredients to all good cultures, no two businesses or their cultures are the same or stay the same. Good culture may have got you to where you are, but the right culture will get you where you want to be. Culture should be directly aligned to these goals. It is the enabler in this instance.
Are we in the midst of a leadership crisis?
An inauthentic leader damages culture and overall performance. While culture is everyone’s responsibility, the onus is on leaders to lead by example. Employees want to see directors, executives and managers living the strategy and walking the talk when it comes to the espoused values of the organisation. Organisations should invest time in creating great people leaders – all employees deserve one.
What are the merits of measurement?
Some organisations are doing away with measuring cultural activity altogether, while others argue that metrics provide much needed structure, clarity and accountability. For organisations that do, culture should be measured through lead indicators and what internal and external stakeholders are saying about the way you conduct business.
Employee engagement: A point-in-time ‘feel good’ metric?
Using engagement surveys to measure culture can be dangerous and should not be used as a single source of truth. Engagement surveys can be fickle, two-dimensional and can skirt over real issues affecting the inner-workings of the organisation.
Why do we learn the most about our organisations’ cultures when something goes wrong?
Good culture is easy when the organisation is going well, where employees feel driven along with a sense of enthusiasm by the momentum of good results and positive performance. However, when things start to decline, the road ahead is fraught with risk. People begin to feel vulnerable, leaders stop communicating and the ‘open’ culture rapidly descends into one with little transparency.
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