Almost every company today, regardless of sector or business model, is grappling with transformation and dealing with change at an unprecedented scale and pace. It is in this context that culture and talent--previously regarded as squishy topics--need to be a bigger part of the board agenda.
This disruption has been brought about by the confluence of various factors and largely driven by technology. Changing customer preferences and demographics, social media platforms, societal changes focused on equity and empowerment, wellness and lifestyle, increasing global wealth, and more engaged large institutional investors with an environmental, social and governance (ESG) lens are further exacerbating the pace of disruption.
We are seeing a sense of urgency and signals from the boardroom on the recognition of culture and talent for a company's sustainability and success. We are seeing increased and visible communication around culture, a heightened focus on appropriate behavior, ethics and integrity, training to manage biases, reviews of code of conduct and no-tolerance policies, and heightened attention to hot lines and whistle blowers. There is also increased companywide training on new skills and technologies and the use of tools and scorecards to measure and foster culture and talent.
What is culture and why is it important?
Culture is defined as the sum of the shared beliefs and values that shapes organizational behavior. It dictates what and how an organization does things. It also defines what an organization holds meaningful--its purpose or mission and it creates the organization's unique character. Therefore culture is the framework that aligns behavior for long-term value creation.
From a board's point of view and its accountability for the long-term sustainability of the company, culture is therefore a strategic asset. It has a direct and concrete impact on financial performance and improved risk management. Multiple surveys and research studies have proven this linkage.
Further, culture defines how things get done across an organization--from goal setting to employee engagement and retention to controls and compliance. Therefore, from a board perspective, understanding culture is necessary to reinforce strategy. Strategy cannot be implemented unless it is in sync with the culture that brings together organizational elements that reinforces strategy and facilitates implementation.
Over 40 years ago, the management guru Peter Drucker...