How board governance and company culture intersect: few issues of organizational effectiveness and performance have moved so decisively to the front burner in recent years as culture.

• Author: Boehmer, David
• Position: HEIDRICK & STRUGGLES GOVERNANCE LETTER

MOST DIRECTORS TODAY are accustomed to thinking about culture and its profound effect on business performance in the organizations they lead or have led. As sitting or former CEOs, divisional presidents, or functional heads, they have likely led culture change. But as independent directors of other companies, they may devote little, if any, time to understanding the cultures of the organizations they oversee and the impact--positive or negative--that culture has on company performance.

When urged to do so, they typically raise any of several objections, beginning with the fact that the day-to-day functioning of the culture is largely inaccessible to directors. Culture does not show up in the financial documents or other materials they review, and directors have only limited contact with the organization and its leaders. "How can you address what you cannot see?" they ask.

On the other hand, despite limited contact, some directors say that they have an instinctive grasp of the company's culture and silently factor it into their thinking already. Still other directors believe that wading into culture, regardless of how accessible it is, might be seen as meddling, crossing the line between overseeing the enterprise and managing it.

Culture is as culture does

In answer to the first objection, culture does not have to, and should not, remain invisible to the board. Directors oversee strategy and are held accountable for shareholder value--and they must address impediments to achieving those goals. Because culture can directly affect performance and business results, understanding how the organization manages and measures culture should be a part of the board's mandate.

Numerous straightforward methods exist for taking the cultural temperature of a company. The board can begin with the company's existing set of values. These will, of course, differ from corn-pany to company. However, the ultimate goal of any culture remains the same: high performance against the measures the board and the executive leadership team have established to enable and gauge long-term success. In our experience, cultures that generate high performance do share many essential values. In the top quintile of such organizations, boards and leaders typically emphasize and hone these characteristics:

* Strategic thinking

* integrity

* Results

* Collaboration

* Customer focus

* Innovation

* Optimism and confidence

Based on the company's values, a cult ural diagnostic can be...