How Boards Should Assess Company Culture: A Primer

Boards are increasingly called upon to exercise oversight over all kinds of new and complex human capital issues – none so nebulous (yet critical) as company culture. Boards seek to understand whether employees are comfortable speaking up, disclosing mistakes, reporting misconduct, and expressing perceptions of unfairness. The ability to assess ethical culture and identify strategies to enable new behaviors in a desired culture is vital, but not always easy to achieve.

Tapestry Networks recently partnered with a working group of public company directors and compliance leaders to examine how boards can gain better insights into a company’s ethical culture. They created a detailed framework of five key areas that can lead to improved assessment, monitoring and communicating of culture. The full framework is well worth a look.

• Put culture on the agenda. Some boards may only prioritize culture after a major incident, but this is a topic that should have a permanent place on the agenda. Board members may align with management in their expectations of what information they will receive by asking probing questions and digging into the data, so a well-curated dashboard is key.
  
  
• Articulate the desired culture. Because culture encompasses so much, companies can break down topics into components such as Ethisphere’s Eight Pillars of Ethical Culture. This helps create a common language to talk about the specific attributes that reflect the organization’s vision and values. A “present versus future state” polarity assessment may also help to define where you are today versus where you want to be.
  
  
• Challenge the board’s culture. Board culture has a cascading influence throughout the organization. Boards should consider their own group dynamics and assess if directors encourage opposing viewpoints and allow management to speak freely and admit missteps.
  
  
• Measure and monitor. Identify a variety of ways to measure culture through direct forms like employee surveys and site visits, and indirect forms such as human capital metrics, hotline reports and KPIs, which can provide insights into what is valued in promoting and rewarding employees. Companies may analyze data by business unit, demographic or region, correlating multiple sources of information to identify potential areas of concern that may not look concerning in the aggregate.

Establish clear communications. While the CEO will paint the big picture of a company’s culture, boards hear directly from a variety of business functions such as HR, risk management, internal audit and business lines, who can report on a cross-sectional view of culture from a different lens.