Where was the board? As corporate scandals make headlines across the nation, this is the question we often hear. How could directors not see the glaring problems within their companies? Once the crisis has surfaced, board members are often painted in a negative light, portrayed as either out of touch with the reality of their organization, or as willfully turning a blind eye to these critical issues.
But understanding company culture is a daunting task, especially for public companies comprised of thousands of employees in offices across the globe. Proactively addressing issues of company culture before they escalate into a crisis is a multifaceted challenge. Boards must first gain the proper insights to assess culture within their organization, and then guide the actions of management on these issues.
Assessing culture: gut feelings are not enough
When workplace scandals hit the headlines many often question the origin of the problem. Is this a standalone incident, or merely a symptom of a much larger and deeper-rooted issue of toxicity?
PwC’s 2018 Annual Corporate Directors Survey of over 700 board members found that directors acknowledge that many culture problems start from the top. Eighty-seven percent (87%) say that the tone set by the executive team can lead to culture issues. But directors also recognize that these culture problems can permeate an organization, with 79 % saying the tone set by middle management is a contributor.
Given the nebulous nature of company culture, how are directors assessing if their organization’s culture is healthy? Sixty-four percent say they evaluate the culture of their company using their “gut feelings.” But directors are often only present at the company a few days a year for board meetings. And they usually only interact with the same high-level executives. This isn’t really enough to assess the company’s culture, and directors realize that. Only 32 % believe that relying on their gut feelings is among the most useful metrics for gauging culture.
In order to really understand company culture, directors need other resources. They need data. This often means urging management for detailed information, beyond what is typically provided to board members. Directors say that the most useful metrics are employee engagement survey results, exit interview debriefs, and 360-degree feedback results for executives. These types of data can give directors than what they might observe solely from interactions with executives at the top.
Working with management to change toxic culture
While identifying the route of toxic work culture is a challenge, directors want to fix problems once they are found. According to our survey, 80 % of directors say their companies have done something to address culture concerns. Among the most common actions are enhancing employee training and improving whistleblower programs (60 % and 42 %, respectively.)
However, some actions are harder to take. For example, while 67 % of directors said compensation plans can lead to problems with culture, only 17 % say their companies have revised their own plans. How can directors persuade management to move the needle on these key issues that impact culture?
Communication is key to foster concrete changes in these areas where progress still lags. Directors can challenge executives to identify the areas where revisions could be made. And they can encourage accountability when things go awry.
Collaboration is key
Ultimately, it takes a collaborative relationship to ensure that the workplace culture remains healthy. Once board members have fully assessed the culture and identified some areas responsible for problems, they can then champion tangible changes. The board’s role is one of oversight, but directors can use their position to guide the direction of management and set the pace for positive development. Directors can make culture a regular topic of the board’s agenda and reinforce its importance at the company. By urging executives and consultants to suggest revisions, directors can promote solid changes that move the needle and eliminate toxicity in the workplace before it escalates into a media-generating crisis.