Holding Management Accountable For Culture

A people-centric culture can foster world-class performance—and directors have a lot more influence over that than they might think.

Culture is the foundation of organizational health. It also happens to be one of the most difficult elements of a company to assess and oversee from the boardroom.

Let’s be clear: the management team is accountable for the culture inside the company. However, recent events prove that shareholders will make changes to the board if directors are not holding the management team accountable for bad corporate culture.

In my experience, directors can have more influence on company culture than they might think by taking a few simple steps.

Create a shared understanding with management about what makes a safe and healthy culture. There are many varieties of healthy cultures, but all of them have one thing in common: they are people-centric. People-centric cultures feature a handful of critical elements, namely an atmosphere in which people are viewed as central to the company’s success, rather than assets that can be bought or sold or traded. They start with a belief that people come into work with good intentions, and that with the right opportunities, they will flourish and even enjoy what they’re doing. At its core, a people-centric organization is a place where people say, “Thank God it’s Monday” instead of “Thank God it’s Friday.”

Look for connections between people-centric principles and the company’s systems, structures and processes. At people-centric organizations, the relationship between employee and employer is one that is rooted in mutual respect, trust, collaboration and transparency. This applies to everything from operational processes and development programs to how a company handles market pressures, M&A and restructuring.

Lean methodology is based on this people-centric ideal. The Japanese founders believed that eliminating waste was a way of showing respect. Leaders working with employees in a transparent open environment not only eliminates waste but allows staff to flourish and maximize their potential. This culture encourages workers to be sure each aspect of their work has zero defects before handing it off to the next worker; it would be disrespectful to ask a colleague to waste time fixing your mistake—and would destroy value for the customer. Furthermore, transparency breeds accountability and trust. If people trust that the truth will be handled constructively, then every aspect of the business can be improved, including culture.

Creating this respect, trust, collaboration and transparency can foster world-class performance. It also applies to sensitive issues, such as how a company deals with decisions about a reduction in force. While leaders may not be able to promise lifetime employment, at a people-centric organization, they will collaborate on how to handle their cost pressures with minimal impact to existing workers. For example, instead of widespread layoffs, they would first opt to implement a hiring freeze and retrain existing employees to fill open positions. Rather than cut coffee and doughnuts in the breakroom, they would focus on critical process improvements that could fundamentally reduce the cost base and add value to customers.

Even under pressure, leaders at a people-centric organization never lose sight of the question: How do we make sure we are living up to our commitment to ensure people are excited about what they need to do?

Look for a commitment to safety, regardless of the industry. In the manufacturing environment, there are many executives who believe that because the work is difficult and dangerous, someone is just bound to get hurt. That is not a people-centric approach. People make mistakes every day. In a people-centric organization, leaders ensure that if someone makes a mistake, it doesn’t end up as even a minor injury. You want people to go home exactly the way they came to work.

In most office environments, people don’t take safety seriously at all, but it is incredibly important. If someone is under so much stress they can’t enjoy their family and friends when they leave work, that is not okay. Furthermore, a people-centric company would have a serious driving and travel safety program for those with heavy travel obligations, such as its sales and marketing organization.

Wellness and fitness programs are all people-centric, since they help people go home the same as when they got to work in both physical and mental ways. As a side benefit, they can save the company a huge amount of money. For example, through screening, a company can help employees discover they are pre-diabetic and may be able to avoid diabetes by changing their diets. Employee health is the primary objective, but it can also save the company a lot of money in health care costs.

Keep asking the right questions. Like I said before, boards don’t run companies; the management team does. However, the board can ask questions that help keep executives true to their ideals and build trust throughout the organization. This would suggest that on an ongoing basis, boards need to be asking the right people-related questions so that they don’t end up with demoralizing events involving people. This is particularly important as we see technology displacing people in the workplace. Ongoing questions for a people-centric organization would include: What are our staffing levels? What are the new skills we need to develop? How are we managing performance? As we implement new technology, how are those displaced being retrained and retained? It’s important to ask all those questions before big decisions are made, and even afterward, as various phases are completed.

On an informal basis, boards can assess the culture of the organization by inserting some telling questions into conversations with staff members. This can help build trust so that staff members will be truthful with their responses. Some of my favorites: How is the company treating you? What do you hear from others? If you were CEO, what would you do differently tomorrow? Whether you’re an experienced director or not, staying inquisitive really helps. The answers help you assess what’s going on—and when you hear answers that concern you, you share your thoughts with the CEO.

Gaurdie Banister
Gaurdie E Banister Jr. is the founder and CEO of Different Points of View, a private firm that provides advisory services in the areas of leadership and safety. He is the former President and CEO of Aera Energy LLC, one of California’s largest Oil and Gas companies. He is currently on the board of Tyson Foods,is the Lead Director at Russell Reynolds Associates and is a member of the board of trustees at American University. He has served on the boards of Marathon Oil and the Bristow Group. The opinions expressed herein are the opinions of Mr. Banister and, except where stated, are not necessarily reflective of his experiences at any company where he has served on its board.