Six Questions To Ask Yourself About Culture—Before Investors Do

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Getting below the surface to see what’s really happening inside a company isn’t always easy for board members. Asking these six questions will help.

Are we hearing enough disagreement?

Board members can tell whether the culture is truly primed for innovation by how much dissent they witness when key executives or even mid-level managers present in the boardroom. “If people under the CEO, or even the people who report to them, don’t come in and say something controversial, you probably don’t have a very innovative culture because folks aren’t willing to speak up.” says Pisano. “The board can’t be given the massaged answer that looks nice and fits nicely on the PowerPoint. There has to be unvarnished candor.”

Pisano recalls a time when he was consulting for a large financial services company and sat in on board meetings where the CEO’s direct reports had to give presentations. “These were senior people, extremely well compensated, very accomplished and yet they looked like scared schoolchildren when they had to present in front of the CEO. I’ve never seen people so afraid of a leader,” he says, adding, “things did not go well for this organization during the financial crisis, because nobody would ever speak up.”

How is our whistleblower program?

Obviously, making sure the company has “the bells and whistles and suspenders and belts in place” to provide all employees with a [safe] place to report incidents and making sure they are independently assessed and categorized is priority number one, says Babiak.

Then the chair of the audit committee can analyze the data for patterns, such as whether a disproportionate number of complaints are coming from a single branch and if that also corresponds to higher turnover. “I’ll also look at the whistleblower report, and it will say, ‘This many people were fired, and this many cases were inconclusive.’ I’ll ask, ‘How did we conclude that these cases were unfounded? What’s our process for that?’ You don’t just take as fact what is given to you,” says Babiak. By asking about it, having the back and forth, “you begin to get a feel for how seriously management takes these things.”

Whistleblower stats can also alert you to the possibility that employees are not sufficiently aware of the resources available, says Marzec. “If I’m there saying no one has ever complained and we have 5,000 employees, something has to be wrong.”

If management claims there are no calls because there are no problems worth reporting, probe further for proof of that, says Matt Fawcett, general counsel for NetApp, and secretary of the board. “I would ask, how do we know we don’t have a #MeToo problem in this company?”

Consider giving the chief ethics and compliance officer a seat at the table. “The CECO should be asked to regularly demonstrate and explain to the board how the company is performing in terms of ethics,” says Katie Smith, who owns that particular title at Convercent, which makes benchmarking software for companies to measure their own ethical performance. “The board needs to treat this evaluation as a key performance indicator of overall business success and know which questions to ask early on.”

Asking the right questions will hopefully uncover the areas of greatest concern before those become front-page news. “We have that expression, ‘noses in and fingers out,’” says Babiak, “but I always say your nose has to be deep enough in that you smell something if it’s rotten, and then you can do something about it.”

With pressing concerns and daily fires to put out, management can sometimes lose sight of what’s important over the long term. Boards have to keep asking the right questions to make sure culture stays on the front burner, says Briscoe. “Values can’t be something you put on a poster somewhere and nobody ever talks about it. You have to talk about it all the time. It’s the way we portray ourselves, the way we act, the way we treat each other—and I do believe that starts with the board.”

Read more: State Street Global Advisors CEO Cyrus Taraporevala On The Value Of Culture

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