Culture: Big Risks and Big Opportunities

(*AICD is the Australian Institute of Company Directors)

The agenda was:

• What is culture
• How is it best measured
• Critical risks posed by culture
• Culture as a valuable asset, for organisations and team
• Changing market and societal expectations
• Responsibility for Culture

The bottom line is that culture is not only one of the greatest risks of any organisation – the one that keeps Directors up at night – but also one of the greatest assets – both for the organisation, and equally for individuals and the community who participate, both employees and customers.

If you’re a member of AICD, it was recorded and is available on their website.

Head on over, and look for ‘Governing the risky business of culture’. July, 2023. We’d love your thoughts.

If you’re not, we’ve summarised a little of the content here.

We refer to three definitions, all related:

• “Culture is the tacit social order of an organization: it shapes attitudes and behaviors, in durable ways. Cultural norms define what is encouraged, discouraged, accepted or rejected within the group”.  Harvard, 2018
•  “Collective behaviours driven by a set of norms and valuesthat directly impact decision-making”. AICD
• Finally, a lay person definition, used when we talking to whole organisations about culture, and the role that every person can, and should, feel confident to play:

“The way you treat each person, and each other, around here”.

For too long Culture has been measured as a single score. Since 1994, ‘Engagement’ has been the go-to ‘score’ for organisations to ‘tick off’ once a year (dual meaning intended). But that approach, is largely a sentiment score – an opinion – from individuals.

In reality, Culture is a complex system*, and should be measured as such. That means from multiple perspectives, that are all interrelated.

At mwah. we’ve been a leader of the move to complex systems measurement for five years. We start with 3 core elements:

• individual identity (who is here),
• how they experience culture and the culture they prefer to ensure they can thrive confidently (belonging), and
• organisational network analysis, whereby we look at how people impact each other.

We then add those three perspectives, to 12 other data points, to determine how information flows, how decisions are made (and who makes them), and other factors, like who is solving problems or coaching the team.

Finally, we cross reference that with customer and other business data, to determine the relationships between culture and the organisation’s goals and strategies.

We’ve have been working to get all those perspectives in one place, on the same scorecard, thereby enabling a single point for understanding, and ultimately leveraging culture.

That’s no doubt the reason, AICD asked us to present the culture, and specifically, culture measurement education session.

*This is in much the same way, we measure financial and customer information. Not single scores, but multiple perspectives that interconnect.

Perhaps more than any other agenda, the risks in culture keep Board Directors and Executives up at night. Ironically, poor culture, isn’t great for the sleep patterns of every other employee as well. Plus, it has a pretty wicked impact on customers as well.

While there are whole books written on the risks in culture, we examined just a few on the day:

• Standards – defining them, setting them, and holding them. Setting the tone from the top that is clear and visible to everyone,
• Decision-Making – who makes decisions, how they make them, who’s involved, what they refer to, and how transparent all that is,
• Stories and Narrative – Accountability, how things are challenged, and the exceptions that are allowed and then create the true understanding of culture

When we talk of culture as an asset – one that can truly be leveraged to create a better environment for contribution, success, and wellbeing – we firstly look at context. We use these reference points:

• What is your purpose and strategy to achieve it?
• What is your work to do?
• Who are your customers and how do you want to add value to their lives?
• And from a person perspective, what are the capabilities, behaviours and mindsets you need on your team for success.

From there, we can appreciate what’s needed, and against that, we look at measurement (as already noted above).

To do that we need idiographic data (individual) AND nomothetic data (collective); we need to understand homogeneity and important differences; we need to appreciate healthy tension points versus destructive misalignment, and (when assessing M&A work) we need to look at Culture A versus Culture B and where Culture C that both can join, might be.

There’s a wealth of information about the changing expectations, specifically in the conversations around ESG (Environment, Social/Society, and Governance) reporting. Culture sits firmly in S (Social) but definitely impacts G, and even E, as well.

For the purpose of the AICD education session, we looked at keeping up to date with what’s expected, without jumping on every ‘initiative du jour’.

For example, there’s an increasing, and appropriate, expectation that workplace culture is safe – physically and psychologically. At a minimum is should be free of physical and mental risks, certainly including a zero tolerance for harassment and bullying. That said, it should not be free of accountability and responsibility. In fact, our research strongly demonstrates that clear accountability, and high expectations, are a cornerstone for most of us to feel that we belong – that we are expected to, and appreciated for, contributing our best work towards the collective effort.

Finally, we landed on the responsibility for culture.

We always look at culture work in three layers:

Layer 1A: Board – Tone, Governance, Alignment to Strategy

Layer 1B: Executive – Accountability for delivery of the culture as required and defined.

Layer 2: Architecture – The processes and practices that hold culture. (e.g., performance, reward, talent, and change). This layer is held with the Executive, or the People and Culture function.

Layer 3: Every Day – Leaders and employees are responsible for bringing culture to life, every day, in every decision and every interaction.

Of course, culture, like any system, can be a complicated conversation, but its getting easier to understand, as we wrap our heads, and a whole lot of very different data around appreciating the good, the bad, the ugly, and the spectacularly cool.

We loved the opportunity to present for AICD, and welcome a deeper conversation on every element we’ve summarised here. If you’d like to learn more about our work, and how you might measure culture in your organisation – mitigating risks and leveraging strengths – drop us a live at [email protected]

Two final note of thanks:
One to Ming Long for joining us to present.

While we often get to work with some of the most forward-thinking Board Directors in the country, you are truly a role model of what’s possible when we expect every organisation to do business the right way, and in the best interest of who they serve.

We very much appreciated your experience and passion for the agenda of culture and the increasingly important role it plays in how we build organisations, and how they impact people every day.

Secondly, a Thank You to AICD, for creating this space to move this important conversation forward in the Board and Director community of Australia.