Corporate Culture Matters. Here’s What Boards Need To Do

Over the past several years, the values and cultures of business organizations have become increasingly important to employees and customers . A renewed sense of values that respect individuals and create a unique work atmosphere, has led to employees weighing factors that are far more qualitative than salaries and benefits.카지노사이트

The absence of positive values and some corrosive dimensions in corporate culture have recently played a part in the Great Resignation, Quiet Quitting and other labor market trends. People leave companies because they find other professional contexts more attractive. Moreover, national regulators and large institutional investors are pressing companies and their boards to disclose some indicators on the quality of their cultures. The assumption is that corporate culture—which has long been a relevant theme in both management studies and in leadership development—can be a formidable tool to improve corporate governance.

It’s a positive development that corporate boards are focusing more deeply on these issues. A recent IESE survey presents some data on which dimensions of corporate culture board directors focus their attention. Themes such as employee collaboration, trust and pay are relevant factors shaping the firm’s culture. This survey also presents another perspective: boards consider those factors to be relevant, but don’t pay them as much attention as they should in decision-making. And when those conversations do take place, they don’t consider the full, complex picture of a company’s culture.

The facts

Surveyed board directors agreed that accountability, collaboration, trust, transparency and equal pay for equal work are key features of their firms’ cultures, as seen in figure 1 from the survey.

And in an encouraging finding of the survey, strong alignment of CEOs and senior managers with company values suggests the feasibility of leaders walking the talk. In the combined results for public and private companies, CEOs played the most important role in shaping corporate purpose (4.52 on a 1 to 5 scale), followed by senior management (4.16).

Still, there is room for improvement when it comes to boards and senior management teams applying culture and values to concrete strategy decisions. The impact of culture does not seem to be very strong. Figure 2 shows that culture in public companies plays only a moderate role in organizational change (3.81 on a 1 to 5 scale), CEO hiring (3.65) and CEO pay (3.53).바카라사이트

Boards of directors need to consider different arguments and interested parties. Culture is an important dimension at the board level, but boards also face pressure from shareholders to deliver results, often in the form of improved short-term financial performance, as is happening in the current global economic crisis. Pressure on boards can also come from competitors’ strategic decisions that may catch the firm off-guard and to which the board may overreact and leave culture aside. The recent crisis of Boeing and the terrible accidents of the 737 Max model, or the pressure that the senior management of Wells Fargo placed on sales teams to grow aggressively, are good examples.

A bigger role of culture in governance

To better integrate values and business strategy, directors must more strongly consider culture when it comes to strategic decisions, organizational design, hiring and development. The deeper integration of corporate culture in business decision-making will have a positive impact on the quality of those decisions and will make the company more attractive to current and potential employees.

The recent 2022 IESE-ECGI Conference on Corporate Governance highlighted some levers that can exert a positive influence on corporate culture, make it stronger and help the firm’s governance, including:

  • the clear definition of purpose that helps all parties understand why the firm does what it does is crucial.
  • the alignment of purpose, culture, strategy and organizational design.
  • the design of executive compensation mechanisms that focus on the long term.
  • the work and agenda of the board of directors to develop its governance and make it function more effectively.
  • senior management development and people’s development: who gets promoted and why
  • the presence of more women on boards of directors, which can lead to a more diverse workforce and foster deeper diversity of thought in executive decision-making. Fortunately, gender equality scored highly (4.39 out of 5) as a social value priority on the IESE survey.

This unusual moment in many labor markets, from staffing shortages to mass resignations, underscores the importance of firms meeting the employee demand for a positive culture . Yet many companies are still falling short. Companies should work at defining and strengthening the dimensions of their culture and, more importantly, integrating them with corporate decision-making. And boards should play a pivotal role in this process that will also strengthen the quality of firm’s governance.온라인카지노

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