The tone from the top

Transcription

The tone
from the
top
www.kornferryinstitute.com
Taking responsibility
for corporate culture
02
Contents
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Conversation with… Vivek Bhatia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Conversation with… Paul Brasher. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Conversation with... Elizabeth Bryan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Conversation with... Melinda Conrad. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Conversation with... David Crawford. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Strengthening culture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Conversation with… Tom Gorman. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Conversation with… Brian Hartzer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Conversation with… Christine Holgate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Conversation with... Jayne Hrdlicka. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Aligning culture, strategy, and talent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Conversation with... Greg Medcraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Conversation with... John O’Neill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Conversation with... Andrew Pridham. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10 red flags. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Conversation with... Simon Rothery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Acknowledgements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Contributors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Contact. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
THE TONE FROM THE TOP
Introduction
Consider this: Somewhere in the world, right now, it is likely that someone
is breaching the culture of the company that he or she represents. The
transgression may be minor and it may pass quietly, or it may be so
grievous that it bursts to the top of the organization and attracts viral
news coverage and widespread condemnation.
The response to such a possible corporate crisis reveals much about the
culture of the organization. Blame is often assigned to a “few bad apples,”
a “rogue employee,” or a “random event.” It may appear in the early days
of an unfolding crisis, that culture is the hardest word to say. Instead,
the focus often turns to looking for someone at fault, punishing them,
and considering the problem solved. The emphasis is on who, when the
greater need is to look deeper and to ask how and why. Conversely, the
media may put their focus higher and deeper—toward executive teams
and boards, questioning their knowledge, or ignorance, of the breach and
the system failure that enabled it.
There was a key finding in a recent global culture survey conducted by
Korn Ferry.1 The majority of the 500 business leaders surveyed (72%) said
that culture was extremely important to organizational performance, yet
just 32% said their organizational culture aligns to a great extent with
their business strategy. This means that two-thirds of executives believe in
culture as a driver of performance, yet just a third believe it should closely
align to strategy. The gap between these contradictory findings should
concern business leaders, board directors, and executive teams. It is
where risk and ambiguity thrive and where small cracks in culture widen,
until something, somewhere, falls through.
Korn Ferry interviewed 13 business leaders who serve on boards or are
CEOs of organizations in Australia to gain their insights on the strengths
and weaknesses in organizational culture. The firm sought to understand
where these leaders think responsibility for organizational culture belongs
and how boards and executives can work together to ensure that the
culture set at the top permeates throughout an organization.
The conversations explored the relationship between strategy and culture
and how fault lines can form in organizations that allow toxic subcultures
to flourish. The business leaders helped to identify the warning signs—the
smoke under the door—that should cause concern for executives and
directors.They outlined ideas and practices on how organizations can
achieve cultural alignment from the top down. Their views are illuminating,
and their approach to cultural transformation will be of interest to anyone
with a stake in the power and role of culture and the impact it has on
performance.
1
http://www.kornferry.com/press/15195/
1
2
Conversation with...
Vivek Bhatia
“Start with culture. If you don’t have your culture
right, your strategy is pretty meaningless.”
KF: Who is responsible for the culture of an organization?
VB: Undoubtedly, the senior leadership, because accountability for
culture starts at the very top. In my opinion, the leadership at the
board level sets the tone, which is then cascaded by the executive
team to the rest of the organization. I strongly believe that the
leadership team needs to “live” the culture and set the example, not
just talk about it or have posters on kitchen walls.
KF: As a board member, you are part of the group that sets the tone. As
CEO do you have much influence over what that tone is?
VB: It is my responsibility to inform the board and influence my
colleagues around the boardroom table on the most appropriate
Vivek Bhatia is CEO and
managing director at icare NSW.
culture for an organization of our shape, size, and scope. This
is driven by my personal value and belief that a leader needs to
espouse the culture they want the organization to be. There is a
long-standing mantra of, “Be the change you want to see.” If you are
not, then don’t expect it.
KF: How would you describe the culture at icare?
VB: We’ve had a very interesting journey over the last 15 months. I joined
a previous incarnation of the organization after a parliamentary
inquiry, which found that harassment and bullying were systemic in
this workplace.
One of my key objectives upon joining was to understand the root
causes that were impacting on or influencing that culture. Very
quickly I learned it wasn’t everywhere, and it wasn’t everyone.
And that is always the case. There are always challenges in a fairly
large organization and people tend to generalize the organization’s
culture. We need to find root causes rather than purely addressing
the symptoms.
Organizations don’t have one culture; there are numerous
subcultures. But there is something thematic in those subcultures.
They are typically influenced by the worst behavior that is tolerated.
I believe an organizational culture is driven by the worst behavior
that a leader allows to happen.
My first course of action was to apologize for what had happened
in the past. Then, I started an open, honest, and transparent way of
operating, which includes a weekly blog that I write to all employees
and an email address they can all write in to ask me any question. It
3
things. If I can’t answer any questions, I prefer being honest in saying
Key factors that strengthen
culture chosen by Vivek
Bhatia:
either “I don’t know, we are working on it” (and it’s OK to admit
• Leadership from the CEO
is a huge time commitment from my perspective. But if I don’t have
time to listen to my people, I am spending my time on the wrong
that!) or I can’t talk about it due to confidentiality reasons. We have
to build trust within the organization, that’s the foundation stone of
culture.
KF: Is that the key to turning around a toxic culture? Call it out, apologize
for it, and start again?
VB: We said everything is not bad, everything is not broken, but there
was an incident that impacted a lot of people. Let’s call it, let’s
apologize, draw a line in the sand, and let’s move forward. We do
not want to constantly be looking back. But we need to bring people
with us to move forward. Regaining trust does that best. I added the
value of respect to our set of values. It is a pretty simple term, almost
a hygiene factor. But in the context of where the organization was
at the time, it needed to be elevated. We ran programs that helped
to embed respect into our day-to-day behaviors and operations. I
opened direct communication channels with the employees. I heard
what works, what doesn‘t work, and what people are feeling. I also
outlined across the organization my expectations of people leaders
in leading teams and building a constructive workplace culture.
KF: Was this intuitive on your part or was it a more strategically
structured process? How did you know how to do what you did?
VB: It was a bit intuitive. But throughout the 17 years I have been
working, I have learned that certain leaders inspire, and certain
leaders don’t. Over the years, I started to think about what I would
do when I got the opportunity to lead an organization.
In 2008 when I was appointed to my first CEO role, I conducted
a trial with an open culture, in terms of making the workplace
transparent, accessible, and a place where it is OK to talk about
things that are not going well without the fear of being judged. If I
can quote Peter Drucker, culture eats strategy for breakfast. Start
with culture, because if you don’t have your culture right, your
strategy is pretty meaningless.
KF: How do you set a new cultural tone for icare?
VB: It is about setting clarity around what you want to be and engaging
as many in the workforce as possible to contribute to the culture
they want to be a part of. The foundation of icare is that we are
• Engagement from the
board
• Included as an intergral
part of strategy
4
here to deliver a world-class service to our customers. Everything
we do places the customer at the center. Most of our customers are
vulnerable. They have been injured, and it is hugely important that
when we deal with them that we do so with utmost empathy and
a very clear focus on how we can help them get their life back to
as normal as possible. We say: “We have a commercial mind and a
social heart,” and that juxtaposition for us is the most critical thing
that sets the tone for what we want in our organization. We are here
to deliver a very strong social purpose and we can make a difference
to people’s lives. It’s a huge responsibility and we need to deliver the
best possible outcomes for the people and communities of the State.
KF: Are you seeing improved productivity from your cultural change
process?
VB: Undoubtedly. It is well known and well researched that stronger
culture results in better engagement and better engagement results
in better productivity and through-put. We did an engagement
survey this year and during a 12-month period we saw a quantum
improvement in our engagement.
KF: Do you recruit for culture?
VB: Absolutely. It is most important to us to recruit somebody who is the
right fit. For me, the right skills get you to the table. But what gets
you into the organization is the right fit. It is really important that
people come in with the right mindset, and feel equal responsibility
to make sure that their teammates and their colleagues are as
successful as they are. If they are successful at the expense of their
colleagues then that is not success to me.
KF: What role do you see for HR in cultural change?
VB: I see the role of HR as an enabling function or service. I don’t see
the role of HR as the owner of culture in the organization. It is the
collective role of the leadership team and a point of accountability
for the board and me. I believe the only reason we can’t deliver a
world-class service is because of our own selves. We cannot blame
anybody else. We take out the plausible-deniability levers and we
say: We are the owner of our own destiny, how are we going to
deliver what we aspire to deliver? Do we know what good looks
like? And if we know what good looks like, what is stopping us from
getting there?
5
Paul Brasher
“The minute the CEO does something that
contradicts a cultural value, you are set back
years.”
KF:Culture appears to be gaining a more formal place in conversations
on how companies are run, particularly in relation to governance. Is it
important for companies to properly define their culture?
PB:It is interesting that there is a lot spoken about values but not about
culture in annual reports. I think that is because culture can be
difficult to describe without trotting out a bunch of platitudes. I see
culture as an aggregation of how people behave and live particular
values. In a corporate environment, it is how a company first of all
enunciates its values, and, more importantly, lives them.
KF:How important is understanding culture to managing risk?
PB:I don’t think you can seriously address risk without having some
regard to culture throughout the organization. For example, in
certain situations you may have subcultures that are inconsistent
with the overall culture you are trying to achieve in an organization,
which can lead to disaster. Some of the recent high-profile issues
where things have gone wrong involved a smaller group with their
own culture. It didn’t matter what people thought the company’s
culture was, this group thought it was something else.
One of the hardest things to deal with is when you have a subculture
in a part of the organization that has been incredibly successful. The
temptation is to say, “Just leave them alone, you don’t want to upset
them, they are doing all right.”
Well, you can pay a big price for that and they can become a law
unto themselves if no one is prepared to break down the silos and
challenge these cultural terrorists.
KF:Some subcultures may be absolutely fine and are welcome, but when
the subculture doesn’t marry up to the overall culture there is risk of
a breach. How do those at the top of an organization identify these
strong, potentially risky subcultures?
PB:That’s the $64-million question. I think every director worries about
how you might “smell the smoke coming under the door.” How can
you know what is going on three or four levels away so you will be
able to sense when there is something amiss? You can rely upon
some of the indicators. For example, most companies now have
whistle-blower programs that provide an avenue for people to report
behaviors that shouldn’t be occurring. But perhaps not. You might
Paul Brasher is the Chairman
of Incitec Pivot Ltd., a NED
of Amcor, and the Deputy
Chairman of Essendon Football
Club.
6
find that the people in the particular group think it’s wonderful but it
culture chosen by Paul
Brasher:
KF:How much weight do you place on intuition in recognizing a cultural
• Cultural leadership from
the CEO
PB:You won’t make drastic moves based on intuition alone. But if you
• Penalizing/calling out
work and/or behavior
that contradicts cultural
values
• Inclusion in leadership
and development
programs
• Frequent communication
of culture-related
programs
is contrary to the values of the rest of the organization.
breach?
are sniffing a bit of the smoke under the door at the same time
people are raising matters that they intuitively feel might be an issue,
you will take notice, and you will make further enquiries.
In this regard, one thing I have found very useful when I have chaired
audit and risk committees is to have regular, informal conversations
with, for example, the internal audit manager or the external
auditor. These are along the lines of “Tell me what you are sensing
in our company, even if you can’t necessarily back it up with hard
evidence.” Often this leads to a discussion around culture issues.
KF:If a director hears something, or sniffs something, can they talk to
their fellow directors and the chair?
PB:Yes, and they should. Some of the celebrated disasters in corporate
history have people wise after the event. The number of people
you hear say something like “I knew they were a bunch of crooks,
everybody knew that.” Well, somehow or other, you don’t tend to
hear those insights before the event.
KF:What do you think are the key factors that strengthen culture?
PB:I think leadership from the board, and particularly the CEO, is
absolutely critical to strengthening culture. If the CEO is just paying
lip service to it, then you have no hope of embedding a distinctive
culture.
It is almost as important to have somebody standing next to the
CEO to act as the champion and driver of culture, who will cajole the
CEO to do what he or she needs to do. This person will act as a kind
of intermediary between the CEO and the organization.
Penalizing behavior that contradicts cultural values is also really
important, and in the context of the CEO it becomes imperative.
People read messages into what the CEO does, so the minute the
CEO does something that contradicts a cultural value, you are set
back years in what you are trying to achieve in an organization.
Everything is amplified many times over in relation to the CEO.
KF:Culture or strategy? Which comes first?
PB:I think they run in parallel. I struggle to see how you could sensibly
define a culture without having some regard to your strategy. If I
think about culture as defining the way we do things around here,
you would define that by the various values that you enunciated
and hopefully perform to. For example, if one of your values is
innovation, that is presumably aligned totally to your strategy,
because that’s what your markets and customers demand.
KF:Do you think there is a difference in how culture and leadership
works in sporting organizations?
PB:I think the difference with a major sporting organization is that its
success has to be immediate and it is closely scrutinized every single
day in the media. No corporation gets that kind of scrutiny. Coaches
are on short-term contracts and have a minuscule window in which
to achieve success, so they may be tempted to be more focused on
immediate results than on building a sustainable culture.
Having said that, sports clubs now recognize the importance of
having a strong leadership group that will act as cultural guardians
while playing their part as sports people. With the right people, that
can be really powerful. If you really believe your leadership group is
committed, then you will trust them to have a big say in how to deal
with people who are not living the culture.
KF:Is there anything you would like to change about the culture in
organizations you have knowledge of?
PB:Probably not in terms of defining the culture that is right for the
organization—most companies do that pretty well. However, where
a company is implementing a program of cultural change, people
sometimes have an attitude that they may need to sacrifice shortterm profits for longer-term success. I don’t agree with that—a well
thought out, defined, and lived culture is fundamental to success in
both the long term and the short term.
7
8
Elizabeth Bryan
“You cannot manage a complex organization unless
you manage through the tool of culture.”
KF:How important is it that companies focus on culture?
EB:Culture is the environmental setting required by society as part of
your license to operate. And any company that has a culture that
is at odds with those societal expectations is going to wind up in
trouble. That is where society’s relationship with businesses has
evolved to. It hasn’t always been there, but it is there now.
KF:How can companies improve their understanding and application of
culture?
EB:The best analogy for what will have to happen with “company
culture” is what has happened with “safety culture.” There used to
Elizabeth Bryan is Chairman
of Virgin Australia, Deputy
Chairman of Insurance Australia
Group, a NED of Westpac and
former Chairman of Caltex. She
is a member of the Australian
Securities and Investments
Commission's Director Advisory
Panel and the Takeovers Panel,
and is the president of YWCA.
NSW.
be a time when there wasn’t much focus on safety culture. That has
changed. A good safety culture in industrial companies has become
a critical “must have.”
Take a company in a dangerous goods industry like Caltex. Safety
is embedded in absolutely every aspect of the business—in the
language, in the format of the board meetings and all management
meetings, in any type of assessment or response to issues of the
day-to-day business, in score cards, in management practices, and in
all work processes. If you can’t talk the language and walk the talk of
safety you cannot survive in that company, because safety drives the
business.
I think company culture has to take the same journey, and we are
way behind. Many companies are only just beginning to even
discuss culture. It has got to become embedded in organizations.
For that to happen, you need an understanding of how to make
culture work for an organization.
KF:There are various opinions of what culture is.
EB:It is what we are, it is who we are, it is how we do things around here,
and, it is how we do things around here when no one is looking.
You don’t have to think about it, it is just there. In a safety culture,
if something goes wrong, you immediately consider: What didn’t
happen to prevent the accident; why didn’t it happen; if it was an
individual misjudgment why didn’t all the checks and balances
work; why did the system that was put up around that individual to
help them fail to do that? You need a similar thought process for
company culture and you need to be able to talk about it, and talk
about the details.
KF:What do you believe are the key factors that strengthen culture?
It is all the factors you have on your list [see page 17], and if you
miss one of them, then you’ve got a hole in your system. One factor
is not more important than another; the strength comes from how
you weld all of them together in a system. So every link in the system
has its own job to do; the links that sit on the board have the job of
espousing, communicating, monitoring, making sure the systems and
procedures are right, making sure culture is discussed down the line,
and making sure it pervades all the different things we do.
Culture needs to be explicit. That is what instills it and makes you live
it day by day.
KF:The CEOs of some companies involved in high-profile governance
breaches are distancing themselves from the crisis by saying they
knew nothing about it, that nobody told them what was happening.
Is that a valid defense?
EB:Of course not. The CEO is responsible. Someone not knowing
something is no excuse because you can’t ever know it all. But you
are responsible for the culture and the system that allowed the
breach to occur. Were they not told because the culture doesn’t
allow that dialogue to happen? If, for example, the breach occurred
because the sales targets were impossible to reach any other way,
then the leadership need to be wide open to hearing that and acting
on it. The ability to have those conversations has to be part of the
culture. Bad news has to flow to the top quite quickly, which is very
hard to do in big organizations. And people should not be fearful of
transmitting that information.
Tone is very important, particularly in how you acknowledge
achievements. Who do you seek out to be a hero? Is it the person
who against all odds hits ridiculously high sales targets, or is it
someone who raises a problem and discusses it with you? Those
choices send a cultural signal from the top.
KF:How much do boards get involved in engagement surveys, whistleblower data, or social media monitoring?
EB:Boards should monitor those measures because they need to know
how their company is being seen by different stakeholders. NEDs
also need to know how to interpret this data, and they need to
understand the business model and the behaviors it encourages.
KF:That is a constructive way to talk about culture. It elevates it.
9
On strengthening culture:
“Every link in the system
has its own job to do.
The links that sit on the
board have the job of
espousing, communicating,
monitoring, making
sure the systems and
procedures are right,
making sure culture is
discussed down the
line, and making sure it
pervades all the different
things we do.”
— Elizabeth Bryan
10
EB:Culture is hard edged, just like safety is hard edged. Safety is
all about not killing people, and a safe industrial enterprise is a
profitable one. Once you start to have safety problems, you have
consequences and costs that build up all through the system. The
same levers will drive culture. If the culture is right, then your cost
base doesn’t have to be so heavy. But your business model has to
be right, it has to be set to succeed.
KF:When you have such a strong culture of safety—zero harm—then you
have something that anchors a tough decision. You can walk away
from an overseas partner who has different safety rules, or walk
away from potential revenue sourced in a country that doesn’t work
the way you do.
EB:It becomes an absolute no-go; this is our culture, we will not breach
our culture, if we do, we are putting it at risk.
KF:How long is the journey that culture has to make to match where
safety is today?
EB:It is long. There is no coherent framework that I know of around
culture as an influencer. But there is, particularly in service
industries, demand from many powerful stakeholders that boards
know and own their cultures. We must accept culture as a tool for
managing complex organizations. I think you can argue that you
cannot manage a complex organization unless you manage through
the tool of culture.
KF:What is strategy done in absence of culture worth?
EB:Nothing. How do you work from that? Success is no longer sufficient
if you go outside an acceptable value system to get there.
11
Melinda Conrad
“The board and management must collectively
own culture, with the CEO and management team
delivering those values on a day-to-day basis.”
KF: What are the most important factors that strengthen an
organization’s culture?
MC:Cultural leadership from the CEO is, without a doubt, the most
important way to influence a company’s culture. In my view, the
board must mutually agree on the vision, behavioral expectations,
and boundaries of the company’s culture. And then appoint the
right CEO who is able lead the organization to deliver on that vision.
Because while the board is there to uphold the vision on culture, on
an everyday basis, it is the CEO who sets the cultural tone.
The next most important factor is recruiting senior executives with
the right cultural attributes, and the board does have some influence
here. In all the boards I have been involved in, members of the board
who are most aligned with that particular function will also meet the
final candidates. This helps give the CEO another perspective on the
candidate and provides an opportunity to engage on what the board
expects of management.
KF:How can you determine what the right cultural fit looks like? Is it
through assessment benchmarking that examines desired cultural
attributes or is it more intuitive?
MC:The data from some of the more scientific assessments provides a
useful perspective. However, in the end, one’s intuitive judgment is
just as important. Observing the small actions and the signals they
send provide the best clues. In my experience, there can be a very
big difference between the talk of culture and the action of culture.
I’ve seen many times that it ends up being just words, whereas it
is actually when actions support those words when culture comes
alive.
I knew a CEO who prided himself on thinking he had created the
best culture in the company. But further investigation revealed that
the reality didn’t match the rhetoric. This is a classic example of
saying all the right things, but not having any substance. The worst
thing you can do is set aspirational views on what the company’s
culture is, go to the effort of putting the meat on the bone of what
that means in terms of specific values and behaviors, and then when
it comes to the crunch, you have not followed through on it. Such
inconsistency can create a lack of unity and trust in the culture and
values of the organization. In contrast, when there is consistency,
a sense of pride and focus on performance builds, which can be
incredibly powerful.
Melinda Conrad is a NED of
OzForex Group Limited, the
Reject Shop Ltd., the Garvan
Medical Research Institute
Foundation, the Australian
Brandenburg Orchestra, and has
previously served on the boards
of David Jones Ltd. and APN
News & Media Ltd.
12
culture chosen by Melinda
Conrad:
the CEO
• Recruiting executives
with the right cultural
attributes
• Taking swift action on
work and/or behavior
that contradicts cultural
values
KF:How do you identify the gap between words and action in relation to
culture?
MC:It is challenging for boards, as directors aren’t there for the dayto-day actions and are less exposed to the little signals that make
up what the culture really represents. In the extreme, you can
be shielded from it by management so, you have to find ways to
be actively talking to all of your stakeholders. Interactions with
employees, customers, suppliers, shareholders and competitors all
provide insight into how the organization is delivering.
KF:How do you receive enough signals to know there is a problem?
MC:I am operating on the assumption that, as a director, I am probably
the last to know; so if I hear a little snippet, it has the potential to be
the tip of the iceberg and I need to be digging pretty quickly. That’s
why it is important to be attuned to all those seemingly little things,
and then use your judgment to assess whether it is just an isolated
example or is representative of a bigger issue which needs to be
explored.
KF:Singularly they probably don’t mean a lot, but collectively they mean
something.
MC:It is challenging for a director to identify a cultural issue early, yet
we need to accumulate enough clues to give us enough confidence
to act. Board meetings can be very scripted and run to a strict
timetable, and people presenting to the board are well prepared.
So opportunities to explore the “snippets” occur at the dinner
afterward, walking the halls of the company, chatting with people,
and being on the shop floor hearing what people say. Or when
talking to customers or watching the CEO and management team
interact. Once you put your collective snippets together, you then
consider, am I still comfortable, yes or no?
KF There is extensive research that suggests in many organizations,
culture is in one box and strategy in another. Do executives truly
understand the impact of culture on achieving strategy?
MC:I think it depends on your definition of both. Everyone has his or her
own definition on what strategy is and everyone has a different view
on culture. It needs to be defined and collectively agreed upon. For
example, are you talking about a culture of interpersonal behavior
or a culture of risk? Are you talking about a culture of compliance or
culture of accountability? Those are all elements that make up a kind
of synthesized definition of culture.
KF:That’s a really good point. You’ve got to question how organizations
can genuinely move forward in the right way if they don’t
understand that it’s not just about culture but about its component
parts.
MC:Culture is made up of a whole lot of different elements. You can have
a culture of collaboration and a culture of risk and these things aren’t
mutually exclusive. It’s the collective that makes up the corporate
culture. Most important is a culture of mutual respect, because if you
don’t have that, nothing really quite works.
KF:Another way of viewing culture across all the silos is a clear
understanding of: “This is how we do things around here” and
ensuring employees have a clear understanding of that.
MC:This is where the conduct of CEOs is so important. It is their job to
say, “This is who we are, this is how we are going to behave, and
this is what is acceptable and not acceptable. And the way I am
going to conduct myself is the way you need to model yourself.”
The executives gain a direct understanding of what is acceptable
through the actions of the CEO. It filters through.
KF:How much influence do you think the board has on driving the
culture of a company?
MC:In my view, the board should uphold the vision for the organization’s
culture, set boundaries, and measure performance against
expectations. Ensuring the role of the remuneration committee
more broadly encompasses the evaluation of people, and culture
is an important way to formalize this accountability. And ultimately
if the board doesn’t believe the agreed cultural expectations are
being upheld, our job is to either help change the CEOs' behavior or
change CEOs.
KF:Who on the board should be most proactive in helping to shape
culture?
MC:It is like strategy, everyone has to own it. It starts with the board and
CEO agreeing on a collective vision, followed by the executive team
fully understanding and engaging with those values. On a day-to-day
basis, the CEO can then work with the head of HR whose, role is as a
facilitator and as an advocate. However, as soon as you say culture is
something that HR owns, you’re dead. Everyone has to buy into it.
KF:It’s a journey isn’t it?
MC:Yes, and culture is not a fixed concept. It is constantly evolving as
the organization changes. And depending on the size and life cycle
of the organization, the pace and style of that change varies.
13
14
David Crawford
“Culture is not something you can stop and think
about, it should be part of your DNA.”
KF:How do you describe culture in a business context?
DC:Culture is a very common word, but it has a huge range of meanings
for different people in different organizations. I believe culture
is fundamentally important to the success or lack of success of
corporations. Unless an organization has a set of fundamental
principles by which it operates, then all the people in the
organization will not know how they should behave and what is
necessary in the interests of the organization, and the community in
which they operate.
KF:What are the main factors that strengthen culture?
David Crawford is the Chairman
of Lend Lease, South32, and
Australia Pacific Airports Corp.
DC:Leadership from the CEO is absolutely fundamental. Leadership isn’t
just about presenting to the community and addressing the troops,
it is actually the way in which the leader and the team work day to
day. Many companies I am associated with have a culture of safety. It
is a top priority and non-negotiable. This extends to not working in
countries where you cannot get the people you are working with to
treat safety as a fundamental part of your culture. The companies I
work with believe that every employee who comes to work (and their
family), has the right to expect that they will return home in the same
condition they went to work.
KF:How difficult is it to have alignment between the people who might
be described as the chief custodians of the culture? What is the role
of the board or the chairman in culture?
DC:The board has to be absolutely committed to it, totally supportive of
the principles involved, and the CEO needs to have their full backing.
KF:What work is required to ensure the full board and executive team
is also aligned on culture? Is it a deep and specific exercise or is it
wrapped up in strategy?
DC:You don’t sit down and say, “Let’s talk about culture today” or “Let’s
talk about strategy today.” That is not the way it happens. When
you appoint board members, you look for people who have similar
values and similar views about those fundamental things.
KF:We often hear more about a company’s culture after a crisis. There
may have been a moral or regulatory breach that is first described
as random but later is seen as systemic. Does it take a crisis to turn
people’s attention very firmly on culture?
DC:Possibly. With my background as a corporate receiver, I have had
a lifetime of fixing stuff-ups. And mostly you would say those
businesses had no decent culture or values. Almost without
exception, they were businesses that were run for the benefit of the
individuals at the top. There was no overarching culture of doing the
right thing.
KF:Is “We didn’t know” an excuse from leaders when a breach occurs on
their watch?
DC:I come from a harder school than that and say: “Why didn’t they
know?” They should have. I have been called in over the years to
perform reviews for all sorts of organizations, and it is quite plain to
me, and no surprise, that the people at the top were either too busy,
didn’t want to know, or the boards weren’t chosen with due skill,
care, and attention.
KF:What are the fundamental ways to mitigate cultural risk?
DC:I often use the phrase—if you’ve got good governance and structure
in place, you’ve got a chance for success. If you don’t have it
in place, you’re going to struggle to ever have success. This is
particularly so in not-for-profit or sporting bodies.
It is interesting how often executives get caught up in their own
little world, and are doing something that they perceive is in the
best interests of the corporation because it is going to improve the
bottom line. You might ask: “Let’s look at this more broadly. What
will it do to the company’s reputation?” The answer may be “That’s
not my issue, that’s for somebody else to worry about.” Well, it is for
you to worry about, it is fundamental. It is a question not addressed
often enough by senior executives because they are not focused on
their broader role.
KF:Do those executives think that cultural issues are handled
somewhere between corporate affairs and human resources? Is it
considered a delegated task?
DC:Some people don’t even get that far to say that it is somebody else’s
job. It just isn’t on their radar. But culture is not something you stop
and think about, it should be part of your DNA.
15
culture chosen by David
Crawford:
• Cultural engagement
from the board
the CEO
attributes
16
KF:What do you think are the red flags, and how can an NED who has
limited access to the inner workings of an organization investigate
something that might not be right?
DC:One has to think about the role of an NED. Some people think
it is about reading the papers, turning up, answering questions,
responding to issues, and going home. To me, the role of the NED
these days is a 24/7 role. That is not to say I’ve got to be thinking
about the companies I represent all day. It is about having an
awareness of what is going on around you that will trigger you to
ask a question: Is this something relevant to your business? Is it
something the business might suffer from? Being an NED is not just
come to work, do your boards, and go home. The trigger points are
out there.
17
Strengthening culture
Korn Ferry asked the business leaders who assisted with the Tone from the Top
research to review a list of options provided by the firm and to nominate three or four
leading ways to strengthen corporate culture.1
Cultural leadership from the CEO

Rewarding work and/or behavior
that represents cultural values

Penalizing work and/or behavior
that contradicts cultural values

Recruiting executives with the
right cultural attributes

Cultural engagement from the
board

Culture included in strategy
discussions

Frequent communications of
cultural values

Inclusion in leadership
development programs

Defined clearly, internally and
externally

Culture is measured

Our culture is aligned with our
customers' expectations

Linking all of the factors listed
above

The leaders were: Vivek Bhatia, Paul Brasher, Elizabeth Bryan, Melinda Conrad, David Crawford, Tom
Gorman, Brian Hartzer, Christine Holgate, Jane Hrdlicka, Greg Medcraft, Andrew Pridham, John O’Neill, and
Simon Rothery. Some nominated more factors, some ranked them, and some didn’t; one interviewee didn’t
distinguish among the listed factors. Interviews and data collection occurred September-November 2015.
1
18
Tom Gorman
“You have to find the person who is going to do the
right thing, and I don’t mean the right strategy and
the right tactics, I mean do the right thing in life.”
KF: Do you recruit for culture at Brambles?
TG: Very much so. Part of our process involves psychometric testing, and
there have been candidates who got through the general interview
process but we rethought the offer based on the psychometric
results. We do the testing because when I came in as CEO, we had
a number of people from the outside who did not have the right
behaviors for our culture, and we ultimately had to exit them from
the company. Early in my time as CEO, we churned through quite a
number of leaders, which had less to do with capability and much
more to do with culture. I am very happy with the team we have now,
but we also need to make sure there’s a place for those who have a
Tom Gorman is the CEO of
Brambles.
different point of view.
KF: Does culture also feature in how you remunerate people?
TG: We’re all incentivized to support the culture as part of our bonus
structure. There are cultural components for the senior leadership
around employee engagement and satisfaction and safety. Safety
is a big driver in the company in terms of culture. Additionally, we
focus on customer centricity as a key cultural need and measure
Net Promoter Score for all key business units. This too is part of our
compensation system.
KF: Can you easily describe the culture at Brambles?
TG: Yes, I believe we can. In addition to the annual Brambles employee
survey, we have conducted research that examined different
organizational archetypes and which archetype best represents the
culture at Brambles. The archetype that most suited Brambles was
that of the architect and the builder. Nobody was surprised—this is an
archetype that makes sense because people here don’t wait around
to be told every detail of what to do; that’s not in our culture. What
our people really like is to have a general plan, which they execute
locally.
We give people freedom within a frame; they have freedom to do
things, but there are parameters in which we measure and monitor
performance.
KF: How can the leadership team and the board be connected with
what’s happening a long way away from their world? What alerts you
when people act against your culture?
TG: Often I talk about the three “I’s” in leadership. These are: intellect,
because we want smart people; intensity, because you have to have
energy to tackle the opportunities we have; and integrity. Now,
everyone takes integrity as a given but you shouldn’t. Every now
and then there are violations of what you hold dear in terms of your
culture. We have a “speaking up” process throughout the company,
and whenever there’s a speaking up matter it gets discussed at the
board level. We have removed individuals for a violation of integrity
and the executive leadership team member who owned the business
unit presented to the board on why he took the decision to exit
the employee. So whenever there is a violation there is a board
discussion.
KF: Who is responsible for setting the culture in an organization? The
CEO or the board?
TG: The board doesn’t run the company, the CEO does, and therefore the
CEO has a bigger role in setting the culture. But the board needs
to understand what the culture of the company is and you can’t
understand that without getting out into the business. Half of our
board meetings are held offshore, and every one of those meetings
has opportunities for the board to interact with employees and
customers. Every director has the freedom to visit all the operations.
I think if your CEO says: "I don’t want you meeting with my people," a
red flag should go up immediately.
KF: Given the board is responsible for appointing the CEO, doesn’t the
board ultimately own the culture of the company?
TG: While I said earlier the CEO is more directly responsible for setting
the culture, the board must understand and agree or the CEO gets
removed. So yes, the board does own the culture as well. The board,
when hiring the CEO, needs to thoroughly know what makes that
person tick. They have to find the person who is going to do the right
thing, and I don’t mean the right strategy and the right tactics, I mean
do the right thing in life.
There are things that are right and wrong. When we talk about
management development I spend a lot of time with the board
discussing the makeup of our people. The board’s responsibility is to
spend quality time with the leadership team—not just reviewing and
watching Power Points but actually sitting down and getting to know
them. We’ve been fortunate enough to be able to do that here over
the last couple of years.
19
culture chosen by Tom
Gorman:
• Cultural behavior from
the CEO
• Rewarding work and/or
behavior that represents
cultural values
• Penalizing work and/or
behavior that contradicts
cultural values
20
KF: Who do you think has the most responsibility for implementing
culture? Is it the CEO, HR, or the entire executive team?
TG: I think virtually everything regarding culture emanates from the CEO.
The execution rests elsewhere, and HR and the executive leadership
team have to be on the same page as the CEO.
KF: How does one “speak up” in the speaking up process?
TG: There’s a system in place (protecting individual anonymity) and every
business unit has access to it.
KF: That could be a very effective way of identifying a cultural issue
somewhere.
TG: If you receive a number of repeat comments, then you have to spend
the time to understand what’s really going on. For example, in some
of the emerging markets the issues are less behavioral and really
about the fact that we are holding people accountable who are not
used to being accountable. It is not about any behavioral issue other
than “My boss is too tough on me.” So is that really a speaking up
matter, or is someone being held accountable? It was important
that I spend time trying to understand the cultural differences in the
emerging markets.
21
Brian Hartzer
“The essence of cultural transformation is how you
build trust and give people the skills to build trust
with each other.”
KF: How do you define culture?
BH: I think the word culture is now being used by so many people in
so many different contexts that it is important to say what you
actually mean. During my career, I have spent a lot of time on cultural
transformation. It boils down to how people work together.
I believe for an organization to achieve its potential you need highquality people and you need an environment where those people
work effectively together and have the best chance of achieving
their individual potential. The organization must, individually and
collectively, work effectively. It is no good having a bag of Ferrari
parts unless the car is put together well and oiled well. Otherwise you
just have a bunch of parts and that’s not going to work. In the same
way with companies, it is one thing to have a nice structure on paper
and theoretically high-caliber people, but if the culture isn’t right, and
people don’t engage with each other well, it’s not going to work. For
me, it all stems from making the organization as effective as possible
at whatever it is trying to do in its market.
KF: How do you approach this?
BH: You need a set of practices and rules of the road and expected norms
of behavior. These set expectations of people for what you need and
allows them to understand what they need to do to be successful in
the company.
The single biggest thing I learned from a cultural transformation
program I was involved in years ago is that the tone from the top is
very important … for the organization taking culture seriously. But I
would also argue that the leadership is less important when culture is
built from the ground up.
Before the program commenced, I was quite cynical. I thought here
we go, there will be some posters and it will be a waste of time. But
I became utterly convinced about how important culture was as a
result of the process we went through. I realized that the day-to-day
culture was the sum of the parts of interactions that happened in the
company every day. And that what you needed to do was to give
people skills on how to effectively deal with each other while being
clear at a high level what your expectations were. The culture began
to emerge, in a sense, from the bottom up, through the interactions
Brian Hartzer is the Managing
Director and CEO of Westpac.
22
culture chosen by Brian
Hartzer:
the CEO
attributes
• Inclusion in leadership
and development
programs
and the training that helped people improve how they dealt with each
other.
The essence of cultural transformation is how you build trust and give
people the skills to build trust with each other.
KF: Do you have a specific culture program at Westpac?
BH: We have started a cultural evolution program. It will roll out
throughout 2016, starting with the group executives then, cascading
throughout the bank. It is about being clear with people on how the
culture needs to evolve. People at Westpac are very proud of the
culture; for us, it is about history and the legacy we have inherited.
It’s also about diversity, sustainability, community orientation,
conservatism as a bank, service, and helping people. We need to be
proud of the culture here while recognizing that the challenges that
we face to transform the company over the next five years are going
to require us to evolve the culture a bit. The world is changing, and we
need to bring in a lot of these concepts of agility, accountability, and
decisiveness to people.
I am also seeing culture manifest in the way that the management
team is working together. We recently worked closely on an issue that
involved a number of executives and culminated in a decision made
by the entire executive team. Every single one of us had a role to play,
and afterwards, when we got back together to discuss how it went,
a number of the executive team members volunteered that it was a
great team experience that left us feeling really connected to and
supportive of each other.
KF: You have just described an inclusive culture. Is that the tone you want
to set?
BH: Very much so. Inclusive is a huge word here.
KF: Can you talk about how culture and strategy go together and how
you want them to intersect at the bank?
BH: I think they are related. The way I think about it, if I had to try to
describe it in a linear way, is that I consider what it takes to be
successful and sustainable. I start with the question: Why do we exist?
My conclusion is banks exist to support economic development. That
is why banks are here, and I believe that a lack of understanding of
that purpose is part of the reason the global financial crisis happened.
The banks forgot why they exist and they just started thinking they
were like any other profit-seeking enterprise. Whereas, for banks
to be sustainable, they have to balance the interests of customers,
shareholders, employees, and the community. If you try to go too
hard on any one of those things, ultimately all of them suffer. And
so, in the end, my job and my team’s job, is to get that balance right
between those four stakeholder groups in a way that is sustainable.
Considering the context is also important. What is the market
dynamic at the moment and what do we have to do as a company to
be successful in the context of the operating environment? What kind
of people do we need to implement the strategy?
KF: How do you define the best people?
BH: I think the best people have a combination of capability and
skills along with personality and fit, plus an inherent achievement
orientation and inner drive. We need to create an environment
where those people want to work and where they feel welcome. So
one element of the inclusiveness comes from people with diverse
skills and personal characteristics who believe they can thrive here.
Another element is that right now the industry is in a dynamic phase
where technology is bringing incredible opportunities to change the
way we serve customers and creating opportunities for reengineering
our internal work practices and processes. There are some real
existential threats from technology to some aspects of our business,
so we have to be nimble and fast. That implies that the culture needs
to become increasingly agile, tech savvy, flexible and, in order to drive
change, increasingly accountable.
23
24
Christine Holgate
“When you join us and sign your contract, you are
signing to live by our values.”
KF: How do you define culture at Blackmores?
CH: I think it is our culture that separates Blackmores from any other
company in our space. We really believe in what we do. We are not
just making a product, and a great product, we are making a product
that we believe adheres to our values; if it’s not natural, we won’t do
it.
KF: How structured is the accountability relating to values?
CH: We refer to how we operate as The Blackmores Way. We have a set of
values we call our PIRLS: passion for natural health, integrity, respect,
leadership, and social responsibility. Those values underpin our
culture and we hold each other accountable to them.
Christine Holgate is the CEO
and Managing Director of
Blackmores. In 2015, she was
recognized as CEO of the Year
by CEO Magazine.
We use the values that underpin our culture to frame our awards
system. Twice a year we present a cultural hero award and a
performance hero award. We constantly promote it. In fact, when you
join us and sign your contract, you are signing to live by our values.
Culture has to come before performance because the culture is the
very glue that holds the company together.
KF: How important is transparency in culture or strategy?
CH: During my career, I have worked in organizations that had some kind
of ambiguous mission statement on the wall but the strategy was
confidential. I found that annoying because I never knew what I was
supposed to be doing to contribute to the company. If you are a
young, ambitious person, you want to know if you are doing the right
thing, if you have the right skills, and, how to prepare yourself for a
fabulous career. You don’t know how to do this if you don’t know the
strategy.
My approach at Blackmores has been to create a strategic framework
on one page, developed with the executive team and the board and
workshopped throughout the organization. The strategic framework
contains our values, our mission, our goals, and the four strategic
pillars that deliver those. To help communicate the strategy, we have
turned it into a picture, made it into a movie, and put it into different
languages. I would put $100 on this table that says you could walk
into our head office, go onto the factory floor, and 90% of the people
will know what those four strategic pillars are. In my view, if everyone
in the organization knows what you are trying to do, you can align
people, have open conversations, and create a nice environment to
work in.
KF: How do you keep a culture strong?
CH: First, people at the top of the organization must be absolutely
demonstrative of the culture you are trying to set. You cannot go
around saying, “These are our values,” and have the leadership team
demonstrating a different set of values.
The next part is recruitment. When we are hiring people into the
organization, we work with a partner who finds people who are
technically able to do the job. My job is to find the person who
culturally fits my organization and will be a success here. The job is
just as much about cultural fit as it is about skills.
The final stage of bringing somebody into the organization is a panel
interview. We prepare thoroughly for the panel interviews and map
out the values that we want from our leaders. We don’t want clones;
we want a diversity of skill sets, and you can have that if you are
commonly connected with culture.
KF: Are you able to say culture improves productivity?
CH: Most definitely. If you’ve got high labor turnover in your business
you are losing skills. You’ve got to train new people and they’ve
got to adapt to your organization. When people leave, it’s highly
disruptive, and the distraction is costly. Our labor turnover is just 7%
for approximately 1,000 staff.
It is easy to decide to change the person in the seat when something
is going wrong. But it might not be the person in the seat that’s the
issue. It could be some other factor, and just changing the person
often doesn’t give you the solution. Having low labor turnover works
really well for us and I am proud of our deep employee loyalty. When
you’re going through a difficult time, the employees will work through
it with you when you’ve got a strong culture.
KF: The culture sounds very participative in the way you profit-share, the
way you communicate; everyone’s contribution is celebrated.
CH: We also have initiatives to keep women in our workforce. Women
drop out of organizations often during the child-raising period.
People might say it is because they have had a baby and want to
stay at home. But I often wonder if it is because women, after a year
out of the organization, find they have a new boss and new peers
and they find it confronting. At Blackmores, when a woman is on
parental leave, we offer to sponsor an education course, and once a
month, we have a morning tea for anyone on maternity leave. They
can come back to the office, have morning tea, bring their child in,
and we tell them how we are performing. That way, by the end [of
25
culture chosen by Christine
Holgate:
• Culture is clearly defined
internally and externally
cultural values
cultural values
attributes
26
their leave], they are not coming back through the door of a company
they haven’t been in for a year. They are coming back to a company
they were at a couple of weeks ago. And during that time, they have
formed a network with other women in the company they may not
have been friends with before. It creates a trusting environment.
KF: These are all small but important connection points that keep people
feeling part of the organization. You have really tapped into the
cultural piece, and what is really important to us as human beings.
CH: We call it people, passion, and purpose. I believe most cultures that
are sustainable have a strong purpose. Our purpose is helping people
live better lives through natural health, and we are passionate about
it. The combination of purpose and passion are much better [as is]
working in an environment like that. Some people might change their
job for salary, but they will stay because it feels good to help people.
27
Jayne Hrdlicka
“You can feel businesses where there’s no cultural
core. Their people are less loyal, less passionate
about the brand, and less connected to the
business.”
KF: Is culture treated seriously enough in business?
JH: At Jetstar, culture is a core part of our business, and the
consequences when people don’t work well in our culture are
significant. The strength of Jetstar’s culture is one of the key
ingredients in growing so rapidly and successfully over the last 12
years.
KF: How can you build an organization of people with shared values?
JH: For many businesses, it comes down to how the business was formed
in the beginning. If you have a clear vision, mission, purpose, and
values, you have an amazing anchor to everything else. You can feel
businesses where there’s no cultural core. Their people are less loyal,
less passionate about the brand, and less connected to the business.
At Jetstar, our core values are straightforward: safe and responsible,
which is an obvious value; energetically efficient, because we are
looking to do things differently and cost-effectively all the time; plus
consistently can-do, genuinely caring, passionate about enjoyment,
and one team.
KF: Do you test for those attributes when recruiting?
JH: Actually, we have inverted the pyramid relating to recruitment into
my team. I interview first, then HR will screen, then I interview again
and arrive at a shortlist, and, then my entire team interviews. Not as
a panel, but in ones and twos. Then we make the decision together.
It’s about whether the candidate has the relevant experience to do
the job, and, also about whether they fit with us and can work the
way we work. We won’t hire somebody only because they can do the
job; they have to fit. So that process has two benefits: We achieve a
good broad test on fit, plus the team owns the success of the person
coming in. And we invest in coaching to help people assimilate into
our culture.
KF: What would you say are the three things that strengthen an
organization’s culture the most?
JH: First, cultural leadership from the CEO, because I think you have to
be a role model and live the culture. It’s high risk if you don’t. Then
recruiting executives with the right cultural attributes; followed by
Jayne Hrdlicka is Jetstar Group
CEO and a board member of
Tennis Australia.
28
culture chosen by Jayne
Hrdlicka:
the CEO
attributes
cultural values
rewarding work and behaviors that recognize cultural values. So you
are recognizing people and always putting on show the things that
are important.
KF: How do you change culture?
JH: Almost everything has to be rewired, including the way you reward
people, the way you talk about what success looks like, and the
way people lead and manage. It is really hard to change the way an
organization’s system works. It’s a journey, and you don’t get there in
six months. You might get there in three to five years, but the work is
probably never really done.
Rewiring takes conscious thought and engagement from the CEO,
the CEO’s team and all the levels down. It’s not that different from
the gender challenge, which involves rewiring people to think
differently.
KF: How can somebody senior in the organization know if culture has
broken down in areas that are remote from their world?
JH: Usually something gives you cause for pause and the early warning
signals will have been rattling around for some time. You may be
losing market share, you’re not as profitable as you used to be, or you
see a disruption on the horizon and you’re not sure the organization
is fit for it. There are usually clues all over the place—engagement
scores, customer scores, and supplier scores.
KF: How do you capture and use those scores?
JH: You have to value them by having a clear vision, mission, and strategy,
and then define what success looks like. With most businesses, there
is some version of the same thing. But if you get it down to the
simple principles of emotion and connection between people, you
have to be measuring both. If you’re not measuring those things, then
you can’t see what’s going on in the business. For example, you may
be financially literate but you miss the early warning signals that the
financials in the future aren’t going to be as strong as they are today. I
don’t think you can identify the issues without a holistic view of what
makes your business tick in the environment it operates in.
KF: Which comes first? Culture or strategy?
JH: I think you have to have both; strategy can’t be done without culture
and I don’t think you can think about the culture without strategy. I
think culture has to be the centerpiece that drives what is possible.
KF: How do you manage people in key positions who aren’t culturally
aligned with what you want to do?
JH: I call them cultural terrorists. You have to figure out who they are,
allow enough time for the organization to see they have been given
every chance to recover, then if they can’t get to where they need
to be, they should go. And in core positions you sometimes have no
choice but to move quickly.
KF: How do you protect the hard structural work done on changing a
culture? Isn’t it vulnerable to the next leader with a different view?
JH: The beauty of cultural change is, if you do it properly, you’ve changed
all the wiring. As long as the CEO is aligned and believes in the
culture, and believes in empowerment of the front line and all the
things that have got you to where it is aligned, it’s very difficult
for someone to come in and change it. It’s easily spotted and the
organization starts to react—the antibodies come out.
29
30
Aligning culture, strategy,
and talent.
Organizational performance emerges from alignment of purpose. To
align its culture with its business strategy, an organization must have a
clear understanding of:

The type of culture that will drive its specific strategy.

The current culture and how it supports or hinders strategy
execution.

The differences between the two.

The levers that will have a powerful impact on culture
transformation (potential accelerators).

Foreseeable challenges that could derail efforts.
Source: The power of cultural transformation – Korn Ferry, 2015.
31
Greg Medcraft
“Sometimes it’s not a bunch of bad apples; it may,
in fact, be a problem with the tree.”
KF: Culture is a key focus of the Australian Securities and Investments
Commission (ASIC). Do you think it is increasing in prominence at the
board level?
GM:Culture is a key driver of the behavior of gatekeepers in the financial
system. It is the global topic of the moment.
KF: Can you regulate for culture?
GM:My view is that you can’t regulate culture. Firms must be responsible
for their own culture. ASIC cares about culture, because it is often
a red flag that there may be conduct issues resulting from a poor
culture.
KF: How do you define culture?
GM:Culture is the mindset of a firm. Interestingly, it is defined in the
Australian Crimes Act as an attitude, policy, rule, course of conduct,
or practice. Much of that is embodied in the internal controls of the
firm. But whether documented or not, it is the mindset of the firm.
KF: Where does responsibility for culture lie?
GM:It starts at the top, with the board. That is how the law recognizes
it, because the board is responsible for the internal controls of the
company. Start at the top and constantly challenge whether the
culture at the top is cascading through the company. Leaders must
ensure the culture in the middle and the bottom layers match what
they expect it to be.
KF: How can boards know what is happening several layers down?
GM:There are quite a few ways to check this. Most businesses are subject
to the power of the crowd, which, due to the reach of social media,
is extraordinary. If a customer gets a poor deal, the firm won’t be the
only one to know about it, everyone will. That is the power of social
media to shape perceptions and influence views. I think you have got
to be aware of the opinion of the crowd even at a board level. This
may involve monitoring social media because it can shape how you
are viewed.
Then you have vehicles, like 360-degree surveys, which tell you what
your customers think of you. We participate in those to the shock of
some banks that have learned that we view them very differently to
how they view themselves.
Greg Medcraft is Chairman
of ASIC and Chairman of the
International Organization of
Securities Commissions Board.
32
culture chosen by Greg
Medcraft:
from the board
the CEO
cultural values
cultural values
It is also important to reward people who demonstrate good aspects
of your culture and to make an example of those who don’t.
KF: I think that is a really strong point; the reward system has to reflect
the values. It is one of the levers that companies use to encourage the
right behavior from their people.
GM:People who do the right thing should be rewarded, and firms should
be willing to make an example those who do the wrong thing.
It is really important to have an arrangement internally where
people are valued for being whistleblowers. People also need to be
encouraged to speak up if they know a breach is occurring, even if
they are not involved. Organizations are now saying: “We will punish
the person who knew about it and sat there and did nothing just as
much as the person who was breaching our culture and values. By
remaining silent, they allowed it to happen.” That is an interesting
cultural change. We are all in this together, and if you are doing the
wrong thing and destroying the brand, then you are affecting all of
us.
At ASIC we’ve been saying: Look at remuneration structures, look
at the way whistleblowers have been treated, look at the message
from the top, make sure you are constantly challenging what you are
doing, and never be complacent because bad culture can set in very
quickly.
KF: Do you think those messages are getting through to boards?
GM:We meet with the boards of the major banks once a year. We tell
them what we are seeing on the front line. They find it helpful
because sometimes their management doesn’t tell them everything.
I think ASIC can provide a positive contribution in this way. From
my perspective, I don’t want there to be anywhere to hide or a
situation where board members can say they had no idea about
a breach. Banks often don’t know how to connect through all the
layers of the organization because they are just so large. There are
leaders who want to do the right thing, but they are managing a large
organization and it can be difficult to change the culture.
KF: It can be difficult for the board to get down and dirty to the front line
in large organizations, plus management might not want that.
GM:I think the one way you can deal with it is for the board to say we
want to do a 360-survey of our culture. Or use the audit committee.
The focus of audit committees these days should be on sustainability,
not just the numbers, which requires a broader skill set on the audit
committee. The numbers don’t mean much if the business isn’t
sustainable.
KF: When do you call something out as cultural?
GM:When we do our surveillance, we look for a pattern of behavior. This
includes: companies that are slow in breach reporting, and companies
that are not reporting things they should be reporting. We look at
remuneration structures that don’t encourage good culture. We also
look at the way they treat whistle-blowers and their whistle-blower
policy.
When we undertake surveillance, we may see breaches on the front
line that are clearly a cultural problem related to remuneration.
Sometimes it’s not just a bunch of bad apples; it may in fact be a
problem with the tree.
KF: How closely do you look at remuneration structures?
GM:Remuneration structures are important, and commission-based
structures often don’t encourage the right behavior because they
only measure one thing. A balanced scorecard that includes
cooperating with people, or working as a team is a better way of
assessing someone. That’s because it is not just about how much
money someone brings in, it also recognizes qualitative factors.
Poor culture can have very real consequences, for business, for
investors and consumers, and ultimately, for trust and confidence in
the entire system.
33
34
John O’Neill
“Culture should not be viewed as the latest fad—it
needs permanency, consistency, and endurance.”
KF: What do you see as the most important factors that can strengthen
an organization’s culture?
JO: Cultural leadership from the CEO and cultural engagement from the
board are of equal importance—they go hand in glove. And culture
should be included in strategy discussions.
KF: How important is culture to strategy?
JO: Very important, and it is really important that culture is not seen to be
a fad. Often in business practice, best practice, and governance, you
get the latest and greatest fad. But there has got to be a permanency,
consistency, and endurance around corporate culture, and it’s the
John O’Neill is the Chairman of
The Star Entertainment Group.
board and CEO’s responsibility for it.
KF: How can organizations best be accountable for their culture?
JO: We need transparency around culture and we need to elevate its
importance. Often, if a company has a financial stumble, it is pretty
visible to the market. But a company might have a cultural stumble
that isn’t immediately obvious, and the instinct of management might
be to cover it up, to keep it hidden.
Culture is being elevated to the boardroom. It needs to be a normal
part of the narrative of good corporate governance.
KF: Why is culture being elevated?
JO: There have been quite a few significant instances of malpractice, poor
behavior, neglect, and serious offenses that were undetected for long
periods of time. When a crisis occurs, it is often the shareholders,
customers, and other stakeholders who suffer the consequences, and
they are inclined to ask, quite rightly: What was the board doing?
Was the board engaged on this or did it just delegate it?
There are some delicate issues here around the level of delegation.
But if you are going to have a genuine zero-tolerance culture, then
the board has got to be comfortable that the systems, procedures,
and practices have been road tested. You can’t always avoid corrupt
conduct or just dumb conduct. But when the checks and the
balances are in place, the alarm bell rings such that you can correct
the problem more quickly.
KF: What are the red flags for a board? What’s the smell test on a cultural
problem?
JO: It starts with the board’s single most important job: selection of the
CEO. The board needs to be satisfied that the successful candidate,
having met all the skill requirements, academic background, and
specific industry experience, has the right personality and the right
cultural fit for the challenge ahead. The culture of the new CEO either
fits with the company or, he or she has a personality and set of values
that will take the company down the right cultural path.
KF: Sometimes a new CEO is not appointed for the current culture. They
may be a change agent, a “sand in the oyster type” who is going to
shake things up a bit. It’s important to know what you’re buying with
culture, isn’t it?
JO: Yes. I have seen this approach where a board has handpicked a CEO
to shake up the company and to create in a short period of time,
scale and critical mass. And, it didn’t matter if there were body bags
along the way. The person might be gone in three or four years and
those left behind think, “What was that?”
If I can use a sporting example, you can see the impact that a good
coach will have. You can have a team of great players, but if the
coach is not respected, doesn’t have credibility, or wants to be one of
the boys and doesn’t understand the necessity of a gap between the
team and the hierarchy, then the team doesn’t perform. However,
when you get the right coach, who has the discipline to demonstrate
that, “This is the way we do things around here,” you can see the
transformation in teams because they’ve got the right leader. It is the
same in business. CEOs are the chief strategists and the glue that
holds companies together. But equally, if they don’t have the right
DNA and cultural fit, companies become divisive and dysfunctional.
The great coaches, captains, and CEOs are absolutely self-disciplined.
KF: Do you think it is a joint responsibility of the board and the CEO to
manage the culture?
JO: Yes. The board has to work on it with the CEO, hand in glove.
KF: How does a board decide to whether accept what the management
team says about an issue not being cultural? When should the board
treat a seemingly one-off issue as a red flag that needs to be delved
into deeper?
JO: I am a great believer in intuition. I have worked with executives who
have been quick and slick and it was difficult to get a direct answer
from them, and my intuition has proved to be right. I have learned
that when you have to clean up a mess, you only get one shot at
it. And replacements have to be wholesale. I don’t believe in giving
35
culture chosen by John
O'Neill:
the CEO
from the board
• Culture is included in
strategy discussions
cultural values
36
people a second chance; that’s where zero-tolerance philosophy
comes in. This is a lesson for every company director.
The board should be exposed as a collective to the top management
team, to reinforce the cultural message. Plus, it is important for a
chairman to get the dialogue right with the CEO and work together
on a cultural narrative that is seamless, understandable, and
impactful. There is a saying—it is lonely at the top. It is, and the
chairman has to ensure the CEO doesn’t get too lonely.
37
Andrew Pridham
“If you are running the organization—unless you
are asleep—you know what is happening. The issue
becomes your willingness to address it.”
KF: How do you define culture in a business and at a football club?
AP:It is starker in football than business. They are very different
environments to create, maintain, and build a culture.
Culture is very hard to define. It needs to be driven from both ends; it
can’t just come from the top. Everyone has to believe in it and live it.
It’s really the vibe of the people.
KF: How would you describe the culture at Moelis?
AP:At Moelis, we try to have a culture that is consistent with the type of
organization that we are; it needs to fit the scale and scope of the
business. Our culture is non-bureaucratic. We just get on with it, the
clients come first, and we try to do the right thing. Put pretty simply,
that is the culture—and if you talk to people at Moelis, I am pretty
confident they would say that. We operate in a team environment,
respect each other, and if someone is consistently out of line, it is
dealt with quickly.
One difference between a football club and a business is that the
turnover of people is much more intense at the football club. New
people are coming in all the time, which does change the culture
faster. Another difference is the speed in which you can deal with
someone who breaches culture. You can pull someone aside and say,
“If you do that again, you are out.”
KF: What about a superstar who acts against the culture—in sport and
business?
AP:At the Swans, we try to treat all the players the same. It is easier
said than done, but that is the goal. Running a football club is vastly
different to running a business. One of the obvious differences is the
legal environment. Businesses are subject to strict workplace laws.
But in sport, the players work within a totally separate set of rules—all
the players are on a contract, and if they do the wrong thing they can
be disciplined or dismissed. The process for managing someone in
business who acts inappropriately is far more protracted.
KF: At Moelis do you talk about culture? Do you have a discrete,
deliberate strategy?
AP:Largely it just happens. The time we most talk about it is when we
Andrew Pridham is the CEO at
Moelis & Company and Chairman
of the Sydney Swans.
38
culture chosen by Andrew
Pridham:
• Cultural behavior from
the CEO
• It is clearly defined
internally and externally
cultural values
cultural values
are hiring people, or looking to buy a business. When hiring, it will
be the number one thing we consider. Will they fit in? Will they be
culturally aligned with what we do? What will be the social impacts of
bringing that person into the business? We talk about that a lot. We
frequently decide not to hire people for cultural reasons. In a small
team environment, one bad egg can affect the whole culture.
KF: There have been many recent corporate crises that have been first
presented as single events, but later acknowledged as cultural. When
do you, as a leader, know that a damaging action or behavior is
cultural?
AP:If you are running the organization—unless you are asleep—you know
what is happening. The issue becomes your willingness to address
it. It is often hard [to do so], because the problems could be in your
most profitable businesses with your highest-performing people.
You need to know when to draw a line and deal with it. The earlier
you address breaches of culture, normal interpersonal decency or
compliance, the less chance there is of the issue becoming endemic.
If you let it fester, people think it is OK to behave that way.
KF: In the aftermath of many of the recent corporate crises, the media
has criticized boards for not knowing what was going on or failing to
act quickly enough. How much responsibility do boards have for the
culture of the organization they are overseeing?
AP:I think boards get a very bad rap in the media. Boards are there for
governance, not to run a business. I don’t think the board’s role is to
deal with the culture. The chairman has more responsibility than the
NEDs and is more in touch with what is going on in the company.
As chairman of the Swans, my role is to hire and fire CEOs and to
make sure they are the right person. If they are the right person, I
don’t need to do much. It might sound overly simplistic, but that is
the way I look at it. When you have the right CEO, the right culture
should flow. When you see issues in listed companies, there is often
a disconnect between the chairman and the CEO, or the CEO is not
good with people and doesn’t understand culture. A good NED has to
look carefully at who the chairman is, who the CEO is, and what the
business is, but you’re there for governance.
KF: How difficult is it for some of the global investment banks to align
their culture in various divisions and jurisdictions?
AP:It is difficult because of the matrix structure. A country CEO may
have surprising little influence over the heads of division because they
report to someone else in the matrix. As a CEO, you need to have the
ability to coach, reward and/or discipline someone. If you operate in a
matrix environment, where is your authority to do that?
KF: Does a matrix structure make it difficult to have one consistent
culture throughout an organization?
AP:I think it is the antithesis of having one culture and I don’t think you
can. I understand why corporations have matrixes, but they can
destroy cultural alignment. There are, of course, exceptions. But I
dislike matrixes. I dislike joint-heads. I strongly try to avoid either.
KF: What role does HR have in culture?
AP:There is a clearly a role for HR, but it is an administration or
facilitation role. God help you if you are trying to have the HR
department define and drive your culture. HR can set parameters, but
it is the business that has to do the work.
KF: Let’s talk more about the Sydney Swans, a very successful club, with a
strong culture. Do you recruit for culture in a footy club?
AP:Yes, constantly. There are times when players and coaches may want
to come to the Swans for cultural reasons but we won’t take them.
You can see the clubs that put a higher value on culture than some
other clubs, it is very obvious. At the Swans, we put a huge emphasis
on understanding the club’s history. That doesn’t happen enough in
business.
KF: An AFL club in Australia has a spotlight glaring on the management
and the players. Does that bring a certain transparency to the culture?
AP:There are more sports journalists than there are players. The analysis
of players, coaches, CEOs, chairman in the AFL far outstrips what
happens in the business world. It is not in the same stratosphere. It is
very hard to hide things in a football club.
39
40
10 red flags
How NEDs can identify culture derailers
People often say after a crisis that they could see the warning signs. The
red flags were there, hiding in plain sight, accessible to those closest to
them if they had known what to look for. It can be challenging for nonexecutive directors to identify a potential breach of culture because their
touch points with the organization tend to be structured and contained to
their colleagues on the board, the CEO, and the executive team. However,
NEDs share responsibility and accountability for their organization’s
culture, and, therefore, must be in tune to potential cultural breaches.
It may be intuitive and nuanced work, but it requires an unequivocal
exploration—by the time the “smoke comes under the door,” the damage
has been done. Korn Ferry suggests NEDs explore a combination of these
10 markers to get closer to the organization’s culture and avert harm.
1.
The
CEO
2.
The
strategy
3.
The executive
team
4.
Talking
culture
5.
Whistleblowers
6.
Toxic
subcultures
7.
Media
noise
8.
Be a
customer
9.
Engagement
surveys
10.
Recognition
and rewards
41
1.
The
CEO
The appointment of the CEO will determine the culture of the organization, and the
candidate assessment should explore character along with previous experience and
reputation. A “god-like” CEO should set off warning bells. Command and control
is out, bringing people on the journey is in. How the CEO values and demonstrates
culture should be a Key Performance Indicator.
2.
The
strategy
Do you know the kind of culture required to drive the strategy, and was the strategy
created in the context of culture? Is culture enmeshed in how the organization goes
about achieving its performance targets? Is it measured? The answer to all these
questions should be yes.
3.
The
executive
team
Is the executive team accessible to people at lower levels? Look for hierarchical clues
that point to a closed door at executive level. Does the organization have a diverse
executive team? When an executive team looks the same, chances are they will think
the same. Diversity of gender, ethnicity, experience, education, and ideas is good for
culture, performance, and governance.
4.
Talking
culture
Start talking about culture to fellow NEDs, the CEO, the executive team, and
employees. Can they articulate it? Is everyone on the same cultural page? This is not
about reciting values, it is about knowing the hard-wiring of the organization. Try to
meet employees in diverse roles and ask them what they think works well and what
doesn’t. If your intuition tells you something isn’t quite right, explore it and see where
it takes you. It may be nothing, or it may be your years of experience telling you there
is a problem.
5.
Whistleblowers
Is there a formal whistle-blower program? What is the process when an employee
needs to speak up? And most important, how are whistle-blowers treated? Ensure you
have access to whistle-blower reports and that you are aware of the process.
6.
Toxic
subcultures
Subcultures can be difficult to identify and challenging to change, particularly if toxic
subcultures are thriving in high-performing parts of the business. They can derail
your entire strategy and must be disrupted, even when it results in financial loss.
Commitment to culture is also measured by what you say no to.
7.
Media
noise
Look for inconsistencies in media reporting between what you read and what you
know. Social media sites such as Facebook and Twitter reveal much about the supply
chain, customer service, and brand awareness. Follow the company on your social
media platforms and closely review social-media monitoring reports.
8.
Be a
customer
Phone the call center, make an inquiry, or visit a shop. Experiencing the organization
as a customer will reveal things about the culture that you may not learn in your NED
role.
9.
Engagement
surveys
Be forensic in your review of employee engagement surveys and HR data. Red flags
will show where there are consistent issues every year, where there is low morale, high
turnover, or pockets in the organization where results are at odds with the overall
picture.
10.
Recognition
and rewards
Are the reward systems financially driven, behavior-driven or both? Who is valued
more—the sales executive who exceeded targets during a recession, or the employee
who revealed there was a breach of culture that could have hurt the brand? People’s
behavior will directly correlate to what is most valued and rewarded.
42
Simon Rothery
“The leader's legacy is the culture they leave behind
in an organization.”
KF: How do you view culture in the context of your workplace?
SR: I think culture is the single most important thing that drives success
of an organization and that culture defines everything that I do as a
leader. That’s my No. 1 role. I believe the leader’s legacy is the culture
they leave behind in an organization.
KF: How do you build the culture you want?
SR: I refer to culture as being either inclusive or exclusive. I aim to set
an inclusive culture because what we need is diversity of thoughts
and views. I think exclusive cultures drive bad behavior. When I took
this job, I had 10 men on my executive committee who were likely to
think the same way. We had done the same job for 20 years, we went
Simon Rothery is CEO of
Goldman Sachs in Australia and
New Zealand and serves on the
boards of European Australian
Business Council, Australian
Financial Markets Association,
Great Barrier Reef Foundation
Chairman’s Panel, Murdoch
Children’s Research Institute,
Swimming Australia, and the
Knox Grammar School Council.
to the same schools, and have the same interests. That exclusive
culture was sending a terrible message to the rest of the firm and to
the market. We want to be an employer of choice and we want the
best ideas. That comes from diversity of thought, which you don’t
get unless you have an inclusive culture.
The change in our culture over the past six years is reflected in our
results. We’ve seen it in league tables: There are now four women on
the executive committee, and we’ve created a diversity leadership
group comprised of 25 of the most senior leaders in the firm. They
are tasked with creating an inclusive culture that encourages equal
input from everyone.
KF: Some organizations, following a public and embarrassing breach,
take a long time to admit that certain problems are cultural. Why
does culture seem the hardest thing to talk about when there is a
crisis? Is it because it is difficult and expensive to fix?
SR: I think cultural change is one of the most difficult jobs there is. It
has to start from the top, so you must have a CEO or a leader who
absolutely believes in setting the right tone and the right culture.
Cultural change also has to survive a change in leadership. You
probably don’t know if you’ve achieved the right culture until you
leave and it survives a change in leadership.
KF: Is there a link between “god-like” leadership and cultural risk?
SR: Absolutely. Success is about bringing people with you. My job as a
leader is to elicit as many ideas as possible and then determine the
right one. In a group, I think that’s what people are looking for now in
leadership of an organization.
KF: You have asked 25 of your leaders to be responsible for culture.
How do you test that? How do you measure it? Is it part of their key
performance indicators?
SR: People who go through the managing director promotion cycle are
evaluated on three criteria: commercial effectiveness, leadership, and
cultural carrier. We specifically examine how someone is helping to
build and maintain the culture and reputation of Goldman Sachs. A
lot of people fail on that measure when they are not supporting the
culture, even superstars. The interview process we go through could
43
culture chosen by Simon
Rothery:
the CEO
• Included in strategy
discussion
that person culturally is a good fit. Some superstars in the market
• Frequent communication
of cultural values
we won’t go near because we don’t think they are the right person
• Culture is measured
involve a candidate meeting 30 people until we are sure we think
for us.
KF: How do you communicate your tone, the tone from the top,
throughout the organization?
SR: I think it is really important to be visible. The most important thing
a leader can do for the culture is to be visible and present. The
employees have to see you and hear from you. We have quarterly
town halls and I go through the business results for the quarter. I
always talk about cultural issues and diversity. But typically, at the
back end, after results; quite often now, I will talk about that first,
before we get to results. Our people know it’s a business priority
that sits in the strategic plan.
KF: What comes first, culture or strategy? How do they meld together?
SR: I think the culture drives the strategy and therefore the success of
the organization. I think culture, which I narrow down to diversity
and inclusion, drives innovation, which drives success. I call it a
virtuous circle. Without it, you don’t get innovation and therefore you
don’t get success.
KF: What turned you onto culture as the core component of your
strategy?
SR: When I came into my role, we were outside the top three in
investment banking in Australia, a position we weren’t in globally.
I had a pretty clear mandate to get us to top three. I saw a real
problem with the make-up and the culture of a number of our
business units, so we made changes and started to rebuild teams. I
rebuilt my management team because we just weren’t getting the
ideas that we needed to beat our competitors. It is really important
for me to be able to credential my strategy by being able to say last
year we were No. 1. We call out the bad behaviors but we also call
out the successes.
44
KF: What’s a red flag for you that there might be a cultural problem
lurking? What doesn’t pass the sniff test for you?
SR: The type of behavior that is not inclusive and collaborative, which
we can see very clearly. When somebody is not acting like a team
member, who tries to own a client and not share it with somebody
else, or make decisions on their own. That’s a red flag.
KF: Were you inspired by the work of anyone else? Was there a model
elsewhere that shaped your thinking?
SR: I didn’t really look at one model; I observed different businesses.
Apple is a clear standout because they have rebuilt that business and
have been unbelievably successful. [Apple CEO] Tim Cook realized
that to innovate you need the best ideas and the most diverse
team that you can find. He was also the first Fortune 500 CEO to
come out as a gay man. Apple possibly has the most inclusive,
diverse culture of any corporation I have observed. You can see the
momentum and the ideas the culture there generates.
KF: Do you measure culture?
SR: I think you have to measure it, no question, because I don’t think
you can be serious about it if you aren’t. We measure in terms of
promotion, process, compensation, and review scorecard. Culture is
a very strong component of performance reviews.
KF: Is remuneration directly related to culture?
SR: Absolutely. We also conduct a people survey every year, and culture
and firm reputation is a big part of that. Cultural change is hard at
the beginning, but when you start doing things and momentum
builds it really gathers pace.
Conclusion
It is challenging for a company to achieve cultural alignment because
the values that underpin culture have many interpretations. Culture—
defined by Marvin Bower, the late, former McKinsey managing director,
as “the way we do things around here” (Brower 1966)—may appear
nuanced because it refers to the “tone” that people operate within rather
than specific rules. However, when deep work is done to identify and
set a tone for an organization and the subcultures that influence the
behaviors of its leaders and employees, “the way we do things around
here” provides a powerful guiding principle for how people behave and
how organizations perform. Leaders should not wait for a public breach
of culture to identify and act on issues. Cultural work needs to be part
of the day-to-day way an organization and its people operate, because,
as Elizabeth Bryan says: “culture is how people behave when no one is
looking.”
The process of cultural transformation starts with recognizing the type
of culture needed to achieve the business strategy. This involves first
identifying the current and desired culture, followed by further work
to bridge the gap between the two. The process starts with three
deceptively simple questions (Eaton et al. 2015):
1.
What culture do we need to support our strategy?
2. What culture do we have today?
3. How do we move toward the desired culture?
The questions appear easy, but surprisingly the topic is not always
explored at any real depth and is often transplanted to conversations on
values. This cultural work is important, because if people don’t know “the
way things are done around here” or how things should be done, how can
they be expected to live the organization’s values?
If organizations accept, as many do, that the cultural leader is the CEO, it
is imperative to recognize that the CEO, after setting the tone, then lives
it. While culture has many advocates, as Paul Brasher points out: “The
minute the CEO does something that contradicts a cultural value, you are
set back years.” This is why CEO appointments truly are among the most
important decisions that boards make.
CEOs serve as organizations’ “chief cultural officer” and they hold this
role for their entire tenure at the top. But the role of the board is less
clear. The chairman clearly has accountability for how the CEO leads
culture, but how much responsibility do other board directors bear?
The Australian Institute of Company Directors extends responsibility for
45
46
culture to directors, stating (see Principle 9, Culture and Ethics) that a
board and its individual members have a leading role to play in promoting
a healthy culture for the organization they serve (Australian Institute of
Company Directors 2013). There is, however, ambiguity as to directors’
responsibilities for culture within their purview of corporate risk oversight.
A survey conducted by the NYSE Services found directors were divided
on whether setting risk culture is a board (57%) or management (43%)
responsibility (New York Stock Exchange 2014).
Cultural alignment is an aspect of board governance that is rarely
discussed, yet culture permeates every organization. Cultural alignment
among organizations, their boards, and their broader communities
strengthens performance and reduces risk. Perhaps the focus of the
business planning cycle needs to shift to seeking alignment on culture
and agreement on strategy concurrently. A model may be found, as
described in Korn Ferry’s interviews with business leaders, in the industrial
sector and its experiences in putting in place a safety culture in the wake
of the 1986 Chernobyl nuclear disaster, which elevated safety culture in
academic and organizational discourse and prompted swift, robust action.
Safety culture, and its aspect of “zero harm,” has required organizations
to adopt an absolute belief in and commitment to providing a safe work
environment; this has occurred against a burning platform of personal
injury—sometimes fatal. Organizational culture has a long way to go
before it reaches the same level of maturity as safety culture, for the
burning platform may not seem as palpable. The wisps of smoke seeping
under the boardroom door often get ignored until they flare out of control
into a full-blown crisis that affects performance, trust, and brand.
The mindset of business leaders needs to move from thinking about
organizations’ success solely in terms of their financial performance,
to thinking “culturally” about organizations and all the elements
that contribute to performance. Identifying systemic behavior and
transforming culture is deep work that is led by the CEO, strengthened by
the executive team, with oversight responsibility and accountability by the
board.
Culture must lose its “soft” status and be treated a “hard” issue because
its strength and sustainability is reflected in every performance measure.
The journey toward cultural transformation involves culture and strategy—
interdependent ways of working that are always stronger together.
47
References
Australian Institute of Company Directors. 2013. "Good Governance Principles and Guidance for NFP Organizations."
Bower, Marvin. 1966. "The Will to Manage: Corporate Success Through
Programmed Management." New York: McGraw-Hill.
Eaton, D., Kai Hammerich, Gabriella Kilby, Joy Hazucha, and Jan Thibodeau. 2015. "The Power of Culture Transformation." Los Angeles: Korn
Ferry.
New York Stock Exchange. 2014. "Embracing Risk Oversight—The Board’s
Role in Setting the Right Culture." New York: Thomson Reuters.
To learn more about powerful
ways to alter corporate cultures,
please read The Power of Culture
Transformation:
http://www.kornferry.com/institute/
power-culture-transformation
48
Acknowledgements
Korn Ferry wishes to thank the 13 business leaders who met with Korn
Ferry partners to discuss their views on culture: Vivek Bhatia, Paul
Brasher, Elizabeth Bryan, Melinda Conrad, David Crawford, Tom Gorman,
Brian Hartzer, Christine Holgate, Jayne Hrdlicka, Greg Medcraft, John
O’Neill, Andrew Pridham, and Simon Rothery.
Contributors
Interviews were conducted by these Korn Ferry partners in Australia and
New Zealand:
Katie Lahey, Executive Chairman
Graeme Bricknell, Senior Client Partner
Therese Doupe, Client Partner
Alexandra Goodfellow, Senior Client Partner
Michael Keevy, Client Partner
Lynne Nixon, Senior Client Partner
Robert Webster, Senior Client Partner
Kate Wright, Senior Client Partner
Research and writing: Dr. Kerry Little
49
50
Contact
Australia
Korn Ferry, Level 8, 410 Queen Street, Brisbane Qld 4000
Tel: +617 3015 3700
Korn Ferry, Level 32, 120 Collins Street, Melbourne VIC 3000
Tel: +613 9631 0300
Korn Ferry, Level 20, 60 Castlereagh Street, Sydney NSW 2000
Tel: +612 9006 3400
Korn Ferry, Level 1, 5 Mill Street, Perth WA, 6000.
Tel: +61 8 9217 3900
New Zealand
Korn Ferry, Level 15, 34 Shortland Street, Auckland 1010
Tel: +64 9 309 4900
Korn Ferry, Level 1, Free Ambulance Building, 5 Cable Street,
Wellington 6011
Tel: +64 4 460 4900
About Korn Ferry
Korn Ferry is the preeminent global people and organizational advisory
firm. We help leaders, organizations and societies succeed by releasing
the full power and potential of people. Our nearly 7,000 colleagues
deliver services through Korn Ferry and our Hay Group and Futurestep
divisions. Visit kornferry.com for more information
About The Korn Ferry Institute
The Korn Ferry Institute, our research and analytics arm, was
established to share intelligence and expert points of view on talent and
leadership. Through studies, books, and a quarterly magazine, Briefings,
we aim to increase understanding of how strategic talent decisions
contribute to competitive advantage, growth, and success.
Visit www.kornferry.com for more information on Korn Ferry, and
www.kornferryinstitute.com for articles, research, and insights.
© The Korn Ferry Institute 2016

The tone from the top

Transcription

Similar documents

Team Engagement

Charles Shivery career timeline

lpaa focus on private finance

Implementing Greater Performance through Transformational

#eiforum

Learning labs_4 - Verto Solutions

read the full article

Syed Muaz

mAking cAre A Business

We don`t know. Which is exactly why we do it.