7. Culture in the boardroom Flashcards
What has triggered the shift to greater appreciation of importance of culture?
Corporate failures and the financial crisis
Simple definition of culture
The way we do things around here
6 levels to an individual’s culture (areas of influence)
National
Regional / ethnic / religious / linguistic
Gender
Generational
Social class
Organisational
Schein’s 10 categories of culture
- Group norms
- Espoused values (publicly announced)
- Formal philosophy (ideological principles)
- Rules of the game (unwritten rules for getting along)
- Climate (not weather)
- Embedded skills
- Habits of thinking and mental models
- Shared meanings
- Root metaphors or integrating symbols
- Formal rituals and celebrations
Schein’s iceberg model of culture
Surface level - artefacts and etiquette (visible concrete elements)
Middle level - espoused values (drive pattern of behaviour)
Deep level - underlying assumptions (unconscious, taken-for-granted values and beliefs)
Simple definition of board culture
The repeating patterns of the board dynamic
What is a key marker/indicator of board culture?
Board conversations and interactions
What constitutes conversations and interactions? (6)
- Words
- Tone
- Body language
- Interruptions
- Note taking (or lack of)
- Later or early arrival or departure
etc.
FRC Guidance - 9 aspects of healthy culture
Honesty
Openness
Respect
Adaptability
Reliability
Recognition
Acceptance of challenge
Accountability
A sense of shared purpose
4 issues (of many) that may that may arise on boards if board conversations go wrong
- Directors may cease to be engaged
- Board susceptible to group conformity / groupthink
- Individual concerns may not be raised
- Conflict conversations may turn personal
6 (of many) commonly occurring conversational issues on boards
- Issues discussed at length are unresolved
- Overly talkative or quiet members
- Lack of diversity of opinion
- Chair favours certain directors over others
- A small group sews up decisions before the meeting
- Over reliance on a single director
Korn/Ferry and KPMG research - 4 top issues given by directors as reasons for poor or ineffective conversations
- Dominant personalities / groups
- Inappropriate allocation of time at meetings
- Lack of preparation
- Unhelpful manner of presenting info
4 models/frameworks which help make sense of some basic assumptions of boards which create emergent dynamic behaviours of boards
- Bedrock of board culture model - Chait
- Power culture - Pearce and Zahra
- Ethical culture
- Performance culture
Chait’s four archetypes to diagnose boards - free agent vs group member & institutional guardian vs public watchdog
Type I - Orchestra - group member & inst. guardian
Type II - Consultants - free agent & inst. guardian
Type III - Regulatory agency - group member & public watchdog
Type IV - Lone rangers - free agent & public watchdog
Bedrock of board culture model is guided by which two assumptions (questions)?
1.
‘To what extent a board is more akin to a symphonic orchestra or a jazz ensemble?’
…meaning…
Are directors group members, or are they free agents?
-
Chait’s work was on public sector entities, but we can expand this to all co’s
Chait - Is the board’s role as a ‘public watchdog’ or an ‘institutional guardian’
ie.
Is the board’s role concerned with wider stakeholder interests, or much more internally focussed?
Chait’s four archetypes to diagnose boards - Orchestra (2)
Highly collegial and cohesive boards
At risk of group think and excessive deference (submission and respect) to peers
Chait’s four archetypes to diagnose boards - Consultants (2)
Serve organisations best interests, but with individuals adding value as individuals rather than as a whole
Risks micromanagement and reduced decision-making ability through information asymmetry
Chait’s four archetypes to diagnose boards -Regulatory agency (2)
Compliance and oversight focussed board, which sees responsibility as monitoring rules, regulations, policies and procedures
Formal and bureaucratic board may lack ability to be strategic in issues or generate innovation and insight
Chait’s four archetypes to diagnose boards - Lone rangers (3)
Weaker, as individual directors see role as representing particular stakeholder interests
Directors will be willing to use expertise to challenge decisions
Risk of org falling into zigzagging strategy, and of non-execs and execs often working at cross purposes
Pearce and Zahra’s power culture model is determines a type of board culture based on…. (2)
- Low or high chief executive power
- Low or high board power
Pearce and Zahra 4 types of board culture - and whether they are low or high chief exec power & low or high board power
- Caretaker board - low CE power & low board power
- Statutory board - high CE power & low board power
- Proactive board - low CE power & high board power
- Participative board - high CE power & high board power
Pearce and Zahra’s power culture - caretaker boards (2)
Weak board existing out of legal necessity, with decision-making being largely ceremonial
Power held by CEO and other chief execs, causing board’s weakness
Pearce and Zahra’s power culture - statutory boards (2)
Prototypical image of ineffective board, existing out of legal necessity to rubberstamp exec decisions
Cultural norm in the UK before 1992 Cadbury report
Pearce and Zahra’s power culture - proactive boards
Think supervisory board model seen in continental Europe
Usually comprised of outside directors representing key stakeholders
