If everyone is accountable, then no one is accountable.
When organisations and companies first evolved, it was the founder who tended to be responsible for just about everything, from visiting the factory floor and telling people what to do, visiting the bankers and money lenders, and everything in between. Companies were smaller then and life definitely less complex and the pace of business much slower. Mail used to travel by foot, horse or sailing ship and instructions sometimes took days to months to reach the intended person, who would then be tasked with carrying out the orders of the owner.
As business evolved it adopted the military model of “chain of command” and defined responsibilities, thus ushering in a new era of efficiency and growth (however without the discipline and values!). The industrial revolution, modern accounting and technology advances joined with the scientific management techniques of Frederick Taylor, and businesses flourished, bringing with it societal advances in just about every area. And inside these now large organisations, division of responsibilities allowed for even more efficiency. No longer did management have to “know everything” about the business, instead they could concentrate on being effective in their respective areas of expertise. We now have defined functional responsibilities making up the senior management roles; Manufacturing, Supply Chain, Finance, Engineering, Marketing, Communications, HR, Risk, Sales, etc.
Who “owns” the corporate culture?
In my keynote speeches to executive audiences I often start by asking the simple question: “Who owns your corporate culture?”
The obvious and quickest response to this question is everyone! Culture is everyone’s responsibility! In one sense, this is the right answer, but it is also politically naive and wholly ineffective. While everyone inside the company has a personal responsibility to behave in accordance with the internal values and comply with policies and procedures, culture is much more than just the sum of individual behaviours. And when poor behaviour happens, very few employees believe they have the authority or mandate to correct and coach their peers or their bosses on behaviour.
Those few who truly understand corporate culture and its impact on performance realise that internal policies, such as compensation and promotion, tend to be strongest drivers of behaviour and thus the corporate culture. The current policies inside many banks today foster individual risk/reward behaviours that can easily go astray, creating significant ethical issues with massive economic and financial repercussions.
The next answer I get to this question is usually, well then, the CEO is responsible for the culture. After all, they have the power to alter policies and remove people who are consistently out of alignment with the desired culture.
If only it were that simple. First of all the life of a modern CEO is stuffed with both internal and external meetings of an operational, strategic and regulatory nature. If they do have time to think about the corporate culture, it’s usually after everyone else has gone to bed and then only for a short time. And the analysts and shareholders don’t care about the culture, they want earnings and profit.
The third response comes quickly. Then the senior team should be responsible for the culture. After all, many culture gurus claim that “organisations are shadows of their leaders“. That is, the collective and individual behaviour of the senior executives tend to signal to all employees what is acceptable and what is not. Ideally, this is true, but the fact is most senior executives are more focused on their functional responsibilities, budgets and numbers, than on the overall culture. Besides, rarely does corporate culture factor in their personal compensation or functional scorecard.
By now the room grows silent until someone pipes up; “Shouldn’t it be HR or Corporate Communications responsibility?” After all, this is where it usually lies inside most companies. In many companies, HR and or Corporate Communication are tasked by the CEO to look after people and “the culture”. This does make sense since everyone believes culture is all about people, employee engagement and the communication of corporate values to all employees. Sounds good, but doesn’t really work very well.
First of all, HR has mostly devolved into an administrative function, focusing on employee records, training, pension and health plans, compensation and grievances. And Corporate Communications knows how to craft and spin big messages and use social media to promote the firm and its brand. While they can touch all employees, these two functions rarely understand the real business of the business nor do they understand the fact that corporate culture is a business issue more than it is a people issue.
And traditional HR and Comms approaches to culture rely heavily on workshops, lectures, training sessions, team building activities, top-down values communications, videos on the culture and road shows of executives with hundreds of Powerpoint slides. Interesting and important material, but totally ineffective at shaping or changing culture.
A New “Home” for Corporate Culture?
Risk is not knowing what you are doing. ~Warren Buffett
Risk is not knowing what your culture is doing.
I have a rather radical suggestion about who should have responsibility for corporate culture. I believe the accountability for building and dealing with corporate culture should lie with the Head of Risk and within the Risk function. Of course all the others above play their part and everyone needs to be personally responsible for the culture, but let’s look at the value of having the Risk function “own” corporate culture.
What most people don’t understand is that corporate culture can be a significant business risk. Just ask the banks who have been fined billions of dollars for unethical behaviour resulting from a broken culture. Just ask the people of the US Gulf states about the environmental and economic damage caused by a poor safety culture on the BP Deepwater Horizon oil drilling platform. Talk to the shareholders of Daimler/Chrysler a few years after the much touted “marriage of equals” merger whose share value dropped in half in just a few years due to culture clash.
Why put the care of corporate culture into the Risk function? Because this group is highly concerned with business outcomes as well as behaviours and activities.The Head of Risk has the critical role of discovering and preventing unnecessary and harmful risk activities, policies and decisions inside a company, while at the same time promoting and supporting good asset utilisation and good business practices. And a good risk function is also proactive in identifying and mitigating risk, wherever it lies inside a company.
And there is also a growing precedent for combining culture with risk. Santander UK, whose new CEO came from the risk function of another bank, has put culture and risk together under the leadership of a senior executive. Now culture becomes a real business issue!
Think about it!
John R Childress
Senior Advisor on Corporate Culture, Leadership and Strategy Execution
Author of LEVERAGE: The CEO’s Guide to Corporate Culture
Visiting Professor, IE Business School, Madrid
PS: John also writes thriller novels