Who “Owns” Corporate Culture?

pointing-fingers

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 company-culture-300x282responsibility!  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 Shadow leadersculture.  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.

riskWhat 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!

Posted by:

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

email: john@johnrchildress.com

PS: John also writes thriller novels

 

 

About johnrchildress

John Childress is currently Visiting Professor in Strategy and Culture at IE Business School in Madrid and a pioneer in the field of strategy execution, culture change, executive leadership and organization effectiveness, author of several books and numerous articles on leadership, an effective public speaker and workshop facilitator for Boards and senior executive teams. In 1978 John co-founded The Senn-Delaney Leadership Consulting Group, the first international consulting firm to focus exclusively on culture change, leadership development and senior team alignment. Between 1978 and 2000 he served as its President and CEO and guided the international expansion of the company. His work with senior leadership teams has included companies in crisis (GPU Nuclear – owner of the Three Mile Island Nuclear Plants following the accident), deregulated industries (natural gas pipelines, telecommunications and the breakup of The Bell Telephone Companies), mergers and acquisitions and classic business turnaround scenarios with global organizations from the Fortune 500 and FTSE 250 ranks. He has designed and conducted consulting engagements in the US, UK, Europe, Middle East, Africa, China and Asia. Currently John is an independent advisor to CEO’s, Boards, management teams and organisations on strategy execution, corporate culture, leadership team effectiveness, business performance and executive development. John was born in the Cascade Mountains of Oregon and eventually moved to Carmel Highlands, California during most of his business career. John is a Phi Beta Kappa scholar with a BA degree (Magna cum Laude) from the University of California, a Masters Degree from Harvard University and was a PhD candidate at the University of Hawaii before deciding on a career as a business entrepreneur in the mid-70s. In 1968-69 he attended the American University of Beirut and it was there that his interest in cultures, leadership and group dynamics began to take shape. John Childress resides in London and the south of France with his family and is an avid flyfisherman, with recent trips to Alaska, the Amazon River, Tierra del Fuego, and Kamchatka in the far east of Russia. He is a trustee for Young Virtuosi, a foundation to support talented young musicians. You can reach John at john@johnrchildress.com or john.childress@theprincipiagroup.com
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4 Responses to Who “Owns” Corporate Culture?

  1. beldenmenkus says:

    John,

    Great post. Completely agree!

    Belden M Menkus
    MenKus & Associates

    Mobile: +44 7710 170 115
    Office: +44 20 7321 3732
    100 Pall Mall
    London, SW1Y 5NQ

    Like

  2. Interesting argument about placing the responsibility for corporate culture in the risk department. I wonder what you would say to Nassim Nicholas Taleb, who claims that most risk departments are ineffective because they have become so focused on avoiding the worst disaster that has happened in the past that they have forgotten that each time such a disaster occurred it was worse than the previous disaster.

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    • Malcolm: I guess my reply would be that almost all functions today are overly focused on avoidance, given regulations and our litigious society. But at least the Risk function will put culture into a business perspective, which is more than HR or Corp Comms does. Pointing out the business risks associated with the current culture could be a great wake up call for the CEO and senior team.

      By the way, where would you put the accountability for culture?

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  3. Well, before reading your post I would have said that it was a CEO/senior management issue. Now I am not so sure 🙂

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