“Culture isn’t just one aspect of the game—it is the game.” –Lou Gerstner, former IBM CEO
Most boards think “culture” is the soft, fuzzy stuff that some CEO’s or HR leaders may pay attention to. These boards are sadly wrong.
A high-performing, ethical culture can be a great source of competitive advantage.
An organization’s culture is “how we do things here”—how people behave in their relationships. Business is a set of relationships, and healthy relationships are built in trust.
Organizations with a toxic culture pay a heavy price in lost revenue, damaged reputation, lawsuits, and more. By contrast, organizations with a high-performance, trust-based culture (e.g., Southwest Airlines, Zappos.com, and Patagonia) enjoy a self-reinforcing, virtuous cycle with their stakeholders. They build trust and employees unleash more of their talents and efforts, positively affecting growth, productivity, retention, customers, profitability, and more.
A 2011 McKinsey report stated, “Studies have shown again and again that there may be no more critical source of business success or failure than a company’s culture.”
A 2012 CFA Institute report stated, “ … a board needs to understand the corporate culture and work with management to ensure it is an asset that contributes to long-term value creation and is not a risk that impairs success.”
Boards should pay attention to corporate culture. Culture is the legacy of leadership, and a healthy culture builds stakeholder trust.
This article is one of several Bob Vanourek wrote for Trust Inc., A Guide for Boards and C-Suites, published by Next Decade, Inc. 2014 and edited by Barbara Brooks Kimmel, Executive Director, Trust Across America – Trust Around the World.
Bob Vanourek and Gregg Vanourek are leadership practitioners, teachers, trainers, and award-winning authors. They are co-authors of Triple Crown Leadership: Building Excellent, Ethical, and Enduring Organizations, a winner of the International Book Awards, and called “the best book on leadership since Good to Great.” Take their Leadership Derailers Assessment or sign up for their newsletter. If you found value in this, please forward it to a friend. Every little bit helps!