Is Culture on Your Board Agenda?
How Board Oversight of Culture is Key to Good Governance
When I was in my twenties, I served on my first nonprofit board of directors and went through board training. In this training, I learned about the role of executive boards and the concept of organizational governance, which, as it was taught to me, includes providing strategic direction for an organization and financial oversight.
Throughout my twenties I served on different types of boards, including a more traditional executive board and a working board for a grassroots organization. On the more traditional board, I often felt out of place because I didn’t have deep pockets or access to wealthy donors in my social network. I had already internalized the belief that being a good board member was all about fundraising and finances.
I felt more at home on the working board, where I eventually became Board Chair and gained leadership experience that served me well. This is where I honed skills in facilitating meetings and project management, led the organization through development of core values, established conflict resolution guidelines, and led a large volunteer team in planning and executing a successful music festival fundraiser two years in a row.
Later, as Vice President of a regional nonprofit, I often attended meetings of my organization’s board and worked with them on various initiatives. During this time, I saw our organization contract with an independent auditor to conduct annual financial audits and, along with our finance director, present the findings to the board. I sat in board meetings where the budget and profit and loss statements were pored over in detail. The more time I spent on and around boards, the more I saw financial oversight as the main directive.
Good Stewardship
Where does this focus on financial oversight come from? Of course, there are legal implications for financial mismanagement and it’s common to hear board members talk about being good stewards of resources, especially when it comes to private donations or public funds. For legal, cultural, and traditional reasons, finances are inseparable from most definitions of governance.
This is for good reason: financial mismanagement can lead to waste and reputational impacts, and can compromise an organization’s sustainability and even existence.
Here’s the thing: so can mismanagement of culture. Yet, during my time on and around boards, conversations about culture have been conspicuously missing.
If the core reasons for financial oversight are to manage risk and to ensure organizational effectiveness and responsible use of resources, there’s a big piece of the governance puzzle missing.
Toxic work environments create organizational risk and cause financial waste through high turnover and decreased morale and productivity.
Toxic work environments can harm the reputation of organizations, internally and externally, which can compromise an organization’s people, operations, impact and sustainability.
The longer I do this work, the more I see the need for culture to be considered in governance.
Culture Oversight
As it turns out, I’m not alone in this line of thinking. A 2019 article from the Harvard Law School Forum on Corporate Governance describes how, globally, governance codes and approaches are shifting to include culture:
“Today, company value is defined less by industrial-era physical assets like plants and equipment and more by information-age human capital. It is clearer than ever that a company’s talent, and the culture that enables that talent, are sources of quantifiable competitive differentiation.”
Culture, while less tangible than many assets, has a great deal of value.
Given this, what role can boards play in governance and oversight of culture? That same article advises:
“Responsibility for defining the right culture for the company and embedding it within daily operations falls to management, but the board must oversee and hold management to account on how it is defining, aligning (to purpose and strategy), embodying and reporting on culture.”
If culture has been missing from your board agenda, here are some discussion questions to get you started:
Has our organization defined its desired culture, and does the desired culture align with the org’s purpose or mission?
How are accountability practices being implemented to shift culture in the desired direction?
What are the organization’s mechanisms for reporting on culture, and what is the quality of these mechanisms?
How does the organization consider culture shifts in the context of strategy shifts or in times of crisis?
How is the board ensuring that leadership has adequate capacity and resources to strategically shape culture? What training and capacity-building is provided to ensure board members and organizational leaders are equipped to govern and manage culture?
Adding culture to your Board agenda is key to sparking communication and action in this critical area of governance and organizational leadership.
Risks of Culture Oversight
While recommending board oversight of company culture, I also want to acknowledge the importance of board accountability to culture first.
Expecting boards to monitor culture can lead to problems depending on the culture of the board itself. If a board genuinely cares about culture and if the board composition and operations are in alignment with organizational values, culture oversight can be a good thing. If the board operates in toxic ways itself or misuses its power, this can add fuel to the fire when it comes to culture issues.
In some cases, boards’ approaches to financial oversight include strategies that harm culture. Approving budgets that pay low salaries is a culture issue. Underinvesting in human resources and staff development is a culture issue. Devaluing operational and administrative needs is a culture issue. Stretching human and material resources to their breaking point is a culture issue.
Protecting against wasteful spending must be balanced with responsible investments that promote healthy cultures, valued staff, and long-term sustainability and effectiveness. That is true efficiency and and a key part of being a good steward of resources.
High turnover is inefficient. Toxic, chronic conflict is inefficient. Loss of institutional knowledge is inefficient. Being unable to sustain work that took many resources to develop is inefficient and wasteful.
In organizational governance and leadership, culture matters.
And as much as I want to see boards adding culture to their agenda, throwing culture management responsibilities on executive leadership when they’re already overwhelmed isn’t the answer.
Fully bringing culture under the umbrella of governance requires intentional capacity-building. Still, there are small steps that can be taken to add the culture piece to the governance puzzle.
How is culture showing up on your board agenda? And if it’s not, how will you add it to the agenda?
Additional Reading:
Five Ways to Enhance Board Oversight of Culture
Board Roles and Responsibilities | National Council of Nonprofits
Corporate Governance Institute - Corporate governance and culture
Navigating the cultural compass: The Board's vital role in organisational culture | Blogs | IoD
I lead workshops for boards, executive leaders and funders on the intersections of culture and governance. Learn more about these workshop offerings here.