In disruptive times, culture can play a crucial role in shaping enterprise performance. But culture change must come from the boardroom. Discover how HR can play an active role to drive culture change from the top down
According to the Society of Human Resources Managers (SHRM), nearly a quarter of a trillion dollars has been lost in the past five years due to regretful turnover caused by unfit workplace culture. More than ever Boards and Executive teams appreciate the impact that intangible assets like culture play in winning talent and in the market. But they often don’t know how to act, which is why HR must help drive top-down culture change within an organization.
Risk, reputational damage and short- and long-term value erosion from misbehaviour has shifted the focus onto getting corporate culture right. Today, Board members are struggling with how best to maintain oversight of corporate culture and Executives are struggling with how best to actively measure and manage it.
HR and culture
Historically, handling organisational culture has been passed to HR functions that have not had the data, resources, nor sufficient influence, to properly measure and manage it. Now, as one of the most important human capital issues of our time, corporate culture sits firmly at the top of the board room agenda.
“That’s why,” says Joe Dettmann, Partner / Principal, EY people advisory services, “more progressive companies are appointing a culture leader within HR, recognising the key role the function can play in connecting people across the business and actively shepherding a corporate culture that is fit for both the organisation’s strategy and risk tolerance.”
“Progressive companies are appointing a culture leader within HR, recognising the key role the function can play in connecting people across the business and actively shepherding a corporate culture that is fit for both the organisation’s strategy and risk tolerance”
For many companies, the measurement and management of culture has been simultaneously owned by everyone and no one, with HR playing some small role (typically in providing inefficient employee engagement surveys). However, as the onus and the focus moves to redefining culture, HR has a unique opportunity to take ownership of this key, strategic, people-related business need. There are five key ways it can do this:
1. HR must own culture and help align it to business strategy
While it is crucial for the board to define the cultural changes needed to successfully pursue and accelerate any shift in strategy, HR can play a key role in measuring, analysing and communicating culture in the wider business – define what today’s culture is and what it needs to become tomorrow.
HR can provide the data that allows the board to see not only how the existing culture aligns with strategy but also what progress is being made in building the strategy or transformation-enabling culture that the organisation wants to achieve. For example, forcing a new Enterprise Resource Planning (ERP) system upon employees without changing how they work will reduce the ROI of such an expensive investment. So, if the strategy calls for innovation, HR needs to encourage this as well as measure and report on the markers that exist or are needed to propagate an innovative culture.
“While leaders want their company to be great at everything, company strategy calls for a specific market focus, whether this is being an innovator, the most efficient, etc. and so culture should be intentionally designed and defined with this goal in mind,” says Mr. Dettmann. “Doing so will help shape HR’s decisions and behaviours around what kind of people are hired, what policies and processes should be put in place and what messages are communicated to employees.”
As the eyes and ears of the organisation and its people, HR is uniquely placed to carry out this role. It already has the necessary tools to measure the employee voice and should use them to provide the board with insight into workplace culture.
2. HR must ensure the board communicates and lives culture
Setting the tone at the top is crucial and firmly within the Board and Executive team’s remit – according to the SHRM, some 76 per cent of employees believe managers set workplace culture. But HR needs to ensure leadership articulates company purpose and culture clearly, authentically and compellingly – and then lives it. It is HR’s role to make sure an organisation’s goals reflect the behaviours it is trying to encourage and that the incentives reinforce them. HR owns the mechanisms such as the performance management system, the leadership competency framework and the reward program - and it is up to HR to align those with the right values and behaviours that define the culture the company needs.
Not only that, HR is responsible for ensuring leaders are living the purpose and culture externally as well as internally, so it reinforces the brand with customers and shareholders and in society at large. Now that the investment community is paying more attention to this intangible asset, HR needs to support the Board and Executive team by making purpose and culture a part of any brand or strategy refresh and crafting the narrative when the leadership speaks publicly.
Mr. Dettmann adds, “while it’s easy to say that your organisation’s purpose is ‘serving others’ and that one of your values is ‘putting the customer first’, if you only talk about the customer a fraction of the time that your competitors do (note, analysts actually measure this), then this will almost certainly be seen as a disconnect between what you say you believe in and what you actually do. This kind of inadvertent inauthenticity can quickly erode brand confidence among investors, employees and consumers.”
3. Board directors must monitor culture as it evolves
Not only does the board need to align culture and strategy, it needs oversight of current workplace culture to ensure it’s still relevant. Boards tell us they are using Glassdoor or engagement survey results, or they simply go talk to people. Each of these, is individually flawed or at best incomplete. HR has access to important people data and can gather a more complete set of data from their functional counterparts (e.g. customer NPS scores, whistle-blower reports, operational metrics) that can be a more robust indication of the health and strength of culture.
Where HR can really add value is by ensuring these metrics are continually updated and visible to the board, so it gets an accurate picture of the company culture at any point in time. By evolving some of its metrics and collaborating with other functions such as customer services and risk, HR can ensure the board has the oversight it needs to assess how far culture is still aligned to strategy.
4. Ensure culture keeps pace with strategic shifts
It’s essential for the bottom line that culture changes when the strategy does.
“First-hand experience has taught me how culture and business strategy go hand in hand,” noted Amy Cappellanti-Wolf, Chief Human Resources Officer, Symantec during her talk at SHRM’s June 2019 conference. “Companies that align culture with business have 58 per cent more growth and 72 per cent more profitability.”
HR should have a hand in measuring and shifting the incumbent ‘ways of working’ during any acquisition, merger or transformation (e.g. digital, cost take out, technology implementation) as well as during any company life event, such as a new CEO or a strategy refresh. Getting company transactions and transformations right are about three things: people, process, and technology.
“Too often organisations under invest in their people piece,” says Mr. Dettmann. “Rolling out standard technical training is not enough. HR can play a leading role in defining what new ways of working will be needed, establishing gaps to close on those new ways, and implementing behaviour change interventions to close those gaps.”
“HR can play a leading role in defining what new ways of working will be needed, establishing gaps to close on those new ways, and implementing behaviour change interventions to close those gaps”
HR needs to understand the cultural changes, new talent requirements and any shifts in the employee experience needed to match the organisation’s transformation agenda. Culture needs to stay fresh and relevant, which means measuring it appropriately and making changes to it with the executive team’s sponsorship; HR is essential to that process.
5. HR must elevate culture in the boardroom
In an ideal world, HR can challenge the way leadership is setting the tone at the top. If the senior team is dysfunctional, people will notice. If the Board is homogenous and not active enough, people will feel it. These have a direct impact on culture. According to the SHRM, nearly six in ten employees who leave an organisation because of its workplace culture cite management as their reason.
It is HR’s role to call out board-level dysfunction and to adapt the succession process, top team alignment, leadership coaching and development accordingly if the senior team is not setting the right example. HR functions are already doing this to some extent, but not yet enough.
HR and culture: Aligning from top to bottom
As organisations become more purpose-led and people-centric, success will be driven by individuals from the top to the bottom of an organisation all buying into a core culture and pulling in the same direction. This makes it crucial that this culture aligns with organisational strategy. While the board, the CEO and wider C-suite need to live the company’s values, the responsibility for promoting and growing company culture is now falling to HR.
This accountability presents HR with an exciting opportunity to not just define culture and how it is measured, but to help set the tone at the top and deliver strategic value at a boardroom level. By owning and communicating culture, ensuring that it is embedded yet constantly evolving and by acting as the intermediary that aligns those at the top with those lower down the chain, HR can affect significant change at every level and enable the delivery of results that empower and engage the entire organisation.