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Senior Correspondent

Why Directors Should Care About Corporate Culture

Why Directors Should Care About Corporate Culture

During my tenure as a CEO, my board of directors never challenged me with questions pertaining to the corporate culture. I wasn't surprised in the least. Jacobs Suchard directors expected me to run the company as an entrepreneurial enterprise, and as long the numbers were coming in, they assumed I was doing just that. Like most boards, they were more interested in hearing about profit, financial ratios, efficiencies, headcounts, labor climate and strategic initiatives. Maybe it was the times — 25 years ago, culture wasn’t in vogue like it is now. Other than ensuring an ethical environment in the organizations they govern, I suspect today’s boards still don’t give culture the attention it deserves. And yet, culture is one of the most important determinants of business performance.

Imagine Apple without innovators or Zappos neglecting service or Whole Foods selling a slew of processed foods loaded with saturated fat. Generally, founders instill the culture. When they are long gone, the culture is left to the CEO to nurture. He or she perpetuates "the way" or makes changes depending on the environment. This, I am not arguing. I am simply advocating that culture should be as important to a company’s board of directors as the business strategy. After all, culture is the strategy. With the exception of mega-company “clout” in the marketplace, sustainable competitive advantage cannot survive in toxic cultures.

In the simplest of terms, a board’s primary responsibility is to:

  1. Oversee corporate performance.
  2. Provide perspective and input to the long-term business strategy.
  3. Provide strategic direction to management.
  4. Identify risk and monitor mitigation.

I’m suggesting an addition.

 5. Foster a healthy corporate culture that creates value.

Great strategy and great execution comes from the people within the enterprise. Cultures conducive to inspiring individuals and teams are the ones that deliver superior results. Procter and Gamble have been winning the culture game for 175 years. That is sustainable competitive advantage, and that is why directors should care about corporate culture.

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