Every organisation strives to have a great culture. It’s incredibly important and makes life easier for everyone involved if one exists. Great processes and external successes stem from a robust, resilient, and ethical culture, and we talk to various boards and executives about setting a high bar for organisational character and performance a lot.
Character refers to integrity, ethics, and risk management and is a great way to sum up the “tone” set by your board. This tone filters down throughout the organisation.
Why set a high bar for your tone?
Every organisation strives to have great character and performance. The hundreds of board and organisational culture reviews conducted by the Board Surveys team have shown us that the boards that set a high bar for character and performance correlate with higher-performing organisations.
What a surprise.
The data and facts are in; a high bar set by the board for character and performance cascades down through the organisation, and the reverse is also true. A low (or no) bar negatively affects everyone’s performance.
Furthermore, we rarely see a CEO or executives set a higher bar for character and performance than their board. Just as those in levels below the CEO and executives mimic their tone, and so on.
Is your board setting the right tone?
Let’s use financial services organisations as an example. Traditionally, their primary focus was achieving financial performance despite the questionable ethics and risks associated with their decisions and actions.
The Hayne Financial Services Royal Commission in Australia found that the largest banks in the country were overly focused on achieving short-term financial performance, even at the expense of their ethics and customers. This sprouted a self-serving culture, driven by improper incentives, fees charged for no service, even after the customer passed away, and the sale of financial products, including insurance, in the interests of the organisation, not the customer.
This led to a significant loss of trust and the need for these organisations’ boards, CEOs, and executives to focus on developing a stronger organisational character. The way in which they needed to do this was by embedding a more ethical culture.
High performance should never come at the expense of integrity and ethics
Shareholders expect their boards, CEOs, and executives to drive high performance while maintaining a strong reputation and character. Sustainable high performance is impossible without the trust of customers and the community.
Strong organisational character can take years to form and significant effort to shape. It almost seems somewhat unjust that the trust held by the community for an organisation can be shattered in a matter of minutes. However, this rough judgment keeps everyone honest and striving to continually form positive cultures.
Don’t be afraid to say sorry
In cases where trust is lost, acknowledging the problem and genuinely apologising is the first step. This should never be faked or bypassed. Instead, saying sorry (and meaning it) should be coupled with the intention to set a new and higher bar for integrity and ethics in your organisation.
It is important to determine the things you plan to do differently, change the behaviours and commit the time necessary to ensure success. Cultural and behavioural change takes resolute leadership and sustained commitment over an undefined amount of time. All directors and CEOs should exemplify these new behaviours with various systems, incentives and consequence management processes in place to keep everyone on track.
Employee actions and behaviours will align with what is recognised and rewarded
Incentive schemes or internal systems that support the setting of a high bar can be very effective and a great way to speed up positive cultural change. However, on the same page, it is vital that you ensure your incentive schemes are not promoting inappropriate or risky behaviour!
Your Chairman and the CEO should be considered as the Chief Integrity and Ethics Officers. However, appointing a formal role of Chief Integrity Officer to oversee any new integrity and ethics processes can also be a good idea. This not only ensures things stay on track, but it sends an important message to the members of your organisation about your commitment to cultural improvement.
Dedicate time to your organisational culture and be rewarded
A greater focus on integrity and ethics is always a good idea, and it is tricky to understand how far-reaching the benefits for your organisation may be until you begin down the path. The Chairman, directors, and the CEO must understand the importance of integrity and ethics while making a real commitment to their improvement.
Chairs and CEOs should always be asking “what are we doing to demonstrate that we are champions and exemplars of high integrity, ethics, and values?”. Contact our expert team today for help assessing your company culture formally through a board evaluation. After all, it can be hard to know what to fix if you are unaware of what may be broken.
