Culture catalyst: Five ways the board can enable a thriving organizational culture

By Lea Evers & Dustin Seale (he/him)

A complex blend of shared values, beliefs, and behaviors, organizational culture can be described as the soul of a company. Culture is not just about creating a pleasant work environment; it shapes how work gets done. It’s a strategic asset that drives performance, fosters innovation, and ensures long-term sustainability. A strong, positive culture will align with the company’s purpose and values, guiding decision-making at all levels. Conversely, a toxic culture can lead to employee disengagement, ethical lapses, and even financial failure. It is no surprise then, that culture continues to move up the board agenda.

While the C-suite and HR leaders are typically seen as the custodians of culture, the board of directors also plays a critical role in influencing and sustaining it. The board has the power to be a driving force in cultivating a healthy, vibrant organizational culture. Here are five proactive ways they can wield that power.

1.      Direct and champion culture from the top

The board plays a key role in establishing a culture of integrity by demanding and reinforcing ethical standards – holding executives accountable, and, when necessary, taking corrective action. To do this, the board composition must necessarily support these efforts, with directors who embody and promote the company’s purpose and values, including adequately diverse representation.

When the board leads by example, it sends a powerful message about what is acceptable and expected, influencing behaviors across the organization.

• Reinforce the board’s commitment to cultural values, ensuring every decision reflects the organization’s core principles.

• Model the behaviors you expect, guiding management and employees by example.

• Establish robust governance mechanisms to monitor culture across the business, ensuring consistent oversight and alignment with core values.

• Hold executives accountable for upholding ethical standards, ensuring leadership consistently reflects and promotes the organization’s cultural priorities.

For example: Patagonia’s governance structure includes both a board of directors and the Patagonia Purpose Trust. The board is closely aligned with the company’s mission, overseeing operations and ensuring that strategic decisions reflect Patagonia’s core values. Meanwhile, the Purpose Trust, which holds the majority of voting stock, is dedicated to safeguarding the company’s long-term commitment to “saving our home planet”. Working together, they embed Patagonia’s values deeply into its culture.

2.      Integrate culture into strategic planning

Aligning culture with strategy ensures that an organization’s values are accounted for in all decision-making processes, fostering sustainable growth and resilience. The board should ensure that cultural alignment is consistently prioritized in strategic discussions. To achieve this, many boards are now enhancing their composition with directors who bring valuable human capital insights into these critical conversations – for example, directors with HR expertise – whether as non-executive members or executive directors such as the CHRO.

• Make cultural alignment a key part of strategic discussions, ensuring the organization’s values are integrated into long-term plans.

• Assess the impact of strategic decisions on culture, guiding management to consider how changes may affect the organizational climate.

• Enhance board composition with relevant expertise, including directors with HR capabilities to incorporate human capital insights into strategic discussions.

For example: Under Satya Nadella’s leadership, Microsoft transformed its culture of internal competition into one of collaboration and innovation. The board played a crucial role in this shift by bringing culture into strategic discussions and making cultural transformation central to the company’s resurgence. This marrying of culture with business goals helped Microsoft re-establish itself as a leader in the tech industry.

3.      Align leadership and metrics with cultural values

The board plays a crucial role in ensuring that both leadership appointments and performance metrics align with the company’s cultural values. By prioritizing cultural fit alongside other attributes in executive recruitment and embedding cultural objectives into evaluations and compensation structures, the board can reinforce behaviors and leadership qualities that sustain and advance the organization’s culture.

• Prioritize cultural alignment in executive recruitment, ensuring new leaders embody the organization’s values.

• Integrate cultural objectives into performance evaluations, reinforcing organizational values through measurable outcomes.

• Align executive compensation with cultural goals, rewarding behaviors that support the desired culture.

For example: Unilever’s board has embedded cultural expectations into executive performance metrics, linking specific sustainability and cultural goals directly to executive compensation. This approach ensures that leadership is held accountable for promoting the company’s culture and sustainability objectives, driving both cultural integrity and financial success.

4.      Monitor and sustain cultural health

Regular culture assessments are essential for monitoring and maintaining organizational health. They provide the board with critical insights to ensure that the company’s culture aligns with its strategic objectives and values, enabling the board to foster an environment of transparency and accountability, and to proactively address any cultural issues.

• Oversee regular cultural assessments, ensuring the board is informed about the organization’s cultural health.

• Use insights to guide strategic decisions, addressing any cultural misalignment proactively.

• Enhance transparency through regular reporting on cultural health, ensuring stakeholders are informed about the organization’s cultural priorities and progress.

For example: Following the LIBOR scandal, Barclays’ board implemented a comprehensive cultural audit program to monitor and guide a significant cultural transformation. The internal audit team, under the board’s oversight, developed a framework to measure cultural changes, focusing on recruitment, performance management, and risk culture. Regular reports to the audit committee kept the board engaged in ensuring that the company’s values were upheld throughout the organization.

5.      Foster collaboration for cultural cohesion

Collaboration between the board and the executive team is essential for aligning cultural initiatives with strategy. In this, the board’s role is to provide strategic oversight while supporting the CEO and management to make decisions in-keeping with the company’s culture.

• Cultivate strong relationships with the executive team, ensuring alignment on cultural priorities.

• Provide strategic oversight while empowering management, balancing governance with operational responsibilities.

• Engage regularly with executives on cultural issues, keeping the board connected to the organizational climate.

For example: Netflix’s unique governance structure fosters a close, collaborative relationship between its board and management. Board members attend monthly and quarterly senior management meetings as observers, ensuring they are thoroughly informed about the company’s operations and culture. This transparency allows the board to offer strategic guidance while staying aligned with Netflix’s cultural values, which has been key to the company’s innovation and success.

The culture formula: Tone, oversight, guidance, and leading by example

In today’s complex business environment, the alignment of culture and strategy is a key driver of success. By setting the tone at the top, providing rigorous oversight, guiding cultural change, and leading by example, the board can help engender a culture that not only supports the organization’s strategic objectives but also ensures its long-term sustainability.

A board that understands and embraces its role in shaping culture – while fostering strong collaboration with management – can be a powerful force for positive change, driving the organization toward greater success, integrity, and resilience.