Image Substation Blog Guest Column: Governance Practice Tips - Leading organisational culture from the top

Kerryn Newton, LLM, MBA, MA, FAICD, AFAIM is the Managing Director of Directors Australia. Kerryn has extensive experience working in high level positions in the private, public, non-profit and community sectors and as a consultant to organisations in a range of industry sectors.Governance Practice Tips - Leading organisational culture from the topThere is fairly universal agreement that boards have key functions regarding: strategy, overseeing company performance, monitoring risk and compliance, the appointment and monitoring the performance of the CEO, accounting to stakeholders, and representing the company.However, setting organisational culture rarely appears in the list of board functions. In fact, setting organisational culture is perhaps the board's most important leadership function but to be effective the board must have its own positive culture.History has shown that a number of companies have had sound governance structures, policies and processes but still fail in times of crisis. A robust governance framework needs to be supported by a board culture that enables and encourages directors to ask the tough questions required to fulfil their duties.Below we highlight six hallmarks of boards which engender a positive culture in the boardroom and for the organisation as a whole.Transparency and accountability - Like management, boards should be accountable for their actions. Directors also need to be accountable to each other through, for example, adhering to a code of conduct and declaring any activities that could constitute a conflict of interest with their duties as a director.Diligence - Directors must commit the time required to understand the company, its business and prepare for board meetings and events.Collegiality - A high level of trust and respect among directors is critical for the board to operate effectively as a collective decsion-making entity. As far as possible, boards should aim for consensual decision-making. However, irrespective of whether that has been achieved, once all directors leave the board room they all must abide by the decision of the board.Constructively challenge - Directors must be willing to be candid in discussions and appropriately challenge management and each other on issues. The chairperson plays a key role in encouraging all directors to participate in discussion and ensuring that all issues and dissenting views are fully debated.Continual improvement and renewal - The board and/or each director should have a professional development plan as well as a policy on board renewal to ensure that new skills and perspectives are brought to the boardroom.Regular performance evaluations - Just as employees are expected to undergo performance evaluations, so should the board (as encouraged by the ASX Corproate Governance Principles and Recommendations). Importantly, outcomes from the evaluations must be acted on. Similarly, action must be taken when a director is not performing to the standard required.In addition to these considerations, boards need to look beyond their own culture and ask what they know of the culture in their organisation. Apart from understanding and seeking appropriate leadership styles in the CEO and executive managers, boards can seek to influence organisational culture by:leading by example in a range of areas such as accountability, diversity and budgetary restrictionsbuilding constructive and positive relationships internally and externallyensuring alignment in vision and objectives and showing support for management at board level when appropriate, and'walking the talk' of organisational values.Boards seeking more information regarding board processes can contact Kerryn Newton, Managing Director of Directors Australia on 0408 735 529. email: info@directorsaustralia.com© Directors Australia 2011. All Rights Reserved.