How corporate culture affects governance

You don’t have to look too far or far to find examples of organizations and leaders who have fundamentally failed in their due diligence to shareholders, customers and employees. Financial Services Industry Misconduct Revealed by Royal Commission, for example, paints a clear picture of the impact of poor organizational cultures on risk management, compliance, performance and, ultimately, public and consumer confidence.

Ensuring that business practices are both ethical and prudent is central to the role of any CEO.

Among the most important steps you can take to create a culture that enables high standards of governance are as follows.

  1. Lead from the top.

    The simple reality is that how leaders think and behave, at all levels of your organization, is ultimately what drives culture. If leaders are willing to bend the rules to get a business result, other team members are likely to do the same.

    If leaders think it’s okay to behave with a lack of compassion or integrity, chances are other people will follow suit.

  2. Hire well.

    Whether it’s recruiting externally or promoting people internally, never compromise on the standards of behavior you expect. No matter how attractive a candidate’s skills and professional qualifications are, never hire them if you doubt their ability to behave ethically.

    Pay particular attention to the appointment of people to managerial positions. Recognize the risks of appointing someone who may set a bad example and fail to hold and hold others accountable to acceptable standards of behavior. The ability to be a positive culture influencer should be a non-negotiable part of your selection criteria.

  3. Reward good behavior.

    Give as an example only those members of your team who consistently behave in ways that influence a culture of trust, respect, integrity and accountability. Recognize your team members who are doing the right things and encourage others to do the same.

  4. Invest in leadership development.

    Too often, people are promoted to leadership positions without the training they need to be successful. Think for a moment how often you have observed a leader promoted on the basis of their technical strengths, strive to create an effective team culture, and set high standards of performance and behavior.

    Every people manager should be able to set clear expectations and train their team members to behave successfully. At the heart of their success will be their ability to engage in difficult conversations and hold people accountable for the standard of conduct they adopt.

  5. Apply the consequences.

    Creating a desirable corporate culture requires both a top-down and a bottom-up strategy. Each team member should be held accountable for doing their part to protect the interests of the organization and its stakeholders. Focus on creating an environment in which people feel safe to speak up and point out behaviors that need to change.

Holding leaders accountable for behaving the way others are supposed to behave is especially important. An inconsistent approach to holding anyone accountable is detrimental to the culture, but this is especially the case when those released are in leadership positions.

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