Corporate scandals highlight risk of weak workplace culture, lax board oversight
March 2, 2018
By Lori Sharn
CEO Peter Gleason is pumping the importance of culture, both with his staff and for organizations everywhere.
Gleason’s group, the National Association of Corporate Directors, is calling on boards to take a more proactive approach to culture at the organizations they oversee.
Meanwhile, NACD is in the process of incorporating six newly identified and defined values into its operations, including the onboarding of new employees and staff evaluations.
“It wasn’t that we had a bad culture. We had built a good culture,” said Gleason. “I want to enhance that.”
A multitude of culture-related factors converged at NACD in 2017, Gleason’s first year as CEO. A Blue Ribbon Commission—an annual NACD undertaking—decided to research and develop recommendations on culture.
The report released in October was timely. Wells Fargo had become the poster child for a failed culture and for ineffective board oversight. Low-level employees, under pressure to meet quotas, opened millions of accounts without customers’ permission. Boards are also under fire at companies for failing to address sexual harassment by senior executives.
Less than half of the board directors surveyed for the Blue Ribbon report said they assess the alignment between a company’s purpose and values with strategy, and only half said they understood the “buzz at the bottom”—the behaviors, norms and values of rank-and-file employees. (The report and recommendations are free to download from NACD’s website.)
“The heart of the document really comes down to: This needs to be considered a risk, like any other risk in the organization, and you have to take a proactive approach to it,” Gleason said.
Gleason joined NACD as vice president and director of research in 2000, when the group had just six employees. Since then he has held almost every top job, including COO and CFO. As part of a succession plan, he was named president in 2015 and added the CEO title in January 2017 upon the retirement of Ken Daly.
Today, NACD has about 100 employees, about 18,000 members, and annual revenue of nearly $32 million. The association moved to new offices in 2017 by the Courthouse Metro station in Arlington, Va., with a view of Washington, D.C., landmarks and an eye for collaboration. Numerous huddle rooms, comfy seating areas and whiteboard walls encourage teamwork.
NACD recently restructured its two largest departments, member engagement and business development, leading to some departures as well as new hires.
Karen Horn is NACD’s board chair and a member of the Blue Ribbon Commission on culture. She said the board, in choosing Gleason to be the next CEO, knew that he would consider culture a core asset of the organization.
“The top people have all been together a long time and really share these values,” Horn said. “Because we’re growing so fast we’ve brought in a lot of new people to the organization. We need to be sure the new people feel the same kind of engagement and buy-in to the current culture, and buy-in to the development of the ongoing culture.”
After becoming CEO, Gleason established the Directors Council, made up of the 13 director-level managers—below Gleason and his four senior executives—at NACD. The council meets biweekly to promote cross-department collaboration on issues and projects, but Gleason also charged the team with thinking about how to build a better organization.
The council proposed developing a values statement.
“We had a huge brainstorming session to start. I said, ‘I don’t want this to be a poster on the wall. I don’t want it to be a laminated card. It’s fine if we do that, but I want people to live it,’” Gleason said.
A three-person “Values Squad” interviewed many staffers, and by summer a first draft was ready. The six values were formally announced in a “soft launch” to staff in January. NACD is working with a consultant, who is meeting with managers and teams, to build these values into processes throughout the organization:
- We are one NACD.
- We succeed through member impact.
- We communicate openly.
- We deliver.
- We are continuous learners.
- We are all innovators.
Engaging the board
Gleason said NACD’s board has been “fully engaged” with the effort: “They’re always asking about the atmosphere in the organization, how people are reacting to changes,” Gleason said. The board asked to see the notes from the Value Squad interviews, and has suggested building an employee survey to gauge culture.
“We discuss it regularly at board meetings,” Horn said. “We ask for and get all kinds of information on not only what the culture is, but how it’s being changed.”
Gleason said NACD’s board, with just 10 people, functions more like the board of a corporation than for a nonprofit association. But Gleason said “there’s not a board out there” that shouldn’t be thinking about the topics NACD has been prioritizing for its members the past six or seven years, including talent development, strategy development, diversity, long-term value creation and culture.
“If you’re an association CEO and you say, ‘I want our board to be more involved and to understand the culture of the organization,’ you might open the door to something you don’t want,” Gleason said. “So you’ve got to do it in a measured fashion. What are the reports you can put in front of the board, and how do you structure their engagement at different levels so it’s not a free-for-all?”
The flip side, however, is a CEO should probably never block a board member from obtaining information.
“A red flag should go up if a CEO blocks a board member from talking to the CFO or other senior staff,” Gleason said. The key is to have a structure in place that keeps the CEO in the loop. “You’ve got to balance the approach.”