The concept of company culture is not new. In the past, culture has been a “soft” category, something that has been the domain primarily of HR. However, in the last two years, we have seen a dramatic change in the way that culture is viewed, and it is becoming a strategic corporate asset.
It’s almost tragically naïve to consider foosball, happy hours and snacks in the lunchroom as markers of company culture. Truly assessing culture risk requires a level of understanding comparable with financial risk and cyber risk.
To look beyond this superficial understanding, the first thing boards have to do is to shift their mental model from culture as this feel-good thing about people getting along to a more critical conceptual view in terms of social dynamics and concrete behaviors. They have to look at an organization as a social field that generates norms of working. Doing so creates a tangible, mental model mapping relationships between people and how much fluidity, permission and innovation is allowed. You have to understand what kinds of people are welcomed and rewarded in that social field, as well as the rules of the game and the incentives to win on the field.
The second thing that boards need to recognize, and a lot of them already do, is that culture is built from the top down. However, there are currently no tools for how that tone at the top should cascade through the organization. We developed a model of concentric circles with the CEO as the central anchor to make more sense in terms of how cultural dynamics work. That anchor’s principles and behaviors ripple out to the executive team, to management and then to the front line employees.
The third thing boards need to really understand is the risks they should be asking about. In my framework, there are five major culture risks boards should be looking at to identify and push concrete conversations around culture. (Editor’s Note: See below for an outline of the five major culture risk categories.)
Tatyana Mamut is a former GM at Amazon Web Services and Founder & CEO of Culture Risk.