Three Critical Questions to Ask Your CEO About Your Ethical Culture
In the business world, answering questions is not the same as the game show Jeopardy. Nor does it require an answer in the form of a question (thank goodness, although that is not a bad strategy). CEOs are used to being put on the spot and doing the CEO-shuffle. They are good at it – they have to answer questions from key stakeholders, the media, and sometimes even the public.
Corporate boards, hopefully, will be embracing a new model of corporate governance. As part of this new era, corporate boards need to focus on company culture. As they do so, they need to ask a CEO some basic questions about the company’s culture. This is part of the process to advance accountability – a board and the CEO have to be held accountable for preserving and promoting a company’s culture. After all, it usually is the most valuable intangible asset that a company owns and controls.
We all know the research showing how important a company’s culture and its reputation is to the overall performance and value of a company. Corporate boards and CEOs understand this idea. Yet, in many ways, corporate boards and CEOs do not know how to asses, manage, monitor and advance the company’s culture. Because culture is not “tangible,” board members and CEOs tend to ignore the issue or fail to demand that the CCO develop techniques to assess, measure and manage the company’s culture.
To further the importance a company’s culture, the board needs to ask the CEO three important questions.
1. What is the company’s culture?
Call it the first round Jeopardy. The CEO needs to be able to define, explain and articulate the company’s culture. This will provide an important indication of just how accessible and meaningful the company’s culture is to the performance of the company.
There are two wrong answers to this question. First, the company’s culture cannot be “Do the Right Thing.” This phrase is overused and fails to advance a specific approach to build buy-in from the company’s culture. It is important to remember that the company’s culture has to be defined in a manner that aligns with the corporation, its leadership, managers and employees. “Doing the Right Thing” is not a call to arms, is not a mission, nor is it a way to define a positive message.
Conversely, the company’s culture cannot be defined in esoteric terms. I recall a transportation company’s cultural definition as expressed in the phrase “treating humans with dignity.” I understand that transportation provides important services to promote business relationships, bringing families together, and doing so safely and reliably. But where do we get to the point of “treating humans with dignity”?
In the end, the company’s culture has to be expressed in its beliefs and it mission. Company employees want to believe in what the company believes in and further that mission. A culture has to be defined in this context.
2. What specific actions do you plan to take to promote the company’s culture?
A CEO has to answer this question with much more than just the standard answer – “I live it every day” or “I communicate this point at every town hall or internal meeting.” Itb is not enough to use words to promote a culture – we all know the videos, CEO letters written by CCOs and newsletter communications. My answer to that is “so what?” The question is intended to cause the CEO to think about his/her conduct and how they can advance the company’s culture through action not mere words.
Some examples of this are easy to list – a CEO is the first to take training classes and promotes that fact; the CEO requires the CCO to attend and participate in senior business management meetings to ensure that the company filters its business decisions through ethics and compliance values; the CEO carries the company’s code of conduct with him/her and brings it to every meeting; the CEO attends and speaks at every new employee hiring meeting and explains the importance of ethics and compliance and the company’s culture; the CEO rejected a business strategy because it was inconsistent with the company’s ethical culture.
3. What steps will you take to measure culture, promote culture in the company and remediate culture weaknesses?
The CEO has to treat the company’ culture as its most important intangible asset. Just like the company’s tangible assets that need to be protected, the CEO has to articulate how he/she will ensure that the company’s culture will be protected.
In response, the CEO needs to describe his/her actions and how he/she will hold senior management, the CCO, and managers and employees accountable for the company’s culture. When a senior manager harms a company’s assets, the manager is held accountable for his/her failure. When an employee steals an asset from the company, the employee is disciplined and probably fired. The key strategy here is accountability. A CEO has to define what he/she expects from senior managers, the CCO, managers and employees with respect to the company’s culture and the CEO must hold these actors accountable for their performance as part of incentives and annual evaluations.
A CCO play a critical role in this area and has to ensure that he/she regularly reports to the CEO on the company’s culture. Such reporting has to involve measurement and monitoring of the company’s culture, along with strategies to intervene and remediate culture weaknesses.