GOVERNANCE DOCUMENTS LACK SUBSTANCE, YET ONE OF THE MOST IMPORTANT RESPONSIBILITIES OF THE BOARD IS THE CORPORATION’S CULTURE

The end of financial year is the perfect opportunity to review strategy, management and discipline.

In my previous column, “Get a Grip on your Culture and Influence your Brand,” I quoted Ram Charan, as follows, “A slump can be an opportunity if you use the sense of urgency to improve strategy, management and discipline.” At this time of year, the majority of companies are knee-deep in the process of closing the last financial year as well as planning for the next. As part of this process, they naturally review strategies, budgets and markets, assess products and conduct competitor and brand analysis. Despite the timeliness to do so, very few organisations use this time to review the way they are being managed.

It would be in every organisation’s best interests to review its current management style and how it will enhance or hinder strategy delivery. Why? Because of the commentary of late that is devoted to highlighting the obvious and foreseeable shortcomings in the governance of failed companies.

Companies are rated in today’s market from the point of view of investors. John Fast, formerly Chief Legal Counsel and Head of External Affairs at BHP Billiton, in his article in the Australian Financial Review, “Better Ways to Manage Companies,” states, “One of the most important measures by which corporations are judged is represented by total shareholder return. As a rule, shares in corporations that lead in total shareholder returns are admired and perceived as being better managed than their competitors.” In very recent times, a selection of companies that have successful shareholder returns have fallen on their swords. Despite this, many company boards and senior executives continue to underestimate the value of reviewing their governance and management practices as they relate to how current business practices facilitate - or otherwise - delivering a company’s strategy. reaction to new regulatory requirements that have consequences for boards and personally for directors. Unfortunately for culture, no legislative rules have been drafted to ensure a reactionary hands-on approach to establishing and managing the culture of a corporation, despite much statistical and physical evidence to support the assertion that a well-managed culture results in not only increased shareholder returns but also an effectively managed and highly productive workplace that is reputable, accountable and innovative.