Building an environment of trust is a board responsibility?

May 2016  |  SPECIAL REPORT: OPERATING AN EFFECTIVE BOARD

Financier Worldwide Magazine

May 2016 Issue

May 2016 Issue


Warren Buffet, in a memo to his senior managers, stated “Culture, more than rule books, determines how an organisation behaves.”

Boards need to have oversight of their ethics and compliance function in particular. How does this happen? Here are five challenges for boards. Firstly, boards need to become more involved in ethics culture and consistently evaluate if it is truly managing the culture, as well as serving the long-term goals of the organisation by being proactive in the implementation of the mission statement, values statements, etc. of the organisation. Secondly, boards need to stop asking “Can we do this?”, but rather ask, “Should we do this?” Board active engagement is crucial in directing the decision-making process. Thirdly, boards should focus on how one’s organisation does business, not what it does. Board members need to draw on their strengths and business acumen to focus on this issue. Fourthly, they should reward ethical behaviour and punish unethical behaviour immediately. This is becoming increasingly a non-negotiable, for this sets the tone for an environment of trust. Finally, boards must focus on doing the right thing, at the right time, for the right reason. Board discernment is critical and needs a proactive attitude and focus in guiding an organisation.

One might ask: Why are these serious challenges? The culture of an organisation determines how people act, make decisions and govern their affairs. It has been said that leadership is not so much about what you do, but about what other people do because you are there. In other words, there must be some type moral authority in leadership; otherwise, leadership loses its focus and impact.

There are five leadership values that are non-negotiable if boards are to create a culture of trust: trustworthiness, unity, respect, justice, and service/humility.

Trustworthiness. What is your word worth? There was a time in business when a person’s word was their bond – not so anymore, it seems. Do you keep your promises? If not, can you be trusted?

Unity. Are all ‘players’ on the same page? The same book, same page, same paragraph and same sentence? Do we all share the same goals, values, modus operandi, etc? What is the communication process to the board?

Respect. Leaders and boards have the right to disagree with one’s behaviour, but leaders have no right to go after one’s self-esteem. There is a difference between telling someone that they are stupid and saying something like “Normally you don’t make these types of poor decisions. I was wondering why you did this time?” There is a considerable difference there. The second option keeps one’s self-esteem in check and the first option attacks one’s self-esteem. The ‘cost’ of attacking one’s self-esteem is making yourself an enemy, and what does that do to your culture of trust?

Justice. Leaders need to ask: “What is just? According to whom and why?” Justice can be an elusive concept; boards need to define it, clarify its basis, and then ensure that all ‘play by the same rules’. For example, if something is a compliance issue, then justice is the result of the law. However, if something is an ethics issue, what is the basis for the decision that would be just? Who said so? Why? What is the consequence? Who decides it? Take care in meting out justice. Be discerning, as there could be serious consequences of an ill-thought-out-process for justice.

Service/humility. This is a very critical value, as it is not ego based. It is the understanding that the board, based on its position, authority and power, can alter one’s behaviour, but only their behaviour can earn them respect. We need to understand that people listen with their eyes and not their ears. What you do is so much more important than what you say. Leaders did not get to where they are on their own. Leaders stand on the shoulders of those who have gone before them, be they parents, teachers, coaches or mentors They, and maybe unbeknownst to them, set in motion the process of who leaders and board members have become today. Are your shoulders strong enough to ‘pass on’ the values we have learned in our journey? Isn’t this the goal of genuine leadership? Be humble and grateful – and pass it on.

Alfred Adler, the eminent psychologist, believed that the greatest need of a human being is to belong. He stated that there were certain criteria for people to reference to belonging. In the business context, boards need to ask: “How will what you want to achieve in a business context help your people to: (i) feel like they belong; (ii) feel significant; and (iii) develop a unique identity?”

According to Adler, the more people experience these emotions, the better the cooperation, the better the morale, the better the customer service, and the better the environment. Above all, leaders gain peoples’ cooperation. If these are not experienced and encouraged by leaders, the eventual result is conflict, as there would be no feeling of belonging or being significant or having a unique identity.

What do you as a board do to help the members of your organisation experience these three dynamics? If you change the pronouns, it might read this way: Parents need to ask, how will this help my children feel like they belong, develop a unique identity and feel significant? Sales people need to ask, how will what I do help my customers feel like they belong, feel significant and develop a unique identity?

Why does this work? Adler states that everyone asks what he calls the ‘significant question’, which is: How do I fit in here? The degree to which people feel like they fit in, is the degree to which leaders get their cooperation – and isn’t this the goal of all board decisions?

In summary, the board’s goal needs to be creating a cohesive, proactive, engaging and reinforcing body that not only supports senior leadership but also consistently provides proactive direction based on trust and values.

 

Frank Bucaro is the founder of Frank C. Bucaro & Associates. He can be contacted on +1 (630) 483 2276 or by email: frank@frankbucaro.com.

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