25 Aug #083 – Integriosity – Re-Imagined Implementation – Culture and Governance
ESSENCE: A Re-Imagined Culture aligned with Biblical beliefs, values and priorities can have important implications for the very nature of an organization’s activities, including matters of governance such as ownership, leadership and internal structures and policies. A leader wanting to faithfully “do right” through business a better way must understand their role as the steward of an organization owned by God, including its purpose, values, culture, people, products, policies, practices, and use of capital. Stewardship of an organization requires decisions, and decisions are driven by the governance vision, model and practices of the organization that are embedded in its Culture. The governance structure of an organization can facilitate, impede or completely block business a better way. Leading an organization to faithfully “do right” requires understanding the dynamics of the existing structure and then Re-Imagining a governance structure that is conducive to business a better way–one that is in alignment with, and supportive of, the Re-Imagined Purpose and Values of the organization.
In our last two posts (#081-Culture and Products, and #082-Culture and Capital), we shifted from considering the factors that shape organizational Culture to began looking “downstream” from Culture–the likely impact on an organization of Re-Imagining a Culture aligned with Biblical beliefs, values and priorities. It is worth highlighting once again the following observation from a recent McKinsey article:
Connecting purpose with the heart of your company means reappraising your core: the strategy you pursue, the operations driving you forward, and the organization itself. . . . Your stakeholders care about the concrete consequences of your lived purpose, not the new phrase at the start of your annual report.
Re-Imagining Implementation: Culture and Governance
As we have emphasized through many posts, a leader wanting to faithfully “do right” through business a better way must understand their role as a steward of an organization owned by God, including its purpose, values, culture, people, products, policies, practices, and use of capital. Once a leader truly acknowledges that God owns the organization and that they have been entrusted with its care and growth on God’s behalf, the organization and the leader have taken on sacred identities. As the same McKinsey article notes, from identity flows governance.
What’s needed is relatively clear: it’s deep reflection on your corporate identity—what you really stand for—which may well lead to material changes in your strategy and even your governance.
Stewardship of an organization requires decisions, and decisions are driven by the governance vision, model and practices of the organization that are embedded in its Culture. Because Culture flows from Purpose and Values, and governance is part of the Culture, ultimately governance flows from “what you really stand for” in the words of McKinsey.
Re-Imagining Implementation: The Importance of Governance
Leaders steward within a governance structure, which can profoundly impact their ability to steward in accordance with Biblical beliefs, values and priorities. The governance structure of an organization can facilitate, impede or completely block business a better way. Leading an organization to faithfully “do right” requires understanding the dynamics of the existing structure and then Re-Imagining a governance structure that is conducive to business a better way–one that is in alignment with the Re-Imagined Purpose and Values of the organization. Here are some elements of governance to be considered in Re-Imagining Culture, including how they can impact faithfully “doing right”:
- God. Plug “God and CEO” into the Amazon search box and you see that treating God as the CEO of the organization is not a new idea. Whether a leader envisions God as the “real” CEO or as the “real” 100% owner, it is important to embrace that the leader is ultimately answering to God for how the organization carries out the Creation Mandate. Keeping God in the proper governance perspective (AT THE TOP) will also help the leader model Humility, which we have seen in posts #060 (Humility-The Key to HOW), #061 (Humility-A HOW of Righteousness), #062 (Humility-A HOW of Loving Others), #063 (Humility-A HOW of Pursuing the Kingdom) and #064 (Humility-A Key to Wisdom) is critical to faithfully “doing right” as a leader.
- Ownership. Even if a leader acknowledges that God is the ultimate spiritual owner of the organization, the organization will have temporal “owners” with legal rights under the world’s system of governance. Seth Godin said it very simply: “If you want to run an organization you’re proud of, choose your ownership as carefully as you choose your employees.” The Bible sums it up in 2 Corinthians 6:14: “Do not be unequally yoked with unbelievers. For what partnership has righteousness with lawlessness? Or what fellowship has light with darkness?” It can be extremely difficult for a leader to pursue faithfully “doing right” through business a better way if the owners of the organization prioritize Profit as Purpose and only understand business as usual. At best, the leader will need to pursue the most covert approaches and be prepared, in Seth Godin’s words “to do a sort of dance, explaining to shareholders why, after all, really and truly, what they’re actually doing is serving the shareholders.”
- Public Ownership. Public ownership generally cares about stock price and rarely has a long-term view. Many proponents of the “shareholder primacy” view of governance argue that the board of a public corporation has a legal duty to maximize profits for shareholders, but we believe that is a misunderstanding. In fact, in 2016 the Modern Corporation Project issued a Statement on Company Law signed by dozens of legal experts refuting the misconception that corporate law requires the maximization of profits for shareholders. (We also recommend The Shareholder Value Myth by Lynn Stout for an excellent legal analysis of the issue.) Nevertheless, there will be tremendous market pressure to maximize profits and short-term stock price (including threats by activist shareholders). A founder seeking to pursue business a better way with public ownership will need to plan carefully and creatively in advance, for example by considering ways of retaining control (e.g., through different stock classes) and setting expectations. While a growing number of organizations are trying to address this issue by becoming B-Corps, we explained in an earlier post several reasons why we are not fans of the B-Corp movement.
- Venture Capital/Private Equity. Financial capital is one of the key forms of capital needed for an organization to be sustainable and to grow, and “private” equity ownership is a popular source of financing, particularly for start-ups. “Private” financial owners are not as fickle and short-term as public owners, but with rare exception, they are motivated by Profit as Purpose (because their investors are similarly motivated and holding them accountable) and expect their portfolio organizations to be similarly motivated. They are also investing for the “exit”–whether a public offering or a sale to another private owner in a medium-term time-frame (a few years). A founder will likely have difficulty pursuing faithfully “doing right” with financial owners except in the most covert ways unless they find one of the few faith-driven funds (e.g., Sovereign’s Capital). We are excited that the non-profits Faith-Driven Entrepreneur and Faith-Driven Investor has established a “marketplace” where faith-driven entrepreneurs can find faith-driven investors (and vice versa).
- Succession. An owner can pursue business a better way, but if the owner’s succession plans do not provide for ongoing leadership committed to a Biblically aligned purpose, values and culture, a new owner can quickly change direction to business as usual, dismantling all semblances of faithfully “doing right” overnight. Succession planning is critical for an owner who wants their organization to continue pursuing business a better way.
- Leadership. One clear Biblical priority is receiving wise counsel: “Without counsel plans fail, but with advisors they succeed.” (Proverbs 15:22) A leader Re-Imagining Culture should consider those in the organization they rely upon for counsel (including Board members and other internal leaders) to ensure that they are receiving “wisdom” and “direction” from people who understand and support aligning the Purpose, Values and Culture of the organization with Biblical beliefs, values and priorities. While a leader may not want to (or be able to) change the people surrounding them in the organization, they can be wise about the advise they receive and can seek out advise from trusted sources. In fact, Integrous was created to help meet that need for a trusted and disinterested extra set of eyes to help a leader evaluate a situation in order to process what path or response is most in line with the Biblical values and priorities of the organization and the leader.
- Internal Structures, Policies and Communication. Internal “governance” is made up of the organization’s formal and informal reporting and accountability structures, communication lines and policies governing how people inside and outside the organization are treated.
- Internal Structures. Way back in post #007 (Work is Broken), we talked about ways in which work relationships reflect brokenness from the “fall”. One of those is that work has become hierarchical. While some hierarchy is needed in an organization to keep it “organized”, a leader Re-Imagining Culture needs to look at how the organization’s internal structures might be creating conditions antithetical to its Re-Imagined Purpose and Values and to prioritizing relationships, community, human dignity and flourishing of all people. For example, given that businesses pick the wrong managers 82% of the time and managers account for 70% of the variance in worker engagement (at least according to Gallup), a hierarchy that keeps workers isolated behind a level of managers can have a profound impact on flourishing.
- Policies. Organizations often have many pages, if not volumes, of formal policies governing how people in the organization relate to each other and to the outside world. On top of those are untold “informal” policies that govern working relationships (e.g., open-door vs. closed-door “policies”). These policies are rarely conceived or written to prioritize relationships, community, human dignity and flourishing of all people. They form part of, and help create, the “real” Culture of the organization. An exercise in Re-Imagining Purpose, Values and Culture may be a futile endeavor if it does not include a review of formal policies and an honest discovery and appraisal of “informal” policies to ensure that they are consistent with, and not undermining, the organization’s desire to align itself with Biblical beliefs, values and priorities.
- Communication. In his book Connection Culture, Michael Stallard identified “Voice” as one of the three critical ingredients to creating a healthy culture of connection in an organization. In Mike’s words: “Voice exists when everyone in an organization seeks the ideas and opinions of others, shares their opinions honestly, and safeguards relational connections. In a culture where voice exists, decision makers have the humility to know that they don’t have a monopoly on good ideas, and they need to seek and consider the opinions and ideas of others in order to make the best decisions.” A leader Re-Imagining Culture needs to understand the communication lines within the organization to ensure that people throughout the organization feel they have a voice and that the decision-makers in the organization are able to receive all the information, including from the “front-line”, needed to make the best decisions.
What’s needed is relatively clear: it’s deep reflection on your corporate identity—what you really stand for—which may well lead to material changes in your strategy and even your governance. (McKinsey)
Re-Imagining Capital: Some Questions to Consider
As a leader Re-Imagines Culture and the implications for governance of their organization, it is helpful to consider things such as:
- Will the organization’s sustainability and growth depend on outside equity financing sources, and if so, are there sources who will work with, rather than against, its Re-Imagined Purpose, Values and Culture?
- Is there an ownership succession plan that will maintain support for the organization’s Re-Imagined Purpose, Values and Culture?
- Are their leaders (including the Board) who do not understand and support the Re-Imagined Purpose, Values and Culture?
- Do the organization’s leaders have trusted and disinterested advisors to help them evaluate situations and decisions in order to process what path or response is most in line with the Biblical beliefs, values and priorities that underpin its Re-Imagined Purpose, Values and Culture?
- Does the internal structure permit the “buy-in” at all levels needed for successfully implementing a Re-Imagined Purpose, Values and Culture?
- Does an impregnable wall of “managers” prevent leaders from hearing the ideas and concerns of employees at all levels?
- Does the internal structure create an unhealthy “We/Them” culture (post #023-Unhealthy Relationships)?
- Do the internal structure and policies align authority and responsibility, giving people the authority necessary to carry out their responsibilities most effectively?
- Do the internal structure and policies ensure that employees are rewarded (or at least not punished) for exemplifying the organization’s Purpose and Values (even if it cost a sale or a customer)?
- Do the internal structure and policies ensure that corrective action is taken when employees are undermining the desired Culture (even if it means reprimanding or terminating a highly productive but highly disruptive employee)?
- Do the internal structure and policies reflect an assumption of trust or distrust in employees?
- Do employees feel that their “voice” and unique contributions are valued by the organization’s leaders?
We believe it is time for “business a better way” in alignment with Biblical values and priorities–it is time to begin faithfully “doing right” through Integriosity®.
SPOILER ALERT: In our final post on Re-Imagining Culture posts, we will explore how Culture relates to Connection and employee engagement.
PERSONAL NOTE (from PM): The “plight of the faith-driven entrepreneur” came into focus more clearly for me in 2011 when I first met Henry Kaestner at a meeting in Chicago. Henry shared his frustration with a phenomenon he had seen occur over and over with young faith-driven entrepreneurs. They have a vision of starting an organization that embodies their faith–creating something that matters, doing the right thing and caring for people. And then they need financing. Traditional venture capital funds care only about the bottom line, and the result is that the vision of business a better way erodes into business as usual because it is not encouraged, valued or supported by those who now hold the purse strings. Henry’s frustration led to the founding of Sovereign’s Capital (I was honored to be one of their original “advisors”), which has gone on to provide supportive funding and mentorship to many “values-motivated” entrepreneurs. Henry also went on to start the Faith-Driven Entrepreneur, Faith-Driven Investor and the Faith-Driven Athlete on-line communities.
In partnership with Stanwich Church in Greenwich, CT and NCS New Canaan (the founding chapter of the New Canaan Society), Integrous is sponsoring simulcast “watch parties” for the global Faith-Driven Entrepreneur and Faith-Driven Investor Conferences on September 8 and 9, 2021. If you are in the New York Metro area, come join us (click here to register)! If you are somewhere else, click on their organization links above and find a “watch party” near you.
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Photo Credit: Original photo by Ivan Bertolazzi from Pexels (photo cropped).