In today’s complex business environment, culture isn’t just a ‘soft’ topic, it’s a critical driver of organisational success and risk management. Research indicates that companies with strong cultures outperform their peers in several key areas:
- Revenue Growth: Companies with a strong culture experience up to 2.5 times higher revenue growth compared to those with weaker cultures (Forbes, 2024).
- Employee Engagement: Organisations with a strong culture saw an increase in employee engagement by up to 30%, directly correlating to a 10–20% increase in productivity (Deloitte, 2024).
- M&A Success: Cultural misalignment is a primary reason 70% of mergers and acquisitions fail (McKinsey).
Yet, despite its importance, many Boards struggle to understand and govern culture effectively. The role of the Board in governing culture is increasingly under the spotlight, with regulators and investors demanding greater assurance and transparency.
What is a ‘Strong’ Culture?
A strong culture is one where an organisation’s core values, beliefs, and norms are clearly defined, fully embedded into the way people work and the decisions that leaders make, and consistently practiced across all levels. It creates alignment by ensuring people understand and commit to the mission, guiding behaviours, decisions, and interactions in a unified way. Such cultures foster motivation, loyalty, and resilience. Importantly, culture is not left to chance, it is at the top of the agenda, and deliberate actions are taken to evolve and sustain it over time.
Why Governing Culture Matters
Regulatory Expectations
Regulators are placing increased emphasis on culture, expecting boards to demonstrate effective governance. The Financial Reporting Council (FRC) and other regulators now expect Boards to not only monitor but actively govern culture, ensuring it aligns with risk appetite, strategy, and stakeholder expectations.
Risk Management
A misaligned or toxic culture can lead to significant risks, including reputational damage and legal challenges. Recent media examples include:
- P&O Ferries – National Scandal and Board Oversight
In 2022, P&O Ferries dismissed 800 UK workers with immediate effect, replacing them with lower-paid agency staff on non-UK contracts. The decision sparked national outrage, led to legal reforms, and was scrutinised in Parliament. The case highlighted how cultural failures at leadership level can cause reputational harm, regulatory intervention, and long-term trust damage. You can read the full article here.
- Great Junction Dental Practice – Employment Tribunal – Workplace Bullying Precedent
Dental nurse Maureen Howieson was awarded compensation in a landmark tribunal after sustained bullying, including repeated undermining and dismissive behaviour, was ignored by leadership. The case set an important precedent by recognising that even non-verbal actions, such as persistent eye-rolling, can amount to bullying. It underscored how failure to address toxic workplace culture can lead to legal, financial, and human costs. You can read more about this case here.
Both cases demonstrate that poor culture governance not only damages employees and stakeholders but also exposes organisations to reputational, regulatory, and financial risks—areas directly within the Board’s responsibility.
Strategic Alignment: An organisation’s culture should align with and reinforce its overall strategy to drive performance and growth. For example, Patagonia’s inclusive, purpose-driven culture is rooted in environmental activism, transparency, and employee well-being, which has become inseparable from its brand and long-term growth.
How can you support your Board to lead culture effectively?
Over many years of running culture audits in organisations, we have found the insights shared in our playbacks often come as a surprise to Boards. Sometimes they reveal cultural weaknesses they weren’t aware of, or uncovering strengths that can be leveraged further. With an aligned Board, leaders can ask the right questions, track the right data, and guide culture proactively.
Our Leading Culture from the Boardroom Masterclass is designed for Chairs, Non-Executive Directors, and Executive teams who want peace of mind that culture is being properly assured and leveraged for growth.
Our Approach Includes:
- Briefings with the Chair and CEO: To align on objectives and expectations.
- Board Self-Assessment: Online questionnaires to assess the current cultural landscape.
- Interactive Masterclass Sessions: Covering the board’s role in culture, scenario-testing, and best practices.
- Debrief and Next Steps: Aligning on outcomes and agreed actions.
As Sir Winfried Bischoff, former FRC Chair, says:
“A healthy culture both generates and protects value. It is therefore important to have a continuous focus on culture, rather than wait for a crisis.”
Is it time to invest in your Board’s ability to govern culture – and transform organisational performance from the top?
Find out more by accessing our Leading Culture from the Boardroom flyer, or contact Pecan’s Director, Ella Overshott, for a free, no-obligation consultation at ella@pecanpartnership.co.uk.
Pecan Partnership, we help organisations achieve sustainable, meaningful culture change, engage employees in strategy and change, and build productive, healthy teams.
