SUPERVISORY BOARDS IN THE D-A-C-H REGION CONTROVERSIALLY DISCUSS THE CODE OF CONDUCT AND CUSTOMER ORIENTATION
A recent study on corporate culture carried out by the global consulting company Denison, in which supervisory boards of listed and unlisted companies in Germany, Switzerland and Austria participated, shows that catching up is needed in the areas of further development, values and customer orientation.
Supervisory boards are increasingly turning silently from mere controllers to co-managers. When companies are faced with economic challenges, or profound changes need to be implemented or a scandal shakes the company’s reputation, the hour tolls for the supervisory board to act as a controlling body for management. But is the understanding of silent co-managers for values, customer needs or further development always in line with that of the company? To what extent are supervisory boards actually part of the corporate culture in Germany, Austria and Switzerland? The Denison study shows that every third sparring partner of the board and owners in the D-A-CH region (Germany, Austria, Switzerland) does not believe that its board’s vision creates enthusiasm and motivation for the employees. Just over half (53%) find it easy to have consensus on difficult issues. In addition, cross-national, only 58% agree that they have a clear understanding of customer concerns and a code of conduct as an ethical guideline for action; furthermore, only 31% of those surveyed consistently invest in the supervisory board’s capabilities. Thus, customer orientation, values and further development are the study areas that show the greatest need for action.
Lacking code of conduct, training and customer orientation
However, these areas play an important role as operational pillars in the controlling body’s performance. “Although a strong set of values, integrity and established ethical principles are important decision criteria when selecting and nominating a supervisory board member, they obviously lose their relevance to the company’s actual responsibility,” says Anja Fiedler, Managing Director at Denison Consulting and also a supervisory board member of a German company. “At the same time, the supervisory board should represent and exemplify the organization’s fundamental values and help others do the same.” In a country comparison, 71% of German supervisory boards and 74% of their Swiss colleagues confirm their actions are governed by a clear and consistent value system. In Austria, this is just over half at 54%.
There is also room in companies for improving collective learning: On average, only 61% of respondents believe that innovation is encouraged. Existing continuing education measures paint a rather unbalanced picture across countries. While some companies limit themselves to informing their supervisory board on important changes and corporate governance issues, others offer their monitoring body regular specialist conferences and training as well as coaching in modern corporate governance. In Germany, innovation promotion (57%) is just below the average of the nations in the study, but at least 38% of respondents invest in the Supervisory Board’s capabilities. Anja Fiedler sees a lack of investment in further development critically: “Can we afford it in a world that is changing faster and faster? Today it is our task – no matter in which area one works and the responsibility one has – to strive continually for one’s own transformation in order to lead, supervise or expedite company change. The study shows that supervisory boards want more input from companies.”
A key factor for profitable growth is external orientation in the market and competitive environment, while customer focus helps develop innovations. While nearly three-quarters (74%) of respondents consider their reaction as a supervisory board to the competition and changes in the business environment to be appropriate, there is a lack of understanding corporate customers’ desires and concerns. “How can a supervisory board develop a valid strategy without understanding customer needs in-depth?” asks Fiedler. “Even if seeking direct customer contact is not in its scope of action, there is need for discussion on how to build and maintain customer understanding and orientation in order to satisfy the supervisory board’s strategic and economic responsibility.”
Supervisory boards have cross-national consensus in terms of strategy, goals and agreement
As far as the strategic direction, corporate goals and vision are concerned, it can be determined across borders that communication between the supervisory board and management obviously works well. With almost 100% agreement, supervisory boards in Germany and Switzerland especially reflect a picture of consensus in terms of objectivity and clarity. In Austria, there was 87% agreement. Supervisory boards in the country triangle are also in consensus regarding the coordination of goals and common perspectives: Here there is a high level of agreement as well as for promoting individual responsibility.
Austrian supervisory boards consider lack of corporate culture integration as critical
However, Austrian study participants show particularly large deficits in considering operational pillars such as customer orientation or further development. Nearly half (49%) of them feel the lack of the company’s investment in their own capabilities and just under one-fourth (24%) of supervisory board members in Austria criticized the work organization, which does not allow each member to recognize the connection between their own role in the committee and the company’s goals. As far as customer orientation is concerned, only slightly less than half (46%) felt they understood their customers‘ wishes and concerns. Thus, all 85 respondents from Austria were even more critical than their colleagues from neighbouring countries. The study raises the question of whether companies in the D-A-CH region are sufficiently prepared and equipped for the challenges of the VUCA (volatility, uncertainty, complexity and ambiguity) world, digitalization and cybercrime as well as traditional but ever-changing variables such as consumer insights and customer needs.
About the study:
„The Role of Corporate Culture in the Supervisory Board“ study, which was preceded by a pilot study in October/November 2018, was conducted in September 2019 in the D-A-CH region with 215 participants based on the Denison corporate culture model. According to the Denison model, there are four dimensions that make a successful corporate culture: mission, consistency, adaptability and participation. Participants in the study, 28% of which were supervisory board chairmen, were randomly selected from the following industries: chemicals, biotech/bioscience, consumer goods, education, energy, financial services, health care, information technology/IT, manufacturing, media, entertainment, pharmaceuticals, telecommunications, transportation, consulting, construction, real estate and mechanical engineering.