The adage “culture eats strategy for breakfast”, often attributed to Peter Drucker, echoed Edgar Schein’s 1985 assertion: “culture determines and limits strategy.” While these management theory and organisational psychology pioneers envisaged culture from distinct perspectives, they both championed an integrated approach to culture, strategic change, and leadership.

They believed these elements are deeply interconnected and influence each other within an organisation.

Australia’s ASX Corporate Governance Principles are currently undergoing consultation for the 5th edition. Notably, the draft Recommendations further clarify Boards’ role in the approval and oversight of organisational culture and its alignment with each of the entity’s purpose, aspired culture (values; code of conduct), strategic objectives, risk appetite, and external operating context (laws; standards; key stakeholders). The proposed changes by the ASX Corporate Governance Council on organisational culture are similar to those currently under development in Canada by the financial regulator OSFI.

For organisational culture to ever be in alignment, Board approval of an entity’s purpose, aspired culture, strategy, and risk appetite must also consider their interdependence internally and with the external operating context. All too often, the root cause of significant reputationally-damaging events stem from strategic aims that inadequately factor execution capability (culture), and risk-taking capacity.

The idea of interconnectedness, championed by Drucker and Schein, continues to be relevant today.