PKF Australia

Accountants and Business Advisers

What's on the tip of your iceberg?

What's on the tip of your iceberg?

Posted 08 Apr 16 by Ken Weldin

Another week, another round of comments on culture.

  • CBA’s whistleblower policies under scrutiny.
  • Both Ken Henry (the new NAB Chairman) and Nicole Wakefield-Evans, (director of Macqaurie Group, Toll and Lend Lease) discussing the need for boardroom focus on ethical behaviour and risk culture.
  • Even Wesfarmers now are investigating the treatment of supplier rebates in its Target subsidiary amid questions around culture.

Looking behind each of these and the many other headlines what becomes clear is the need for focus across the ‘whole of the organisation’, and not just one element of it at any moment in time.

To help demonstrate this, I found the following two pieces of work very helpful in rationalising this idea, both in my world and with my clients.

Focus across the ‘Whole’ organisation

Firstly, the Whole of Organisation Governance Guidelines developed by Sam Butcher and Fiona Mead together with the Governance Institute of Australia.

These helpful guidelines start with the premise that good governance ‘extends beyond the boardroom’ and is embodied by the following principles:

  • Transparency
  • Accountability
  • Stewardship
  • Integrity

All of these will combine to influence, shape and determine culture; and from that how, effective your governance is across the whole of the organisation.

Worth a read if you have not already seen this.

Iceberg of ignorance

Secondly, I recently came across the work of Sidney Yoshida (1), as represented in the following infographic.

The iceberg analogy really works when you consider the typical pyramid structure of organisations with Boards and the top, executives in the middle and then business units, divisions and the customer facing areas underneath.

What happens when only 4% of a set of problems are known by top managers? Only 9% by middle managers? What is happening to this other 90 plus percent?

  • What are these numbers in your organisation?
  • How much do you know of the day to day problems facing your company?
  • How much of that has made its way up the governance pyramid?

Communication, trust, culture factors are coming into play here and not always in a way that you would like.

 These themes support the comments by Ken Henry, Nicole Wakefield-Evans and others. Yoshida commented at the time of his work back in 1989 that:

“the failure to understand processes and practices from the perspective of its customers can suppress company profits by as much as 40%.”

40%. What would that number be today given how much change and complexity has been introduced since 1989?


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