Part 2 - Governance & Leadership Accountability: The Foundational Culture Risk
Part 2 in the Culture Risk Intelligence Series for Boards and Executives
“The term ‘corporate culture’ begins to have more meaning as the growing organization differentiates into many units that develop their own sub-cultures. The management of those subcultures then becomes the major issue in the large older organization.” -Edgar H. Schein
As organisations grow, culture becomes more complex — not less. Schein’s insight is a reminder that the challenge isn’t culture in general, but the governance of its many forms. When Boards and Executives fail to set, model, and monitor the culture required to execute strategy, misalignment is not only possible — it’s inevitable.
In this post, we explore the most foundational of the ten culture risks: Governance & Leadership Accountability Risk — where weak or absent oversight allows culture to drift, trust to erode, and risk to take root across the enterprise.
Why this risk matters
In any organisation, culture is shaped less by slogans and more by what is seen, rewarded, and reinforced. Leadership sets the tone — but in large, complex systems, that tone must cascade across a network of subcultures. As Schein points out, managing culture becomes less about uniformity, and more about governing alignment between disparate parts of the organisation.
Where leadership behaviour is inconsistent or cultural oversight is fragmented, misalignment grows — often undetected. This weakens the organisation’s ability to:
- Execute strategy across diverse teams or geographies
- Maintain internal coherence during transformation or change
- Sustain ethical conduct and regulatory compliance
- Respond to disruption with collective clarity
Boards may assume culture is “settled.” But in reality, it may be evolving in divergent directions across functions and business units.
What this risk looks like in practice
Governance and leadership accountability risk often reveals itself through subtle signals, such as:
- Culture that is clearly articulated, but unevenly practiced across teams
- Executive behaviour that contradicts stated values — without consequence
- Ownership of cultural oversight distributed across HR, risk, transformation
- Cultural insight that is lagging, anecdotal, or limited to surface sentiment
- The Board receiving engagement reports, but lacking behavioural visibility
In Schein’s terms, these symptoms reflect a failure to manage subcultural complexity — where the top believes alignment exists, but lived experience tells a different story.
Questions for Boards and Executives to consider
To assess whether this risk is active, ask:
- Has the desired culture been clearly defined and aligned with strategy and embedded into leadership expectations?
- How well do we understand the organisation’s subcultures — and are they aligned, misaligned, or simply unmanaged?
- Are senior leaders modelling the behaviours needed to reinforce the cultural intent?
- Are there clear accountability mechanisms for culture at both governance and operational levels?
- Are senior leaders — across functions and geographies — consistently modelling the behaviours required to reinforce the cultural intent?
These questions reflect the critical shift from culture as aspiration to culture as a system to govern.
Why this risk is foundational
Schein’s insight is pivotal: as organisations mature, culture becomes plural. And without strong governance, those pluralities become liabilities.
If leadership isn’t aligned, culture will fragment. If culture isn’t governed, risk will accumulate.
This is not one risk among many — it is the condition that enables or inhibits every other cultural risk in the system.
Conclusion
As Edgar Schein reminds us, the challenge for medium and large organisations is not just defining culture — it’s governing the mosaic of subcultures that emerge as complexity grows. Without clear accountability from the top, cultural assumptions drift, risks compound, and alignment quietly erodes.
Leadership is always shaping culture. The question is whether it’s doing so by design — or by default.
Connect with me you would like to learn more about culture risk intelligence or enquire about a complimentary culture risk intelligence briefing for your Executive Team or Board.
Regards,
The Culture Factor Australasia
Links to previous posts:
Part 1 - Culture Risk: The overlooked governance priority for Boards and Executives