We’ve recently been working with a very profitable organisation that is now ‘on the market’. In preparing for the sale process, the business is organising itself in the usual way – clarifying assets, revenue, profitability, etc. – to assist potential purchasers with their financial due diligence.

However this organisation is going a step further. They are undertaking ‘cultural due diligence’ as part of their preparation as well. It’s proving a valuable experience, relevant not just to their current situation but to any organisation that wants to ensure it is ‘doing what it says it does’.

What do we stand for?

In working with the executive team, we’re helping them clarify what is important to them and their organisation. They are confirming how they lead now, and how they can lead their people through whatever happens in the future. They are also understanding what is important to respect and acknowledge from the successes they’ve achieved to date so they can take these forward.

At the same time they are building a better picture of what their current culture looks like, knowing that demonstrating a strong and consistent existing culture will add to their market value as well as their ongoing reputation.

Participating in this process with this team is reinforcing (for us) the enormous benefits of ‘checking in’ as a leadership group and working through ‘cultural due diligence’. This is something that can benefit any leadership team, not just one going through an acquisition process.

A cultural ‘health check’

A large part of this check is about the leaders measuring their own effectiveness. It’s really about asking the question, ‘If someone (such as a potential investor) were to look at our organisation, and our leadership in particular, from the outside, what would they see? How would this align with our stated vision and values?’ In other words, how true are we, as leaders, to what we profess to stand for?

In our work, we do this by having the leadership group work through ten separate areas and test themselves against a number of key statements in each area, then giving themselves a score out of 10 for each.

For instance, in the area of ‘focus’ we seek to answer the question, ‘To what extent are current leaders and managers able to focus through clear vision?  Test statements include ‘Leaders and managers focus on a few priorities, even in the midst of performing many activities, they ‘build employee awareness of and commitment to the firm’s vision’, and they ‘articulate a clear business strategy’.

Other areas tested include ’employee commitment’, ‘discipline and accountability’, ‘learning’ and ‘connections and relationships’*.

In another exercise we have leaders reflect on their stated values and ask how those values are showing up from three perspectives. What behaviours are leaders demonstrating and what are they saying? What are the symbols: where time is spent, where resources are invested, what rituals exist, what is rewarded, etc.? And what systems are in place: the way we set goals and make decisions, set budgets, manage performance and so on.

The power of regular reflection

The insights and discussions that come out of these and similar exercises are incredibly powerful. Gaps are identified and there is genuine reflection on whether the leadership group is being as effective as it could be, and how well placed it is to deal with any future uncertainties (such as, in the case of my opening story, the sale of the business).

Fundamentally this is no different to what happens routinely in the finance department when the annual accounts are drawn up. Those accounts provide essential due diligence in financial matters – something not only essential to sound business practice but legally required in the case of public companies.

The difference is that conducting due diligence in the area of culture and leadership is less common. If it happens at all it is rarely a regular yearly or biennial event.

We also find that the level of engagement coming out of cultural due diligence is incredibly high as everyone has a stake in the outcome.

* If you would like a copy of our ‘Measuring Leadership Effectiveness’ chart, please send an email to leadership@globalleadershipfoundation.com