Getting smart about governance means getting smart about culture. But whilst our 18th Corporate Governance Review shows there’s a will to engage and benefit from improving culture, issues persist around the way. How do you get to grips with something many perceive as intangible? We believe it starts with your strategy.
When it comes to corporate culture, one thing is certain; it has never been higher on the business agenda. Whilst this isn’t always for the best reasons, with coverage of recent corporate scandals spotlighting culture’s role in enabling toxic behaviour, look beyond the headlines and the opportunities this renewed interest presents for your business are significant. Culture is a cornerstone of strong governance and strong governance, as our Getting smart about governance research published last year proves, drives profitability.
And yet there’s still a disconnect between what people are saying around culture and what they’re actually doing, whether in their approach to incorporating cultural considerations into governance framework or measuring and monitoring their take up across the organisation in line with new UK Corporate Governance Code.
The bigger picture
Our 2019 Corporate Governance Review (CGR) gives us the best overview of this discrepancy yet. On the one hand, companies are clearly waking up to the challenge, with 45% now articulating how they are addressing culture in their organisations (up from 33% in the previous year) and 78% of chairs leading the way in terms of discussing culture and values in a meaningful way.
However, when it comes to how culture is messaged and enshrined at the heart of these organisations there’s work to be done. Only 32% of CEO’s give any substantive time to the subject with two-thirds of the FTSE 350 still giving little or no information as to how they measure and monitor culture. Even amongst those that do only 19 companies use three or more metrics to gauge success, the rest tend to re-propose existing measures such as employee surveys or H&S as proxies. Taken together it’s a clear indication that many companies have yet to really embrace the power of culture and it could be a costly mistake.
Are you aligned?
Every firm has a culture; defined by history, size, location (or locations), leadership and the environment in which it operates a company’s culture is as unique as it is and a key to developing strong governance practice and ultimately driving value creation. If you get it right.
That’s an important distinction. Right, not good. There is no such thing as ‘good’ culture. Rather, companies should be looking to align their culture to their business goals so that it’s right for their people and purpose; fostering an environment where the strategic objectives are embedded in every aspect of company life because if you’re not doing it right there’s a good chance you’re already getting it wrong.
Driving positive change
Every single day, at multiple points across an organisation leadership and management teams will make interventions that, for employees, are key for building consistency and alignment to the company’s stated strategy.
These interventions, or ‘cultural drivers’, are what leaders who are passionate about aligning culture and goals ruthlessly focus on; giving time not just to what the business is achieving, but also how it is achieving it. From people management to key processes linked to customer service, change, communications, web presence and external reputation, leaders at all levels need to identify and actively engage with these cultural drivers in a way that goes beyond the traditional ‘tone from the top’.
Despite this, the CGR reveals only three FTSE 350 companies use an internal audit team to track cultural consistency across the business. Not only is the value and insight that such a team could provide going largely untested, but companies are missing a huge opportunity to spot areas of concern and invest in strategies to affect positive cultural change.
Making the intangible tangible
Identifying the key drivers shaping culture across your organisation makes successfully auditing that culture a much more tangible proposition; regularly and robustly reviewing your culture allows you to spot where things are misaligned and put the proper resources in place to correct them. This process is the much needed ‘how’ to the ‘why’ of how and why you should focus on culture; the way to match the will.
Embedding a culture fully aligned with your strategic goals could have huge benefits for your company, but getting there takes time and commitment. The most important step you can take today is the first one.