12 June 2023
Many column inches have been written over recent weeks on the subject of culture in business. Time to take stock?
Many column inches have been written over recent weeks on the subject of culture in business.
Examples include the CBI, ITV, the Australian tax saga at PwC, recent plc executive departures and the very disturbing allegations at Odey Asset Management.
So it does seem to be a good moment for public companies and other business organisations to take stock and ask themselves a few questions:
We should start by attempting to define culture. One of the most illuminating definitions I have come across is this one from Jason Furlong in the context of law firms (but of application across businesses):
“The daily manifestation of the firm’s explicit performance expectations and its implicit behavioural norms - what is rewarded, what is tolerated, what is overlooked and what is punished… As a general rule the lower someone sits on the organisational chart, the more accurate is their perception of the firm’s culture…The partners wax rhapsodic about how wonderful it is to work there. But if you want to get closer to the truth, go ask the law clerks, the administrative assistants, the marketing personnel, the IT folks and the person who cleans up the mess in the kitchen every morning?”
The references to performance expectations and behavioural norms go to the heart of themes such as integrity, diligence and respect for others.
Recognising that embedding and monitoring good behaviours in large (often multi-jurisdictional) organisations is really challenging, here are a range of thoughts which seek to respond to the questions I pose above.
It does seem to me that purpose is a key ingredient in the cultural glue of a business organisation, particularly one that is large and global. In building a sense of “one team”, a unifying purpose can make a real difference.
Take a look at GSK’s purpose statement:
“We are a global biopharma company with a purpose to unite science, technology and talent to get ahead of disease together. We aim to positively impact the health of 2.5 billion people by the end of 2030. Our bold ambitions for patients are reflected in new commitments to growth and a step-change in performance. We are a company where outstanding people can thrive.”
You have to be pretty cynical not to find that motivating and it speaks to many people’s desire to be part of “a winning team on a worthwhile mission”.
At the same time, to be effective a business’s purpose needs to be communicated approachably and well (with examples of behaviours sought and discouraged) throughout the organisation. It must be lived – not just a strapline.
A well-articulated purpose, moreover, underpins and gives shape to strategy. In GSK’s case “…We prioritise innovation in vaccines and specialty medicines, maximising the increasing opportunities to prevent and treat disease…”. Which of course drives the investment case for the business and the standing which the organisation has with investors and other external stakeholders.
So, for those organisations which have not done so, the process of consulting within the business and crystallising a “North Star” statement of “why we exist and what we are for” should be high on the agenda.
Are the business’s codes and policies around integrity, countering corruption, respect, safety and safeguarding and external relations easily available, approachably written and regularly discussed within the organisation?
When were they last refreshed? Are there regular training modules and are there periodic “mystery shopper” exercises to check that they are being observed?
Are whistleblowing procedures publicised widely enough and do whistleblowing trends receive Board level attention?
Three points here:
Whilst the tone set by the CEO and the executive leadership goes to the heart of culture, the behaviours and style of middle management will be key. In larger organisations it is this permafrost layer that will be the day-to-day guardians of culture.
Is the executive leadership attentive enough to this reality with regular training and behavioural audits?
And the Board of course has a vital role to play. Often the function of the Board will be poorly understood within organisations - remote, slightly scary and externally focussed.
Boards are increasingly attentive to this, and encouraged to be so by governance codes, but it is surely worth taking stock of practical steps which can make a difference, such as:
The pressure on a Board when behavioural lapses, and alleged lapses, occur at a senior level is enormous.
We have seen this played out graphically recently at the CBI, Tesco, ITV, PwC and (apparently most extremely) Odey. We live in a media world, for better or worse, where news is shared instantaneously and with no boundaries - and where facts may matter less than impressions.
Each circumstance will be different and so “one size fits all” processes are not realistic, but a few thoughts:
“Due process is part of corporate governance. Both are boring phrases, but when the chips are down, they suddenly matter.”
All of the above, of course, feeds into the question of reputation.
As outlined in a thoughtful article from the Harvard Business Review (https://hbr.org/2007/02/reputation-and-its-risks) some years ago:
“Most companies…do an inadequate job of managing their reputations in general and the risks to their reputations in particular. They tend to focus their energies on handling the threats to their reputations that have already surfaced. This is not risk management; it is crisis management—a reactive approach whose purpose is to limit the damage.”
The tips in the article have stood the test of time, summarised thus:
“Effectively managing reputational risk involves five steps: assessing your company’s reputation among stakeholders, evaluating your company’s real character, closing reputation-reality gaps, monitoring changing beliefs and expectations, and putting a senior executive below the CEO in charge.”
Recent events are a prompt for businesses to be more purposeful in reputation risk management.
As we know, time spent in reconnaissance is seldom wasted.
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