The importance of culture and values in times of uncertainty
Corporate culture has been high on the boardroom agenda in the UK in the past year at least partly due to the FRC’s well-received report on ‘Corporate Culture and the Role of Boards’.
Healthy culture essential for sustainable success
Providing a concise definition of corporate culture, however, seems elusive, not surprising given its all-pervasive nature. For practical purposes, it can be said to address how people behave when no one is looking and ‘this is the way we do things around here’. The expression that ‘culture eats strategy for breakfast’ which rightly highlights its importance is often attributed to Peter Drucker though this is disputed. Which one trumps the other is anyway in some respects irrelevant: for sustainable success the strategy needs to be aligned with the culture and with the people capabilities in the business which in turn will be inextricably linked to the culture. Interestingly, a top-of-the-range and a budget hotel may both be focused on meeting the needs of their customers outstandingly but the way they will do it is likely to be quite different, one with very bespoke services the other through meeting agreed standards, with correspondingly different skills needed in their people.
Desired vs actual culture
The board needs to agree on the desired culture and values, to understand them as they actually exist in the business and to have a programme in place to close any gaps between the two. Understanding them as they are involves the board keeping itself grounded and having a genuine understanding of the business through employee engagement surveys, knowing the views of employees as they move on- and those on websites such as Glassdoor- and encouraging them to ‘speak up’ when they see something happening that goes against the values and/or procedures in place. It is also important for NEDs not to be hermetically sealed in the boardroom but to have contacts in the business to enable them to have a genuine understanding of how it is operating from both an employee and customer perspective.
Cultural change is difficult
If needed, successfully changing the culture and values of a company takes time, determination and effective communication. The board must lead by example and ensure that the management is doing likewise. Aligning recruitment, promotion, rewards and retention decisions with the desired culture and values is also key, along with getting buy-in from middle management which can be particularly challenging but is crucial for the success of any cultural change programme.
An ethical culture is essential but capturing the essence of an organisation will generally go beyond this: is it innovative/entrepreneurial, client or customer centric, solutions focused or team orientated? Sustainable success is not just about the ‘vision thing’ to paraphrase President George H Bush, implementation is also a prerequisite, but without an understanding of the distinctive advantages of the business and how they can be fully harnessed in changing times, seeking it will remain a pipedream.
How does your company fare?
The statements below can help you to assess the strength of your culture. It is suggested that boards ask themselves how well they are performing with regards to each of the issues covered and, more importantly, what improvements they could introduce that would help them build a more sustainable business for the benefit of their stakeholders and wider society.
- We have established our desired culture and values in consultation with our stakeholders.
- Our approach to recruitment and promotion, rewards and retention places high emphasis on alignment with our desired culture and values.
- The board gets high quality feedback from team members, customers and other shareholders on their views of the business and takes follow up action when needed.
- There is reliable evidence that our people are highly aligned with our desired culture and values.
- We know that all our main stakeholders, including employees, customers and suppliers, feel that we treat them fairly and live out our values in practice.
- We encourage innovation and have a strong track record in being successful in being innovative across the business.