Posted: 25 Jul. 2018 5 min. read

Are you ready to assess and monitor your company’s culture?

Are you all set for assessing and monitoring your company’s culture? No? I didn’t think so and I’m sure you are not alone. Yet the new UK Corporate Governance Code calls on boards to do exactly that from 1 January 2019. The aim being to ensure that the culture throughout the company is aligned to its purpose, values and strategy. But how does a board assess and monitor company culture?

 

Joining the dots

There is no single indicator or metric which will tell you what your company’s culture is. It is a bit like a ‘Join the dots’ game and only the most enlightened and open boards will do it effectively. The skill is in reading between the lines of the data you are seeing and joining the dots to build and interpret the picture presented.

The FRC’s new Guidance on Board Effectiveness includes the following suggested sources of culture insights – these are the dots which you must join. As you can see, gathering these insights will require an integrated approach across a number of functions within an organisation. This is why the board is well placed to step back and join the dots of what all this data is telling them about the policies, practices and behaviours throughout the company.

  • Turnover and absenteeism rates
  • Training data
  • Recruitment, reward and promotion decisions
  • Use of non-disclosure agreements
  • Whistleblowing, grievance and ‘speak-up’ data
  • Employee surveys
  • Board interaction with senior management and workforce
  • Health and safety data, including near misses
  • Promptness of payments to suppliers
  • Attitudes to regulators, internal audit and employees
  • Exit interviews

An important piece of the puzzle

An important point to note is that culture insights do not come just from your employees. The culture of an organisation is also reflected in its touchpoints with all stakeholders, not just employees, and so the board must ensure that the feedback and insights it is receiving covers groups such as customers, suppliers and, where appropriate, regulators. How a company is perceived by these key stakeholders is a critical part of this culture puzzle.

What about hotspots or issues?

If you are assessing and monitoring the culture of a large organisation, it will be necessary to watch out for the existence of individual sub-cultures or fiefdoms that could undermine, or be inconsistent with, the overall culture. Early identification of potential culture hotspots can prompt a more in-depth assessment before issues arise.

Where the picture presented by the joined up dots suggest that cultural issues exist, then the board must ensure that management takes action to understand why these issues exist. The FRC Guidance recommends root cause analysis as an important tool for understanding the underlying causes of a poor culture and taking effective action to correct it.

It’s more than leading by example

Done well, assessing and monitoring your company’s culture will be a valuable exercise in understanding the mood at all levels of the organisation. All too often we hear about the importance of tone at the top, but for most people their main yardstick for the culture of the organisation will be their direct report. So it is tone at the top, tone at the middle and tone at the bottom which requires attention – tone at every level.

Boards need to look at the information they are being given about company culture to make sure it is appropriately comprehensive. A misaligned company culture can derail even the most well-constructed strategy – that is why this assessment and monitoring activity is so important.

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Key contact

Tracy Gordon

Tracy Gordon

Director

Tracy is a director in our UK Centre for Corporate Governance and our Board Advisory Practice. She undertakes performance reviews and benchmarking exercises for companies keen to meet current standards for best practice and provides bespoke training for board members new to the UK governance framework or needing a refresher on the requirements. She regularly presents to boards, audit committees and members of our Deloitte Academy on the latest governance and corporate reporting developments.