A global survey of 2,500 companies in 36 economies found that 71% of boards of global companies establish internal controls that address employee culture and behavior.
The Grant Thornton report reveals that half of global companies now have culture as a permanent item on their agenda. The survey also showed that 78% of UK companies have internal controls in place, ahead of the global figure and the EU figure of 61%.
Richard Ratcliffe, director of Grant Thornton on the Isle of Man, said the survey revealed growing awareness of the need for corporate culture to be a key part of doing business, and added that Isle of Man companies should heed the report’s recommendations. .
He said: “A definition of corporate culture is the combination of values, attitudes and behaviors that a company displays in its operations and in its relationships with people affected by its conduct, such as employees, customers, suppliers. and society at large. Others will say it differently, but what is undeniable is that around the world, the issue of corporate culture is gaining more and more regulatory attention as a foundation of good governance.
“As a result, the problem has arguably never been higher on the corporate agenda than it is today. The message this sends to the councils, including here on the Isle of Man, is clear; there is a growing responsibility on their shoulders to meet increased regulatory expectations. This involves empowering management teams, making sure they take culture seriously and promoting it in the right way across the company.
“Leadership accountability is one of the fundamental goals of a board of directors and the culture is emerging as an issue that regulators expect to be part of this function.”
He added that Grant Thornton recommends four steps to assess corporate culture.
The first is to understand the culture. Grant Thornton suggests carrying out a culture audit or assessment to get a clear picture, and therefore a better understanding, of the positioning of your organization’s culture. You need to examine the formal drivers of culture – leadership, strategy, corporate responsibility, people management, resource and process management – and weigh your findings against the perceptions of your employees and other stakeholders, such as customers and Suppliers. You should ask yourself where the gaps or misalignments are, then look at your strategy and ask yourself if your culture is allowing or hindering your strategy.
The second is to define the culture of your organization. The creation of a code of conduct is the cornerstone of establishing a strong corporate culture; While the expected behavior of all employees is clearly defined and accessible to all, it provides parameters for what corporate culture can and cannot encompass. You also need to create open channels of communication for the culture to flow. Globally, boards and companies are investing in resources to institutionalize culture across the organization through activities such as public meetings, periodic training sessions, and opportunities for discussion. of the code of conduct once it is defined.
The third recommendation is to test your organization’s culture, using real-life examples. Culture is as much a spirit and a sense of how things are to be done as it is a set of policies and procedures. By pairing culture with solving an existing business problem, it can test the culture in real life rather than exploring it in theory, while also making sure the culture works for the challenges your business faces. rather than against it. You also need to consider culture in ongoing risk governance. Board members have responsibilities for risk, and assessing behaviors and processes from a risk perspective has a significant impact on maintaining a strong corporate culture. If boards discover behavior that could derail the culture, this should be considered as part of the risk assessment activity. Your organization should also ensure cultural alignment with key stakeholders. Survey respondents said boards around the world are thinking about the culture of their customers and suppliers when doing business with them. This illustrates the recognition that the external stakeholders you deal with can affect your brand and reputation if you are associated with a stakeholder who ends up making headlines for the wrong reasons.
The last recommendation is to refine and improve the culture. This involves developing strong relationships with senior management, as one of the roles of a board is to understand how the leaders it oversees express the culture of the organization in their own words. Think about how to spend more one-on-one time with senior management, get to know them, and ask behavior-based questions to see how culture plays into the things they all do. days. You should also explore ways to increase the diversity of your board, as some respondents believe that involving young employees in board discussions could help boards embrace digital change. It can also help embed culture throughout an organization. Setting targets is essential to making culture an achievable corporate goal. You need to encourage leadership teams to include culture change or development as a strategic goal, giving them additional responsibility to ensure culture is properly integrated. Your organization must also focus on the future as well as the present; In addition to overseeing day-to-day operations, part of the board’s responsibility is to ensure that the business they lead is either equipped to meet future challenges or is taking action to respond and equip itself. In order to establish this sustainability, look at the role that culture will play in the years to come.
Mr Ratcliffe concluded: “The growing importance of corporate culture is clear from these findings and Grant Thornton’s recommendations will help boards meet the challenges and opportunities that arise. “
Download Corporate Governance 2017 – Elements of corporate culture from www.grantthornton.global/corporate-governance-2017/
Photo – Richard Ratcliffe.