Company culture updates
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A bad culture can doom an organization. A voucher strengthens it and sharpens its competitive advantage. However, it is difficult to define culture and measure it even more. Sufficient corporate bosses replicate management guru Peter Drucker’s maxim that “culture eats strategy for breakfast”. Yet all too often they don’t realize that their strategy has gone wrong when it’s too late.
In 2019, more and more companies will try to quantify the quantifiable. One reason: regulators demand it.
In 2010, when Hector Sants, then head of British financial supervision, demand if it was legitimate to “intervene on the question of culture”, he suggested that “seeking to establish oneself as a judge of ethics and culture would be neither feasible nor acceptable”.
The regulatory culture police are not yet breaking down the gates of the City of London, but the surveillance action is increasingly acceptable.
From January 1, a revised corporate governance code will apply, for example, to companies listed in the UK. He now specifies that the duty of the board of directors is “to establish the object, values and strategy of the company, and to ensure that these and its culture are aligned”.
The most intense efforts to meet Sir Hector’s feasibility challenge are in financial services, where the 2008 crisis exposed cultural failings. The Banking Standards Board, created in 2015 to help the UK industry regain confidence, manages a annual assessment members, monitoring areas from honesty to accountability with staff survey, focus groups and interviews. This is only one indicator to possibly determine how culture can improve customer outcomes. But the assessment already provides a gauge of external culture for companies. He should in time keep up with changes in organizational health. The initiative could provide a useful model for other regulated sectors.
Business leaders should be as obsessed with measuring their corporate culture against that of their competitors as they are with comparing their pay or monitoring the relative efficiency of their factories.
They can argue that they can take the temperature with their own employee engagement surveys. But these polls can be unreliable. They lean towards the positive and are unable to detect apathy or fear. It can be difficult for an isolated company to change cultures, either because they are afraid of getting too far ahead of their competition, or because certain culture issues – curbing excessive bonuses, say – only give way. Collective action.
Other tools are under development. Psychologists at the London School of Economics have developed a way to measure the cultural footprint of a company from the outside, looking at public information such as research expenses, whether a human operator answers the customer service line, and even whether executives adequately answer analyst questions. Elsewhere, researchers are running bots in emails to assess culture change.
There are caveats. Culture differs between sectors, within an industry, even within the same group. Many cultural elements, including important human factors such as teamwork, are beyond the reach of algorithms or surveys. Any target, even “soft” linked to cultural indicators, can be played or have unintended consequences.
Savvy directors will therefore also arm themselves with old-fashioned tools. They must challenge entrenched assumptions. They must trust these middle managers who are often culture keepers and communicators. Finally, they should keep in mind that culture isn’t just a snapshot or a spreadsheet, it’s a story. It’s hard to rewrite, but if you don’t read it, an unhappy ending is pretty much guaranteed.