the governance challenge of culture

Talk about organisational culture is everywhere these days, gingered up by some nicely evocative prefixes.  “Toxic culture” carries the blame for fraud and malpractice, for bullying and for failure.  Other types of culture get a mention when things go well – a “strong performance culture” or an “open culture” or even an “engaging culture”.  For other purposes the description of culture can come heavy with hints that something is not quite right – “risk averse”, “command and control” or “academic”.

• These days it is commonplace to hear incoming Chief Executives commit themselves to changing organisational culture or to creating a proportionate risk culture.  But anyone trying to get to grips seriously with the slippery slopes of culture quickly hits the problem of definition and measurement. It is not that we are short of definitions – there is a whole industry built on just this – but their actual value in the workplace, and in making change happen, is questionable.  The evidence from our own lived experience is that culture has very little to do with the corporate pledges, with words or structures, it is about what actually shapes our behaviours and attitudes.  It is about what we see as important.  Sometimes this can align with what the organisation wants.  On other occasions the small-scale, local and trivial can assume huge symbolic importance.  This people factor should never be underestimated.
  
  You would think that the whole area of what encourages people to do the right thing at work, and to do it well, would be nailed down by now.  The more recent focus on corporate integrity after all follows decades of activity around risk, governance, capacity development and audit.  And yet the people factor still seems elusive.
  
  The academic evidence certainly remains surprisingly tentative.  What sustainable, high performance and successful companies do, how they spend their time, how they behave, does seem to be getting more clearly understood.  Among many others recent work at Harvard Business School  has shown how the focus on relationships and reputation with stakeholders over a long-term period with a willingness to share information and act transparently correlates to success.  As the recent Institute of Risk Management draft paper  identifies “Every organisation has a risk culture (or indeed cultures): the question is whether that culture is effectively supporting or undermining the longer-term success of the organisation”
  So we should perhaps look at culture, and the people factors it embraces, as both an asset and a liability. Culture is by definition constraining. It is the way we do things around here.  It is about what we do not or should not do as well.  It shapes individual reactions.  It can be said to predetermine the appetite and capacity for productivity, for resilience and for innovation. 
  
  We should recognise that there may indeed be different cultures in different parts of an organisation.  These can reflect the history of an organisation or the individual team, mirror the key events that have shaped behaviours over time, embody the specific tradition of governance and process as experienced on the ground,  and reveal the level of the buy-in to policy , systems and change (or lack of it) over the years.  Professionals themselves of course have prevailing cultures which can also play in locally.
  Although the idea of a diversity of cultures across an organisation sounds like a potential problem for anyone wanting to see organisations as cohesive or seeking to change a single, monolithic culture, do such differences actually matter?
  
  Whether they matter or not, culture certainly represents a challenge to those with responsibility for setting the tone, for taking the temperature of organisations, for managing risk, for improving governance, for auditing performance or for preventing damaging or fraudulent behaviour.  The people factor is very difficult to pin down.  Leaders and auditors alike still tend to rely on proxies for gauging culture – staff surveys, human resources policies, the corporate indicators about how things have been designed to work. Is there really still a prevailing box-ticking culture as far as culture and change is concerned?  And what is the alternative?  What should those responsible for gauging compliance, performance, culture or changing behaviours focus on? 
  Boards have understandably been where the spotlight on governance and risk has settled.  There are a number of excellent guides to what Boards should focus on to get things right.  Set the right ethical tone. Get the accountabilities and reporting structures right. Identify and face up to the challenges and risks. Ensure information flows openly and transparently. Increase professional and technical skills and capacity. Link senior reward to long-term performance. Value the whistleblowers.
  
  This is all fine transactional stuff. No excuses for not making a difference then? Except we hit the culture problem again.  The guides do tend to fall back on wilfully obscure terms like “learning culture” or “risk-taking culture” to describe what is being aimed for – terms that slip relatively easily off the tongue but which do not connect to the way staff actually talk, even in an “employee-focused culture”.  Nor do such terms lend themselves to objective or evidential assessment.
  It is perhaps too easy to blame corporate speak for avoiding the real challenge at exactly the point it matters most.  So let’s be clear what the challenges are.
  
  How do we engage properly with the people factors which are central to culture in a way that is also sensitive to the differences which people inevitably bring to their responsibilities?
  How do we do this in a way that is sufficiently rigorous and measurable to enable some form of objective review and builds confidence and trust? 
  
  This may well demand a new way of approaching risk, governance and audit – one which builds upwards rather than comes top-down and gets to grips with the real shape of cultures which define an organisation and the way it works.
  
  There is certainly a sense that more needs to be done and to be done quickly. The drivers are really no different between the increasingly blurred worlds of the public, private and third sectors. Culture, because it is fluid and both reflected in and shaped by individual behaviours, is a huge challenge for risk and governance, and therefore for the integrity and performance of organisations.  It is good to see some of the key questions now being framed by academics, by professional associations and advisers and by organisations themselves.  It would be good to see this being done together and with employees being more actively involved, so real people factors surface.
  
  There seems a long way still to go.  Whatever happens next the shared challenge for everyone involved is to make sure the culture does not mirror what Mark Twain said about the weather “Everybody is talking about it but no one does anything about it”. 

Mark Butler
The People Organisation
www.thepeopleorganisation.com
Mark Butler is a member of the CIPFA Better Governance Forum Advisory Panel and will be speaking about the People Factor in Governance at the Better Governance Forum Annual Summit on 18 October at Lord’s Cricket Ground, London.
Alex Hindson will also be speaking at the Summit on the Institute of Risk Management’s guidance on Risk Culture.
For more details about the Better Governance Forum contact:
BetterGovernanceForum@cipfa.org
www.cipfa.org