How do you manage culture?
There’s a new ‘Good Practice Guide’ from Australia. The Ethics Centre, Governance Institute of Australia, Chartered Accountants Australia New Zealand, and IIA– Australia recently released Managing Culture – A Good Practice Guide.
This is a topic I have been writing about for several years. In addition to covering it in World-Class Risk Management, I have posted about a dozen times on the topic in the last 5 years, here and at iaonline.theiia.org.
In my posts, I make the point that there are many aspects or dimensions to culture, just as there are many dimensions to the behavior you want it to drive.
They may include:
- Acting with integrity
- Working as a team towards shared goals
- Putting the enterprise ahead of personal interests
- Complying with corporate policies
- Sharing and communicating
- Listening and empowering
- Treating all others with respect
- Respect for authority
- Tolerance for dissent
- Considering risk (what might happen) in every decision
- Being willing to try new ideas and think out of the box
- Putting the customer first
- A commitment to the community and the environment
- Focusing on quality
- Putting employee and others’ safety first
- Coming forward to report suspected violations of corporate policies
- Having a strong work ethic
- A desire for the health, welfare, and growth of the employees and their families
I suspect that most organizations would embrace these values.
They will want the culture to encourage related behavior
The Good Practice Guide talks about many but not all of these dimensions.
In a 2014 blog post, Culture is a Business Issue, I suggested questions that might help an organization assess its culture and whether it is what they want it to be.
- Have the executive team and the board defined the culture they want?
- Has it been clearly communicated to employees?
- What measures are in place to measure whether the desired culture is achieved, and what actions are taken when it is not?
- What is the effect on the organization if behaviors are not aligned with the desired corporate culture? Which strategies and objectives are likely to be affected and how? Is this significant? Does it merit action?
- Does the management team reinforce the message about desired behavior when they meet employees and others? Are they credible?
- Does the management team walk the talk, setting the example they want others to follow?
- Do managers (and risk and audit professionals) pay attention to signs that the desired culture is not in place?
- Are indicators of deteriorating culture noticed and action taken (for example, employees failing to attend or arriving late at meetings; a high level of stressed managers and staff; loss of key employees and failures to hire talent when needed; a scarcity of smiles and laughter in the office; and so on)?
- When actions such as reorganizations and compensation decisions made, is the potential impact on culture considered?
- Are compensation and related programs based, at least in part, on whether employees’ behavior is consistent with the desired culture?
Today, I am suggesting a simple methodology.
- Select one or more dimensions of culture and desired behavior – but not all of them. That would not be practical.
- For each, what is the desired state? (That becomes the ‘objective’.)
- What can happen that would lead individuals or groups to diverge from the desired behavior?
- What are we doing to enable the culture we desire?
- What controls are in place that would either prevent inappropriate behavior or detect it so that appropriate and timely action can be taken?
- Do they provide reasonable assurance that the culture is as it should be and that individuals and groups will behave as desired?
What do you think?
I welcome your comments and suggestions.
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Norman Marks on Governance, Risk Management, and Audit 
Hi Norman
All the above makes sense. In terms of measuring it is essential that there are anonymous surveys. Managers and employees are unlikely to speak out.
Regards Sean
Hi Norman
If you accept the pemise that before you can manage , you must be able to measure, the question is “How do you measure culture” ?
The difficulty initially ,will be the evidential element as few enterprises possess the organisational processes (and maturity) to support this.
Consider the following:
a) There is no consensus definition on what an organisational or risk culture is.
b) Organisational culture is notoriously difficult to align and measure against business strategy and objectives.
c) It purports to support understanding, trust and openness together with clear independence to ensure strong challenge, rigorous, analytical and objective decision making and consistency.
d) Most organisational cultures occur by default; however they can be changed or designed to be positive, as opposed to right or wrong, strong or weak.
e) Dimensions of purpose, governance, leadership, communication, collaboration and capability alone will not develop a “positive” culture.
f) Full commitment from ALL employees should be measured and assessed to establish a base line position.
Edgar Schein (former Prof at M.I.T.), and acknowled father of the term “organisational culture” and its definition, came up with a simple but polarising conclusion in 1993 “Culture is an unconscious and largely invisible entity which by definition is almost impossible to measure, study or change” He has since come up with a few more conclusions, but this is the most appropriate for my comment.
Hector Sants, Former FSA head said In 2010, “The end goal should be that firms understand their own culture and the potential risks posed by the wrong culture”. He failed to define what constituted a wrong (or right) culture !
Understanding culture is the key to measurement, which in turn, is the key to its management. To understand an organisational culture and how to best motivate employees to work productively, responsible and harmoniously, a simple three-part model may help, representing:
The purpose of an organisation (goals and needs)
The functions of an organisation (management )
The energy of an organisation (people and motivation)
As stated prevously, most cultures occur by default; however they can be changed or designed to be positive, as opposed to right or wrong, rich or poor. An assessment of
appropriate dimensions (which will need to be defined by, and will vary by, individual organisations) should demonstrate the degree of commitment to values and beliefs (provided there are adequately defined and communicated) and hence the ease or difficulty to be experienced in understanding a culture and trying to change it !
As these issues have confounded academics for years, Prof. Schein may not have been too far off the mark !.
Malcolm, thank you for your comments and suggestions.
I don’t think it is nearly as difficult as the Professor et al portray. Not easy but also not impossible.
Let’s start by accepting that culture drives behavior, that there are many different forms of (good) behavior that you want to see in your organization, and that sometimes they may even conflict (risk vs reward orientation, rules vs customer focus, obey vs debate).
Let’s also agree that culture can vary by region and even by department. Do you want your accountants to have the same creativity as your engineers?
I am suggesting that you take each of these aspects and not the entirety of whatever is “organizational culture”.
Then there are ways not only to define what you want but to determine whether there is reasonable assurance that it exists.
I agree that if you take the concept of culture as embracing every aspect of desired behavior, it is such a beast that it is nigh impossible to manage. That is why I am subtly criticizing the Aussie attempt to cover it all in one guide.
What do you think?
Hi Norman
I think it’s an interesting concept, If culture represents “the way things get done around here” by whoever, wherever or whatever that might be, then to break that down into components and sub components allows choice of where and which component to measure.
This In turn would give the physical evidence, or reasonable assurance, gained either objectively or subjectively, that something exists and that part, or the whole, is tangible !
So, in conclusion, I approve of your subtle critique !
Reblogged this on Ransom Nformi and commented:
This is an interesting article in how to manage culture within an organization. Multinational organizations grapple with this daily and it can be a daunting task for auditors to audit culture. Have you ever performed a culture audit? How does your organization handle culture?
In my view – you drive a culture – but you cannot manage it, as it is not a process, nor an activity. Driving a desired culture through being the good example, promote requested behaviour and punish bad behaviour will make a lot of employees behave as wanted … whereas other will leave (some by demand).
Incidentally, this is exactly what Xi Jinping will do in China.
I don’t believe its as black and white as that either ! Human behaviour spans the full spectrum between good and bad in thoughts, deeds and actions with volatility ever present.
Incidentally, wasn’t there a “cultural revolution ” in China in 1966 ” driven by Mao Zedong”?
Believing that Communist leaders were taking the party, and China itself, in the wrong direction. He shut down the nation’s schools, called on the nation’s youth to purge the “impure” elements of Chinese society and to take current party leaders to task for their embrace of bourgeois values and lack of revolutionary spirit.
In the months that followed, the movement escalated quickly as the students formed paramilitary groups called the Red Guards and attacked and harassed members of China’s elderly and intellectual population. Some 1.5 million people were killed during the Cultural Revolution, and millions of others suffered imprisonment, seizure of property, torture or general humiliation.
The Cultural Revolution continued until Mao’s death in 1976, and would eventually produce a result opposite to what he intended leading many Chinese to lose faith in their government altogether.
I sincerely hope Xi Jinping does not do the same.