Partner Article

How to get an organisation’s corporate culture right

A new report from ACCA (the Association of Chartered Certified Accountants) and the Economic and Social Research Council (ESRC) seeks to describe the critical role that a boardroom plays in setting the ethical compass of its organisation. The findings assert that boards are critical in defining their company’s culture, which can help to avoid the sort of dysfunctional behaviour that causes accidents, destroys values and creates financial and reputational loss.

Called Culture and Channelling Corporate Behaviour, the report, which is based on a series of roundtable discussions and survey of ACCA members, advises that when assessing their organisation’s culture, boards should ask themselves three fundamental questions, which are seen as basic good corporate governance:

• What are the goals and purposes of the organisation?
• What sort of behaviours does is wish to encourage and discourage
• How is the tone at the top set out and conveyed through the organisation?

ACCA’s head of corporate governance and risk management Paul Moxey says: “An organisation can have the most sophisticated code of governance and rules, but as recent high profile scandals have shown, poor organisational culture has been a significant cause of corporate wrong doing. To design a system that works, we believe it is important to ask the right questions – especially what kind of culture do you want?”

The report lists a number of trade-offs that need to be balanced by the boardroom and by staff; is there openness to mistakes, or zero tolerance? Is the organisation innovative, or controlled? Does profit rule, or public value matter more? Seven points for consideration by the board are also listed, serving as a starting point for assessment and possible change:

1. Align and embed core values at the very top: Do people who do not act in accordance with the company’s stated values get promoted? Do management practices drive people to do things that they regard as unethical?
2. Watch out for the trickle-down effect and dynamics in groups: What can prevent the tone set at the top from effectively trickling down through the various levels of an organisation?
3. Track how decisions are being made: How aware are decision-making groups, from board level downwards, of the risks of cognitive bias and groupthink? How is diversity of thinking and challenge encouraged?
4. Be honest about the value of regulation and codes: What attitude to regulation should an organisation have? Does it want to support and work with the spirit and the letter of codes or does it see regulation as something to be avoided or exploited for its customers’ interests or its own sake?
5. Beware of unintended consequences attached to any incentives structure: Is it understood how incentives (deliberately created or not) work in practice? Can the board identify better measures that properly reflect the long-term aims of the organisation and use them in better ways so they do not get ‘gamed’?
6. Find out what motivates people: Are incentive structures in place actually fit for purpose? Do they promote long-term sustainable performance or do they encourage immediate self-gain only?
7. Anticipate trends: Is the organisation open to new creative ways of thinking or is it constrained by a fear of the uncertain? How aware of global market trends are management and human resources staff?

ACCA’s researcher Pauline Schu explains: “Assessing culture can be difficult because it calls upon a brand new set of skills and requires a multidisciplinary approach. We hope this report will help boards and others avoid some of the potential pitfalls and help them on their journey towards evaluating and improving the culture within their organisation.”

This was posted in Bdaily's Members' News section by ACCA .