Purpose, culture and values have become a key focus for business strategy over the last few years: the UK Corporate Governance Code, regulatory requirements and market and consumer expectations have all played a part in bringing these issues to centre stage for businesses.  However, these issues can be seen as “soft” or as difficult to define and can be extremely difficult to meaningfully separate, identify and measure.  How can companies effectively measure and manage progress in achieving their chosen corporate culture?

Purpose and values

First, let’s start with looking at purpose and values. The “purpose” of a company can simply be defined as being “what the company is for”, and is usually a deceptively simple summary of the business aims of the company.  The culture of a company is about the way that the company operates rather than its business aims.  It could be interpreted as simply the way that the company does things, or more precisely expects that things will be done.  More colloquially, it could be seen as how we behave when no-one is looking.  The intention behind corporate culture is that it becomes the underlying and unconscious context for how people within the organisation think, behave and act.  However, in order to communicate and embed a culture it will need to be further articulated as a set of values which the company expects its people to adopt and apply in performing their work: the establishment and communication of a clear set of values will be essential to identify and achieve the desired culture.

Setting the culture and values

The purpose, culture and values should be set and monitored at board level, but if the culture is to be attained and maintained, the Board will need to first understand the existing culture of the company and identify those aspects of the existing culture which they intend to maintain and those aspects of culture which need to change.  This process will almost always involve engagement with stakeholders, including employees, for the Board to identify the culture it wishes to foster, and to articulate the values which it believes will underpin that culture.  The final stage of granularity is to identify the behaviours and conduct required to deliver the chosen values.  While the process of setting the culture and values sits with the Board, the delivery of those values should be fostered throughout the organisation at every level. Culture is not a separate function or business unit, but should become part of the fabric of an organisation, feeding into the conduct and behaviour of all staff in performing their duties.

Having established the culture and values of the company, it also falls to the senior management to set the tone from the top and ensure that they are giving credibility to the chosen values in practice.  Within business units, management will need to develop formal, tangible practices which align with the chosen values and to ensure that internal communication and training explains and implements the chosen values across the organisation.  In this way, the culture and values of the organisation will begin to penetrate into every aspect of the company’s business, so that the values are taken into account as a part of the institutional mindset in hiring, firing, promotion, reward, and other HR functions, in conduct and behaviour with clients and customers, in risk and compliance decisions and in communication and media engagement.

Managing and monitoring values and culture

By their nature, values are likely to be broad and conceptual.  Some of the values adopted will be readily susceptible to quantitative assessment, but others will be more difficult to measure, and others will simply not be susceptible to meaningful quantitative assessment at all, but will require a more qualitative approach.  In a business environment driven by quantitative, usually financial, measurement, the assessment of progress towards cultural goals may require something of a mindset shift in itself.  For example, three common value categories are “responsiveness” “teamwork” and “diversity and “inclusion”.  These three values would need to be assessed in very different ways: “responsiveness” can be measured comparatively easily and factually, by applying a simple time measurement to establish how long a task is taking; “teamwork” is at the other extreme and is very difficult to test by an objective measure, but will require a qualitative assessment based on the views of staff as to the way they experience teamwork within the organisation; and “diversity and inclusion” would require a combination of these two approaches, with some relatively straightforward staffing data to establish the company’s representation of groups within its staffing, but some more qualitative questioning in order to establish how people within each of those groups actually experience that workplace.

The setting of objectives in relation to values therefore needs to take account of the nature of the particular value, and to recognise that the forms of assessment will vary depending on the value concerned.  If a purely quantitative approach is taken, then the true cultural position can easily be misinterpreted - for example, a company setting itself an objective that 10% of employees should be from a particular group will be able to monitor that objective very simply as a quantitative matter.  However, a purely quantitative assessment may miss the cultural impact of achieving that objective, which may be more culturally significant than the objective itself.  Satisfying the pure quantitative objective may have a very positive impact on the minority group concerned, who may feel empowered, supported and championed within the organisation; but could equally have a negative impact on the minority group, who may face accusations of tokenism, resentment from fellow workers, or face accusations that quality is being compromised.  Without carrying out any qualitative review of the lived experience of the workforce involved, these negative impacts may go unremarked, while the pure quantitative objective is satisfied.

Ways to measure

Monitoring culture should therefore involve a range of tools including internal staff engagement surveys, specific “pulse” surveys on specific topics, focus groups and interviews, exit interviews and social media scanning in addition to utilising quantitative sources of data such as whistleblowing reports and outcomes, staff turnover, sickness and grievance figures, disciplinary numbers and compensation adjustments, client feedback and complaints and Environmental, Social and Governance data.  A combination of these resources will be needed to gain an assessment of the direction of travel and progress towards the cultural objectives of an organisation.

The global perspective

While the company’s culture and values should be set centrally, the implementation and application of those values will take place throughout the organisation, down to a local level.  Global organisations will be facing widely divergent cultural values among their workforces, and the organisation may need to adapt its approach to reach a compromise, retaining its direction of travel while recognising different paces of change in different jurisdictions.  While a diversity value may be set globally, for example, it may have very different meaning and application in different jurisdictions where the prevailing social or legal environment presents an inconsistency with the diversity value.  In setting objectives, the cultural context should be carefully considered so that objectives are set in a way that espouses the value, but is realistic and culturally sensitive.

The direction of travel

The importance of culture and values and the potential for these issues to impact the bottom line is now widely accepted. Indeed, these issues have become a key part of the governance framework for UK listed companies following the recent changes to the UK Corporate Governance Code.  This requires board level engagement with issues such as diversity, whistleblowing and employee engagement which were previously led by HR or compliance functions.  This is something of a mindset shift, as many of these issues are difficult to test and assess, and require an increased focus on the qualitative assessment of how clients, customers, suppliers and staff experience the company’s culture in practice.  As culture changes and values become embedded, targets will need to be reviewed, revised and reset to reflect the achievements of the company and to reflect changes in the company’s vision over time. 

Eight Steps on the Culture Journey

• Assessing the current culture: Using existing data to assess the current culture of the company
• Setting the strategy: Determining what the culture and vision of the company should be
• Identifying points for change: Performing a gap analysis between the current culture and the vision
• Setting targets and goals: Identifying priorities and setting measurable goals for implementing the vision
• Building in flexibility for cultural context: Recognising that global companies will face local issues which will require adaptation and compromise, but retaining the direction of travel
• Establishing metrics (quantitative and qualitative): Identifying the practical, testable applications of each value
• Identify data sources: Ensuring that data will be gathered which is sufficient and appropriate to test performance against the identified metrics
• Review, revise and reset: As the vision develops, recognising and celebrating areas where progress is made, and identifying areas where further work is required or where priorities have changed