Expertise Beyond the Numbers

How to Promote a Positive Corporate Culture through Risk Mitigation and Governance

Corporate culture has a profound influence on organizations of any industry and size, often playing a role in its success or failure. Just as executives evaluate their company’s growth and profits, executives are now monitoring their culture to help facilitate success. A positive corporate culture can encourage employees to align themselves with the organization’s mission and values. Culture also creates pride within an organization, leading to honest, trustworthy, and hardworking employees. The growing attention surrounding company culture has led industry leaders to define their company’s culture and answer the questions of whether or not a negative exists within their organization and if that culture can be improved.

Culture can be defined as “the actual values that influence everyday behavior within the organization.”[1] In order to optimize those values, large organizations should make an effort to review (and yes, audit) their culture, addressing negative attributes that may be detrimental to its overall success.

The Risks Associated with a Negative Culture

There are a variety of risks that can materialize if an organization has a negative, or even worse, a “toxic” workplace culture, such as financial and operational underperformance. A toxic culture may lead to events that snowball into larger issues that create unintended consequences.

Case in Point: In the past five years, a toxic workplace culture has driven 20% of U.S. employees out of their current positions, resulting in a turnover cost greater than $223 billion[2].

Introduced in HR Drive’s “Toxic Culture”, the relationship between management and lower level staff is critical. If there is any type of disconnect between management and staff, lower level employees may develop a lack of trust in upper management, resulting in a demoralized team and inefficiencies that hinder business operations. Finally, organizations with a toxic culture can develop a negative reputation that may spread to external stakeholders, preventing other organizations from engaging in potential business opportunities. Even further, this negative reputational effect can also impact an organization’s ability to recruit top tier employees.

Benefits and Applications to Evaluating Culture

An internal audit (or internal review as we’ll refer to it to lighten the impact) of an organization’s culture can provide an independent and objective assessment on the current state of processes geared toward enhancing a positive workplace environment.

Depending on Management’s appetite for review, an internal review can be performed in a variety of ways. A comprehensive method would be to conduct an enterprise-wide review, evaluating all aspects of the organization’s current methods related to culture. This type of review would include interviewing personnel from the entire corporate ladder, providing opportunities to identify unhealthy practices related to culture throughout all levels of the organization. This level of review can unearth the information needed to provide meaningful recommendations that can improve a company’s culture. Another method is to research and communicate corporate culture best practices to upper management, such as the board other and relevant company committees, that have the resources to influence change within an entire organization. Educating employees in leadership positions with the most opportunity to drive change can be a less expensive, invasive, and resource intensive method to introduce cultural best practices that foster a strong workplace environment. While culture review methods may differ, each should be aimed to assess long-term goals and help facilitate internal momentum to bring about the cultural change that is needed.

Below are some examples of next steps that can be taken to review or audit company culture[3]:

  • Entity wide employee survey
  • Open-ended Interview
  • Structured interviews, in which a sample of employees is asked the same set of questions
  • Combining objective data with auditor’s perceptions
  • Focus groups
  • In-depth root causes analysis
  • Self-assessment workshops

Maintaining an ethical organizational culture from the top down could be challenging for an organization. Leadership should recognize and take responsibility when corporate culture is trending in the wrong direction. An internal review or audit can help educate management, providing insightful data on how to recognize and adjust behavior as it is related to culture. Consistency, clarity, communication, and monitoring are critical management action items that are needed to reinforce an ethical organizational culture – internal reviews and audits can serve as the perfect exercise to assist an organization to achieve the corporate culture they desire.

If you are interested in learning more about how mitigating risk can help drive your organization forward, reach out to our team.

 

[1] “How to Audit Culture”

[2] HR Drive “Toxic Culture”

[3] “Auditing Culture: Audit Project Surveys”