The culture of a business is essential in keeping the values at the heart of the organisation. The loss of such values poses a significant risk to the company’ reputation and performance. So, is there value in auditing culture as well as finances?
We increasingly see a shift towards “enterprise value” in terms of purpose, ethics, trust and culture, rather than a focus solely on finances and performance. Auditing culture could, therefore, help firms understand how everyone in the business is affecting its value, including looking at the “middle” as well as the top.
Understanding how business values correlate to actual behaviours is critical. For example, inappropriate cultures can grow organically and become toxic within an organisation if not kept in check.
“Culture” is open to many different interpretations — it is essential to determine precisely what you are assessing. Are you looking to be a barometer of the organisation’s culture or to provide insights into a specific aspect of the business? This will, in turn, dictate which approach to auditing culture will be most suitable for your organisation. The challenge is to make it meaningful and measurable — “do the right thing” is not easily assessable. Focusing a “lens of culture”, such as risk or well-being, is often more concrete because it addresses a specific issue.
But this can mean missing the bigger picture.
Culture touches every part of a business, but it’s not possible to audit every single aspect of an organisation’s activities in one go. Therefore, businesses should focus on areas where there is a higher risk of cultural issues within the organisation.
Identifying where there seem to be problems is an excellent way to align resources. Departments with a high turnover of leaders or poor engagement scores could indicate areas with more profound issues that need to be addressed.
There are many ways to audit culture. A multi-faceted approach to assessing culture that brings together both quantitative and qualitative data points that already exist can help give the board and senior management insight into the culture of the organisation and help to build a picture of what is important.
This could be through interviews, focus groups and observations, or through data, surveys and KPIs (key performance indicators).
Reporting on culture typically looks and feels different to a standard internal audit report — so including context is useful. One area that is increasing in popularity is to look at root cause analysis. This means understanding the “why?”. It requires listening to — and understanding — the motivations of staff to identify cultural and behavioural drivers.
It is vital that enterprises understand organisational culture isn’t a goal but an operational side effect that is difficult to change. There is little point in going through the motions of a culture audit unless the problems unearthed are acted upon, fed up to the leadership team and result in a change on the ground.
If the findings of a culture audit are not acted upon, staff engagement will suffer, and there will be a lack of buy-in for future audits.
Today, shareholders, regulators and investors are hungry for new and greater insights on a much wider range of non-financial matters, including a company’s culture. Yet these are largely absent from most corporate reporting.
The potential benefits of auditing culture within a business is huge, as it can be used to identify where management action needs to be taken and promote areas which are working well.
Culture is pervasive. As the region’s businesses continue to keep pace with change, businesses should be aware of its effect within organisations to fully realise the value of cultural audit.
A firm’s culture is critical — without the right culture, fast, rapid, organic and credible development and innovation cannot happen.
— Michael Armstrong is ICAEW’s Regional Director for the Middle East, Africa and South Asia.