In the last few years, we have witnessed a number of clear failures of culture in major organizations, including Wells Fargo, GM, Volkswagen and more.
Sometimes, the failure leads to a violation of law or ethical values.
But sometimes it can cause the organization to under-perform.
For example, if the organization is excessively risk averse it will be slow to act (if it acts) in response to change and market opportunities.
On the other hand, if it is excessively risk aggressive, it may occasionally have massive success, but this is inevitably followed by massive losses.
A Piecemeal Approach to Culture
One of the problems I have with discussions about culture is that oftentimes thought leadership papers focus on a few aspects of culture but not the whole. So they may focus on risk culture or compliance culture, but omit any mention of teamwork, shared goals and so on.
Deloitte has published a new piece which takes a holistic approach, “Culture Shift: Changing Beliefs, Behaviors and Outcomes.”
It doesn’t limit itself to risk or compliance culture, but instead broadens the discussion to include the shared beliefs that shape behaviors and decisions on any number of fronts.
There Is No One Culture to Rule Them All
The article compares culture to an iceberg.
“The part that can be seen above the waves reflects the isolated behaviors and outcomes that can surprise and sometimes frustrate incoming executives. The bulk of it, though, the submerged part, comprises the ‘shared beliefs and assumptions’ that are often shaped over generations and can sometimes punch a hole through titanic corporate initiatives.”
It goes on to point out that businesses rarely have a single, homogenous corporate culture. Different parts of the organization, especially in global enterprises but also between functions like Finance and Operations, have different experiences and attitudes — representing subcultures.
When I was in public accounting, each partner and each manager shaped the culture of their teams. Some leaders were dictatorial while others were participative managers. As a result, each team behaved differently when it came to taking risk, complying with firm policies and so on.
In fact, a single employee would behave differently depending on which team he or she was part of in that moment.
Modeling Behavior From the Top
Deloitte lays out a process that makes sense to me.
It starts by defining what the culture should be.
“… it is useful to have executives think through and name organizational outcomes they have observed and that they do or do not like. Next, they should hypothesize behaviors that led to these outcomes, and then the beliefs driving the behavior underlying the outcomes.”
The next step is to develop what it calls a narrative “that shows the value of the widely held beliefs and also the pitfalls and inappropriateness of the beliefs in other contexts. It can also be useful to articulate, in detail, the beliefs, behaviors and outcomes that are desired. In practice, narratives to challenge existing beliefs need to be carefully crafted (and communicated) to acknowledge the value, but also disaffirm the misapplication of the beliefs.”
Leaders then have to communicate, reinforce and model desired behaviors.
Schedule a Regular Cultural Assessment
Culture is complex, not only because any organization has multiple subcultures, but because culture drives so many types and forms of behavior.
I like this simple approach of defining what you want to happen, define what you want not to happen, understand the beliefs and assumptions that drive those behaviors, and deploy change management techniques to make the necessary changes.
It can be very useful to have a periodic, objective assessment of the organization’s behaviors and culture.
Rather than focusing on a single dimension, such as ethics or compliance, I would encourage auditors and others, such as HR professionals, to include many more dimensions — such as teamwork, information sharing, respect for others, belief in the organization and its mission, and so on.
What do you think?
The Deloitte piece is not complete, that is certain. For example, it does not address the fact that when different leaders within the organization have different styles (such as dictator or participative manager), that can have a major effect on behavior.
But it makes some good points and merits our consideration.
I welcome your thoughts.
Norman Marks, CPA, CRMA is an evangelist for “better run business,” focusing on corporate governance, risk management, internal audit, enterprise performance, and the value of information. He is also a mentor to individuals and organizations around the world and the author of World-Class Risk Management.