There can be no mistaking the damage that a bad culture or a perceived bad culture can have on a business. Numerous businesses have found themselves in the headlines not because of profit warnings but rather because of the alleged poor behaviours of their executives or employees.

The corporate world (and those who occupy roles at its helm) are no longer immune from moral judgement. Society will hold you to account for your behaviours, what you say you will do, how you respond to third party concerns and what you reward. Combine this with a shift in expectations, regulatory and governmental focus and you can see why culture is a word that is here to stay for the long term.

Culture is in vogue

As employment lawyers, we are increasingly advising on issues relating to culture, whether as part of implementing new cultural agendas or working with clients as they navigate their way through a cultural crisis. In the last decade following the financial crisis, there has been significant governmental, regulatory and stakeholder attention on culture.

  • The FCA has confirmed in its recent business plan that culture and governance of firms is one of its continuing priorities. The FCA wants culture to be an important and crucial part of leadership and strategy in the same way that risk management is for businesses.
  • Other regulators are focusing on culture, including the General Medical Council, the Charity Commission and the Confederation of British Industry. The Solicitors Regulation Authority is currently focusing on regulating firms’ management of culture. It is working with the Equality and Human Rights Commission and other local regulators to find appropriate ways to promote awareness and encourage good practice within law firms. In addition, there is now much closer scrutiny on how legal practitioners advise their clients on issues such as workplace harassment and the use of NDAs in settlement agreements.
  • The new Corporate Governance Code (which took effect from 1 January 2019) aims to encourage companies to focus on their culture. A major shift in the new code is the emphasis on the company’s role in society and the need to engage with all those affected by its success.
  • We are increasingly seeing calls to action for the Government to do more to affect a societal level change in workplace culture. In the recent months, we have seen consultations considering legislative change relating to the use of NDAs, worker status and reforms to family rights.

Culture has historically been considered a softer, HR or personnel issue. But societal expectations have changed. Public interest is more important than ever. Firms and organisations must be trustworthy and maintain confidence. We have all seen the impact on businesses who go through a cultural crisis, whether because of #MeToo allegations, or lack of diversity. How a business behaves is key and culture is now firmly on the board agenda and if it is not, it should be.

Attributes of a good culture

The FCA has acknowledged that, as a broad consensus, culture means “the way things are done around here”. It includes the norms, values and practices which are revealed by how people think and behave, as well as when no-one is looking.

As an intangible concept, there is no universal or legal definition. There is no one-size-fits all approach. Culture is unique to each business and it exists whether we like it or not.

But there are similar attributes of a good workplace culture which are used across different sectors and industries. These include: integrity; honesty; psychological safety; diverse and inclusive workforce; openness; the ability to speak up and raise concerns; effective management; and self-reflection.

Challenges for businesses

As the current focus and scrutiny on culture continues, this presents a number of challenges for businesses.

No one-size-fits-all approach. An organisation’s culture is unique, shaped by its history, its people, its leaders, its values. What works for one organisation will not necessarily suit another.

Global vs local change. For global organisations, cultural values at a global level need to be implemented at local level, where there might be conflicting expectations and values. How does a global business promote LGBT rights, when it operates in jurisdictions where homosexuality is illegal?

How much impact can your head office have on a satellite office operating with little contact other than those shared online?

Effective measurement and continuous review. Improving workplace culture isn’t a tick box exercise. It needs to be continuously reviewed and monitored. Organisations need to consider how best to create, imbed and measure their culture. Positive discrimination. The benefits of having a diverse workforce have been well endorsed in recent years. Whilst many organisations are taking steps to address D&I and put in place D&I initiatives, research and statistics show that there is still a lot of work to be done. Employers need to balance the desire to foster diverse and inclusive workforces against the risk of positive discrimination – which is still unlawful.

Lead by example and empower mid-level management. Management must lead by example and think carefully about what messages they send about their culture, both individual and collective. Middle management are integral to ensuring cultural values are understood and implemented throughout the organisation. But businesses need to ensure mid-level management are supported and empowered to implement the organisation’s cultural values in practice. How can large businesses effectively manage the mid management tier that is so critical to its culture and what is normal?

Opportunities

Alongside the challenges, culture presents opportunities for businesses.

Culture can be used as part of a process of change. Assessing an organisation’s culture can flush out systemic issues that need to be dealt with and help to tackle workplace discrimination and harassment. Implementing a new cultural agenda can help attract and retain the best talent for the long-term growth and development of the business and ultimately improve the brand reputation, appealing to the increasingly moral and ethical consumer.