09 Oct The role of culture in business
The latest report investigating individuals at UK-based Barclays Bank regarding the rigging of the LIBOR rate (London interbank offered rate), which controls the rate of home loans, credit cards and other financial transactions, cites the company’s flawed culture as a primary reason for its demise.
The report reveals that the subsequent high-earnings paid to top executives was only possible if management ignored the culture of its workforce. Bob Diamond, the star investment banker and CEO of the bank worth over an estimated $350 trillion globally, was forced to resign after being implicated in the scandal.
According to Tjaart Minnaar, MD of OIM International, a leading business consultancy firm, an organisation’s culture is now more relevant than ever to ensure sound risk and performance management. This is in light of the scale of global woes experienced against the backdrop of the financial crisis.
“An organisation’s culture relies on high levels of transparency, corporate governance and accountability – all standards required by investors and society in order for a business to function effectively. This puts pressure on boards and executives to take and create responsibility for the organisational culture that reflects a company’s values and ethics.
“The test of how serious a company is about maintaining its values occurs when a key player does not live or adhere to the values of an organisation. Are we happy to make an exception to the values of our organisation to not lose a key player’s contributions, or just turn a blind eye in order to reap the profits without adherence to the ethics and culture depicted by our business?”
Minnaar argues that its easy to use an organisation’s values as part of a conversation to steer a poor performer in the right direction.
“The problem comes in when a star performer does not adequately reflect an organisation’s culture, which comes about when there is something to gain and a person is tempted.
The collective ethos of a business is more important than the individual and so tough decisions are required when star players don’t live the organisation’s values. Sound leadership requires the values of an organisation to be upheld, and calls for transparency when poor decision-making leads a star performer to misrepresent the organisation,” he says.
A company should consider such a situation as part of its risk management portfolio. Company management should be able to identify the internal risks their company faces, and properly evaluate, communicate and address them, as part of a preventable risk category. A preventable risk exists within a company as, for example, fraud, corruption or bribery. This can be best managed through active prevention, putting monitoring operational mechanisms in place and guiding people’s behaviours towards that which fits the company’s culture.
Minnaar believes a good example of responsible leadership includes the decision by the English cricket team to drop its best performer, Kevin Pietersen, from its team. Pietersen, a South African-born English cricketer, was implicated in a texting scandal when he messaged South African Proteas players, criticising his own team mates and coaching staff. He was subsequently dropped, but will be starting a reintegration process back into the English cricketing team.
Minnaar explains that an organisation’s values are set by the standards upheld by the organisation’s leaders, and that regular, consistent and constant communication and feedback will allow for transparency and accountability to occur at top level management.
Senior management, as the custodians of an organisation’s culture, need to clearly communicate the values and its meaning. By unpacking the values and practices and ensuring consistent application thereof, instilling regular feedback mechanisms and providing channels for transparency and accountability, leaders will exemplify the culture of the organisation.
Minnaar points to a recent example whereby BHP Billiton executive, Marius Klopper, decided to forfeit his bonus due to poor investment decisions made by the company, demonstrated a leader willing to set the example of accountability. In political circles, the ANC expelled the ANC Youth League leader Julius Malema after criticising its parent-body, the ANC. These moves, Minnaar adds, demonstrate sound leadership, as the leaders upheld the values of their organisations.
Minnaar believes that entrenching an organisation’s values is a vital cog in the wheel that will enable a company to guard against a flawed culture.
“Business managers need to understand that an organisation’s culture and brand is to be upheld in order to protect its integrity. Companies need to ensure that the values reflecting its brand personality are defined and clearly communicated throughout a participative process involving internal and external stakeholders.
“The second tier to communicating and defining the values involves making sure that all stakeholders understand and are able to apply them in their respective roles. By unpacking the values in behaviours relevant to the type and level of work people do, as well as ensuring regular conversation about the company’s code of conduct and how this plays out in each person’s role in teams and in one-on-one meetings, will empower each employee to live the company’s values.
Minnaar adds that regular communication, assessments and continuous feedback ensure the entrenchment of an organisation’s values.
“Assessment can occur through individual and team feedback and also through culture surveys. Other feedback channels such as an ethics telephone hotline where irregular behaviour can be reported by employees have also proven to be very useful.
“Lastly, developing the organisation’s values means taking feedback into account and building it into the leadership development of the organisation. Incorporating constructive criticism and appropriate comments when hiring and making succession decisions, will go far in safeguarding the values, and the culture, of an organisation.