Time to follow the culture code

The release of the 2018 UK Corporate Governance Code by the Financial Reporting Council further elevates the image and standing of corporate culture. After extensive consultation, the new code places emphasis on businesses building trust by forging strong relationships with key stakeholders. It calls for companies to establish “a corporate culture that is aligned with the company purpose, business strategy, promotes integrity and values diversity”.

The council also wishes to see clear and meaningful reporting and emphasises that investors and proxy advisors must assess explanations carefully and not take a tick-box approach. There is a new provision to enable greater board engagement with the workforce to understand their views with the code asking boards to describe how they have considered the interests of stakeholders when performing their duty under Section 172 of the 2006 Companies Act.

There is also a focus on succession and diversity. The FRC wants to ensure boards have the right mix of skills and experience, constructive challenge and to promote diversity, the new code emphasises the need to “refresh boards” and undertake succession planning. Other factors to consider are the length of term that chairs remain in post beyond nine years.

Organisations are also asked to address public concern over executive remuneration, with the new code underlining that remuneration committees should take into account workforce pay and related policies when setting director remuneration.

Sir Winfried Bischoff, chairman, FRC, reckons corporate governance in the UK is globally respected and is a framework trusted by investors when deciding where to allocate capital. “To make sure the UK moves with the times, the new code considers economic and social issues and will help to guide the long-term success of UK businesses,” he says. In its “shorter, sharper” form and, with its overarching theme of trust, he adds, the code is “paramount in promoting transparency and integrity in business for society as a whole”.

When it comes to culture, boards are asked to create one which aligns company values with strategy and to assess how they preserve value over the long-term.

Rialto has been banging the corporate culture drum for a long time. The FRC has undeniably helped it make the transition from something that was seen as a HR-nice-to-have to being directly linked to business success when it said in 2016 that corporate culture protects and generates value in the UK economy.

It is also spot on in its latest approach by telling businesses to align culture with its purpose and business strategy. This means not only having company values but ensuring they guide the actions and behaviours of every employee and leader. Culture can work like a magic elixir, running through a company not just correcting ills but enabling and helping to facilitate so many other things such as innovation and transformation.

“If you build it, they will come” is a much-quoted line from the sports film, Field of Dreams. Similarly, if you manage to build the right culture as a leader in your organisation, success will undoubtedly follow.

Many FTSE 100 firms are still failing to share important workforce data in their annual reports despite an increase in the quantity of workforce reporting, according to new research from the CIPD. The study found reporting on skills shortages to be, notably, woefully lacking.

In response, the professional body for HR and people development, is calling for improved reporting and transparency from Britain’s biggest businesses. The body warns that failure to capture and disclose key workforce data is keeping investors, employees and other parties in the dark on key business indicators.

The CIPD’s research examines how workforce reporting has changed over the last five years and how transparent organisations are being about risks and opportunities relating to the workforce.

The report, Hidden Figures: How workforce data is missing from corporate reports, found:

• Workforce reporting in FTSE 100 organisations’ annual reports increased by 9 per cent between 2015 and 2017, a much smaller increase compared to the 19 per cent increase seen between 2013 and 2016 when the CIPD first analysed FTSE 100 workforce reporting
• Regularly reported: The most commonly reported workforce issues were talent management, succession planning and employee turnover
• Skills reporting in short supply: Only 12 per cent of FTSE 100 firms reported their perspectives on skills shortages and only 21 per cent reported on skills gaps, despite many businesses expressing concern about access to skills after the UK leaves the European Union in 2019
• Going up…Apprenticeships (64 per cent more reporting), employee well-being (76 per cent), entrepreneurship (28 per cent), talent management (26 per cent) all saw increased levels of reporting between 2015 and 2017
• Going down… Internships (32 per cent less reporting), commitment (31 per cent less), flexibility (30 per cent less) and employee engagement (21 per cent less) all saw decreased levels of reporting between 2015 and 2017.

“It’s positive to see that the quantity of workforce reporting is increasing, but there’s still a considerable challenge regarding the quality, consistency and transparency of data being reported. Organisations seem to focus their efforts on complying with legislation and governance codes and report on very little else voluntarily,” said Edward Houghton, senior research adviser for human capital and governance at the CIPD.

“Reporting is also often subject to trends or pressure from government rather than ongoing strategic imperatives. We need to see much more consistency in what is being reported, the language used to report it and the measurements being applied so all stakeholders get a complete picture of workforce opportunities and risks.”

According to the CIPD, without full transparency there’s a “real danger” that businesses are painting an overly positive picture of how they manage their people and people risk. Gender pay gap reporting regulations have shown that a framework and a common language can improve disclosure and prompt healthy debate on important issues among key stakeholders. It’s also awakened an appetite among investors for even more workforce data, said the CIPD, and businesses need to be ready to respond to this demand.

“We need senior leaders to get comfortable with being more transparent about their workforce practices and we need investors and government to be demanding far more of these insights,” added Houghton.

Research finds that four-fifths of workplaces don’t have a culture of experimentation

Innovation is the lifeblood of business and in the era of digital disruption it is also critical to survival for some organisations. Many leaders may vaunt it as one of their values and genuinely believe they promote it but new research suggests otherwise.

According to a study carried out by RADA in Business, four-fifths (81 per cent) of workplaces don’t have a culture of experimentation. Moreover, while one quarter (24 per cent) reckon their workplaces are desperately in need of new ideas and fresh thinking to overcome current problems, only one fifth (21 per cent) of employees believed anyone was interested in listening to their ideas.

Worse still, 16 per cent of workers said that any new idea would actually be treated with suspicion and criticism, while 15 per cent believed their business leaders actively discouraged innovation. It is far removed from the vision espoused by many leaders of their workplaces enjoying a collaborative and open communication culture where innovation is championed.

In response to this so-called “innovation gap”, RADA in Business, the commercial subsidiary of the Royal Academy of Dramatic Art which provides communication skills training for corporate individuals, has been working with leading UK companies to transfer dramatic techniques, such as play and improvisation, from a theatrical setting to a business environment.

Kevin Chapman, director of RADA in Business, is concerned to see how many employees feel that creativity and innovation aren’t encouraged in their role “especially when there are simple techniques available to help companies to support and tap into the power of imagination for solving problems or developing new ways of working as a team,” he says.

Chapman recommends that businesses need to create space for people to play with new ideas “without being overly critical”. “Adopting an attitude of enthusiastic curiosity towards every idea that you come up with defies your critical voice and may lead the way to new innovations,’’ he continues.

The research found that government and local government workplaces are the settings where people find it hardest to think creatively (21 per cent). It also reveals that those working in IT (29 per cent) and financial services (26 per cent) find it hardest to make their voices heard, with companies often dominated by a few “loud voices”.

Interestingly, the workers who feel most able to think creatively are those working in teaching and professional trades (such as builders and plumbers), who are four times less likely to struggle with innovation than those in governmental jobs.

Whatever the sector though, it is essential that all leaders create time and space for innovation and put mechanisms in place for ideas to spring forth. Even if they don’t appear to be game-changing initially, they could provide the spark of inspiration for someone else. Adopt the mantra that all ideas are worth hearing about.

A true culture of innovation demands leaders to be more risk-taking, experimental and collaborative but above all, they must recognise the crucial part innovation plays in their organisations’ future rather than merely paying lip service to it. The research also stands as evidence of companies still not listening to their people, which has an extremely detrimental effect on motivation and ultimately recruitment and retention.

And with the most creative and innovative brands of the 21st Century also among the most successful – Apple, Amazon, Google, Tesla, Netflix et al – how much more tangible evidence do business leaders need before they elevate a culture of innovation to the top of their corporate agenda?

Study finds that culture isn’t a soft option but has clear impact not only on business success, but on the economy

Corporate culture has made the shift from a rather nebulous concept to something that is recognised as having a significant impact on the bottom line. Indeed, a new study puts the cost of a bad company culture at a staggering £23.6bn a year for the UK economy.

The Culture Economy report by software company breatheHR finds that one third of British employees (34 per cent) quit their jobs due to bad workplace culture. The survey focused on the SME market but should resonate with leaders of companies of all sizes, large-, medium- and small.

Decision-makers surveyed stated that positive culture led to improved morale and relationships (50 per cent); employees going the extra mile (44 per cent); better customer service and satisfaction (43 per cent); improved individual performance and productivity (43 per cent) and reduced employee turnover (35 per cent). Worryingly, it also indicated a lack of trust exists in many organisations with one fifth of workers saying they don’t trust their senior management. Of these, the main reasons for distrust was because: they don’t feel supported by them (59 per cent); they don’t appear to know what they’re doing (53 per cent); they’re not transparent (45 per cent); and are self-centred (41 per cent).

Jonathan Richards, CEO and founder at breatheHR, is right to point out that culture isn’t a soft option and can impact productivity. “It has a clear impact not just on business success, but on the economy and our society. This includes productivity, an area many SMEs struggle with and don’t have the time to dedicate to it,” he says. “However, one way to boost productivity levels is improving management quality and giving employees autonomy and purpose, as our report reveals. All of which validates the fact that businesses are now operating in a culture economy, and small businesses [which] fail to realise this won’t last long.”

As we know from other research and regular news reports, productivity remains an issue for many businesses and the UK economy as a whole. Those leaders who have failed to respond to the clarion call on culture previously must take it seriously. Company culture is an extremely powerful thing and improving it has the benefit of addressing a range of issues in a single go.

In the most part, employees want to enjoy coming to work, they want to enjoy their jobs, they want to like and trust their managers and employers. But they are unlikely to experience any of these if an organisation’s culture is toxic. In Rialto’s experience, get the culture right and so many other things will fall into place. Individuals who feel more aligned with an organisation and its mission are more likely to release discretionary effort and this, in turn, will lead to improved performance and increased productivity.

Put simply, to improve company culture is to directly treat the cause of many workplace problems rather than the symptoms and we all know from other walks of life that the benefits of this are far greater and more long-lasting.

As the global economic crisis rumbles on with continuing uncertainty and no light at the end of the tunnel, many employees are weary, worn down, battered and bruised.

They may no longer be inspired by their job but trapped by the economic environment, creating mixed feelings towards their employer resulting in them operating below their potential.

The motivation they feel is negative – pushing themselves out of a fear of what might happen, terrified of losing their job if they do not achieve targets and results. This type of motivation is unsustainable and leads to under performance, burnout and eventually the loss of skilled workers.

The challenge facing leaders is how not only how to engage workforces and get the best out but how to keep them focused, motivated and, ultimately, in the right mindset.