Following a long line of value-destroying scandals that have seriously harmed the reputation of many companies, corporate culture is back under the spotlight. As such, corporate behaviour has become a key concern for the government, with the Financial Reporting Council recently publishing a high-profile report tackling the subject. It seems unlikely that this will be the last word on this issue.
Because culture, and the values that underpin it, endures beyond the life of the CEO and Exec team, it should ultimately be ‘owned’ by the board and introduced in reporting by the Chairman. The Board’s choice of CEO has significant bearing on the cultural direction of the business, and such succession decisions should be explained through a cultural lens.
The difficulty with communicating culture is that it is nebulous and can vary hugely between organisations. Much reporting on culture and values remains generic which reduces its credibility, especially alongside more precise strategy, value creation and performance reporting. In order to align with this, culture reporting will need to be authentic and fit with perceptions of the company, as well as the wider narrative of the report.
While culture itself cannot be measured directly, there are likely to be plenty of indicators that can act as a proxy for the cultural conditions your company would like to emphasise and encourage: the recent FRC report notes that ‘indicators and measures used should be aligned to desired outcomes and material to the business’. Qualitative evidence of culture ‘in action’ is also useful, for example when discussing how certain decisions were made and why.
If a business has a defined purpose, look to enlist culture as a powerful proof point – the evidence that you live and breathe this purpose. If the company does not currently have a defined purpose (why the company exists and what it is there to do), this might be a natural time to consider it. It can help align communications, engage employees and differentiate your business more effectively.
Corporate culture is defined by the FRC as, ‘a combination of values, attitudes and behaviours manifested by a company in its operations and relations with stakeholders.’ This is clearly a broad, nuanced topic that cannot be left to a disembodied list of generic aspirations
encircling a business model graphic. Both reporting and broader corporate narrative must be completely imbued with and in sync with culture.
Interest in culture and its impact on shareholder value continues to grow. If you would like to discuss these topics and how reporting can help define how culture is communicated, we’d love to hear from you. hello@friendstudio.com