Corporate culture down to leadership

Many businesses have a sophisticated code of governance, but it is ultimately about the employees - the people in the business - that make the words of a code resonate and actually mean something.

But corporate culture is an imprecise concept that’s often misused and misunderstood. Culture as a set of shared beliefs, norms and values that defines what is important and what is appropriate for individuals belonging to this group. Within organisations, culture comes down to the particular way ‘things get done’.

Corporate culture relates very tangibly to a company’s brand. Take American bank Wells Fargo, which has on-going controversy following the discovery that it created millions of fraudulent savings and checking accounts on behalf of Wells Fargo clients without their consent. Low-level bank employees were under pressure to open multi ple accounts per customer to meet targets which came from the head of the retail bank division, Carrie Tolstedt, who reported directly to the bank’s CEO John Stumpf.

Following the aftermath of the scandal, the CEO stood down from his position. The downfall in the reputation of business: toxic corporate culture that can be blamed on the people at the top - their chief executive. His tolerance of fraud did not instiltrust in the bank so his departure was needed to help recti fy this as customer trust is essential to their operations.

As the business environment continues to evolve, brand, identity and image of organisations have become more important.

Where a corporate culture has failed, its public standing fails. This means that an organisation’s culture should be one of its most important assets as it is highly important to the productive capacity and the value of the brand. Culture can help to stave off reputational risks. Effective leadership results from a trustworthy system of accountability, and promoting accountability at executive board level is essential to a healthy corporate culture that features sound ethical practices. The job of a management accountant is to compile the necessary management information that can help with this accountability.This means that the top must align and embed a clear set of values that define the purpose of their business. Only then can ‘walking the talk’ have positive knock-on effect on the rest of the organisation.

Effective leadership must not lose sight of other stakeholders. Today’s businesses that ignore what its customers think and say do at their own peril in this digital age when a negative view can go viral in so many ways.

Boards should strive to ensure that they understand their culture and that it is as good as it can be. This is especially important if they are based in very different places around the world.

When thinking about corporate culture, here are a few questions to ponder

: • What sort of culture does the board want for the organisation and what sort of behaviours does it wish to encourage and discourage?

• How is the tone at the top set out and conveyed through the organisation?

• Do management practices drive people to do things that they regard as unethical?

• Do people who do not ‘walk the talk’ get promoted?

• How best can boards satisfy themselves that the information coming to them is fair, balanced and sufficient? How is diversity of thinking and challenge encouraged?

• Does the organisation have a ‘speak up’ system in place that staff believe they could use without fear of retribution? Now that’s a lot to think about and the fact there are so many questions does show that there are no absolute ‘right ways’ when it comes to assessing culture.

Attempts to manage culture may not work or can result in unintended negative circumstances. However, the management accountant, working at the heart of an organisation, can ensure these consequences do not arise.