Turning values into value

How can leaders propagate an effective corporate culture?

Key points:

1. Set the tone at the top in both word and deed

Every utterance of a CEO is “amplified manifold”, says Javed Ahmed, chief executive at Tate & Lyle, but he stresses that “the say:do ratio is what really matters”.

2. Review the firm’s values

Financial services group Old Mutual sought the views of its staff about its values to ensure that these were sufficiently well aligned with a new “customercentric vision”.

3. Send clear messages using a code of conduct

Vodafone’s code deals with typical ethical dilemmas to set out what processes the telco expects all employees to follow. This is particularly useful for large multinationals.  

Corporate values need to be stewarded at board level and, once these are agreed, they must be embedded into the organisation’s daily operations. The latter process represents the tougher challenge, according to Claudia Chapman, corporate governance policy adviser at the Financial Reporting Council (FRC).

Rolling values out across a company is a continuous task in which the HR, internal audit and risk teams all have a part to play, she says. Crucially, values need to be expressed in a way that every employee can relate to in their work. Simply publishing an ethical code is not enough.

In many cases the CEO personifies the organisation’s culture. The leader is simply the most significant influence on the company, according to the FRC’s research among FTSE firms and investor groups. The smaller the entity, the stronger the CEO’s grip on its culture tends to be.

Boards, including non-executive directors, also have a role in setting the expectations of others in the organisation and leading by example. But Chapman stresses that a board’s most crucial task here is to hold the CEO to account. To this end, the key relationship continues to be that of the chairman and CEO.

“The board can play a positive role when, for instance, it’s recruiting a new chief executive. If it’s happy with the corporate culture, it needs to look at the values, behaviour and cultural fit of the candidate, as well as their skills,” Chapman says, although she notes that few boards currently prioritise such aspects in the selection process.


How firms express their values

The FRC avoids referring to particular corporate cultures as good or bad. Instead it talks about “healthy culture”. By this it means that a company requires a culture that’s appropriate to its purpose, strategy and business model if it’s to succeed in the long term. Some firms will, for instance, have far more appetite than others for risk, which is perfectly acceptable.

Some organisations are articulate about their cultures, while others struggle, but the council notes that there is “little or no thread throughout annual reports” on cultural aspects. A number of values crop up repeatedly in the FTSE 100’s disclosures. The three most often mentioned are integrity, innovation and respect.

Although such values are clearly necessary, Chapman says, the crucial factor is how companies express these as the behaviour they expect from their employees. Documents such as codes of practice are a useful tool for this.  


READ IT:

The CIMA FM report “Rethinking the business model” can be downloaded from the institute’s website.