The benefits of auditing company culture
The business landscape in Singapore is undergoing some important changes. Business leaders are thinking more than ever before about diversity and equality in their organisations – in line with public demand and the country’s board diversity goals. Action is being taken by the Corporate Governance Council here to ensure boards are more well-rounded, with a mix of skills and experience, which will not only improve diversity and independence, but strengthen investor confidence. This change in attitude is a huge step forward for businesses.
The culture of a business is extremely important in keeping these values at the heart of the organisation – the loss of such values poses a significant risk to the business’ reputation and performance. Assessing the corporate culture of one organisation is not easy, but it can be an invaluable exercise when it is done well.
We are increasingly seeing a shift towards “enterprise value” in terms of purpose, ethics, trust and culture, rather than a focus solely on finances and performance. Auditing culture could therefore help firms understand how everyone in the business is affecting its value; including looking at the “middle” as well as the top. Understanding how business values correlate to actual behaviours is critical – for example, inappropriate cultures can grow organically and become toxic within an organisation if not kept in check. So, how do organisations go about auditing their culture?
About the author
Mark Billington, ICAEW Regional Director, Southeast Asia
Conducting the culture audit
Firstly, it is vital to determine exactly what businesses are assessing before beginning the process of auditing culture. “Culture” can mean many different things, which in turn means a variety of different approaches could be used when conducting the audit. The challenge is to make it meaningful and measurable – “do the right thing” is not easily assessable. Focusing a “Lens on Culture” such as risk or well-being is often more concrete because it addresses a specific issue - but this can mean missing the bigger picture.
Businesses should focus on areas where there is a higher risk of cultural issues within the organisation, such as areas earning high commission, or areas where corruption is more likely. Taking a risk-based approach is critical if there’s potential for the job to get too big. Identifying where there seem to be problems is a good way to focus resources – for example, departments with a high turnover of leaders or poor engagement scores could indicate areas with deeper issues that need to be addressed.
There are a number of ways that a view on culture can be audited. This could be through interviews, focus groups and observations, or through data, surveys and KPIs. Reporting on culture typically looks and feels different to a standard internal audit report – so including context is useful. One area that is increasing in popularity is to look at root cause analysis. This means understanding the “why?” – and requires listening to and understanding the motivations of staff to identify cultural and behavioural drivers.
The potential benefits of auditing culture within the business are huge. It can be used to identify where management action needs to be taken, and promote areas which are working well. Strong culture drives better performance, enables firms to outperform the market and is unique to each business.
As Singapore’s businesses continue to keep pace with change, there is even more significance in providing assurance on value protection, and managing different types of risk. Singapore’s corporate governance reforms are addressing the “tone from the top”, but auditing culture is more about the “tone in the middle” and how what gets stated externally is translated to what happens internally. Culture is pervasive – it touches everywhere. Businesses should be aware of its effect within organisations to fully realise the value of cultural audit.