Could your corporate culture provoke your next crisis?

Towards the end of last year, the CIPR Crisis Communications Network brought together a stellar panel of experts to share their insights with us. This event, our eighth of 2023, proved to be one of the most successful we have ever run, with both record numbers of attendees and a significant uptick in interaction on social media. If you missed the webinar, it is well worth catching it on the CIPR Crisis Communications website. In the meantime, some of the day’s most significant insights are captured below.

The significance of corporate culture: a new perspective

Corporate culture has always existed but it is starting to be thought about in new ways. Opening the discussion, David Ferrabee, managing director of change, culture and engagement at Teneo, reflected on how understanding of corporate culture has evolved. Culture has historically been viewed as a nebulous concept – simply ‘the way we do things around here’ – but it is now considered to be much more tangible. David pointed out that although an organisation does not ‘own’ its culture, culture can nevertheless be understood, managed and influenced. In his experience, a toxic culture refers to an environment in which people feel at risk in some way, and as such are not able to perform in an optimal manner. 

In David’s view, the main drivers of toxic culture tend to occur in three scenarios:

1. Small organisations headed up by a charismatic leader who is more interested in the operations side of the business than its people.
    
2. Larger scale situations where whole teams are dysfunctional, resulting in institutional problems.
    
3. Situations where particular line managers cause a problem for the people they strive to manage.

Quite apart from the numerous examples of toxic situations cited regularly in the news, we can probably all think of examples of all three scenarios from our own experience.

In many cases, what is missing is good management. As David observed, management training is no longer seen as a ‘must-have’ in many organisations; and indeed in the race to sharpen the financial bottom-line, many organisations have removed their ‘clay layer’, in other words their middle management, the people who look after the people who do the work and who would have been able to spot (and potentially delay/mitigate) any challenging cultural issues as they were forming.

This deficit has been exacerbated by rapid societal and demographic change in the workplace, hybrid working, and an ‘alphabet soup’ of other pressures, ambitions, expectations and obligations ranging from LGBTQ+ to Me Too to mental health, all of which organisations need to understand and take on board. Yet whilst organisations are facing unprecedented challenges around their cultures, they must also grapple with revenue pressures at a time of economic downtown, against a background of geopolitical instability. How can organisations balance their need to keep their employees engaged whilst maintaining strong revenue flow? It is not an easy question to answer.

The government angle: a case study in cultural challenges

Dr Hannah White, director of the Institute for Government shifted the focus of the discussion to the heart of the UK government. As she sagely observed, culture really matters in Westminster because it is from where we are governed and where our legislation is made. In a democracy, our elected representatives are expected to adhere to the highest possible standards and set an example to the rest of us. Unfortunately there have been numerous examples over recent years where this has not been the case. Once upon a time Westminster was viewed as an exceptional, special case in a positive sense, but presently it seems to be demonstrating many of the characteristics that David Ferrabee identified. In Hannah’s opinion, there are three main reasons for this:

1. A significant number of people have high levels of power and democratic legitimacy but may not have experience of leadership or management or of what a healthy culture looks like. They may see personal development, support or training as a personal weakness and are unlikely to seek help, or even acknowledge it openly. For example in the Dominic Raab bullying case, there was an open clash of views about the meaning of effective leadership and how to get the best out of teams. Without understanding what a positive culture is, it is near impossible to nurture it. Moreover, the person ultimately in charge of the culture at Westminster is the prime minister: if the prime minister does not choose to reward and model positive behaviours, there is no incentive for ministers to follow suit.
    
2. The adverse effect of power dynamics caused by the clash between elected and non-elected officials. For example, in the recent Covid inquiry Helen Macnamara gave evidence that a ‘hero culture’ created by ‘men who had come to save the day’ meant that women were not able to have their voices heard.
    
3. There are few incentives to create a positive culture. There are no rewards for effective leadership. Instead, rewards flow from media performances, compliance, support, being ‘part of the club’, fitting in. There is little accountability for bad behaviour and often bad behaviours are not punished. Whistleblowing can be catastrophic for individual careers and makes no difference to the overall culture.

All these issues lead to a culture that discourages innovation and adaptation, but happily it is not all doom and gloom in Westminster. The introduction of new systems and processes in recent years has led to an ‘outing’ of historical cases which have now been dealt with and which, with any luck, should have a prophylactic effect in the future. Readers who may be interested in ministers’ reflections on how to do well in Westminster can read their exit interviews.

The board’s role: setting the tone for organisational culture

Fiona Hathorn, CEO and founder of Women on Boards UK, brought the discussion to the boardroom. As she pointed out, boards are responsible for the long-term survivability of their organisations: not just responsible for governance and financial oversight, they also play a critical role in setting the tone for and shaping an organisation’s culture.  However, boards often lack diversity and the necessary expertise in leadership and culture management. This gap can lead to a disconnect between the board’s directives and the organisation’s cultural realities.

Because boards are responsible for risk management, and because both risks and crises can arise from an organisation’s culture, leadership training throughout the business is an essential mitigation. Moreover, skills audits should be a priority at board level and any missing gaps should be filled. According to the Financial Conduct Authority (FCA), the manner in which a board approaches DEI is indicative of how it approaches its culture and may provide some clues as to how it might approach financial crime. Perhaps, then, it is not surprising that the FCA requires FTSE 350 companies to be able to understand and explain their corporate culture.

Yet according to new research conducted by Women on Boards and set out in its 2023 report Hidden Talent, boardrooms are still not diverse. And, in the same way that there is a paucity of communications and reputation management expertise in the boardroom, there is little or no expertise in culture or HR either. Interestingly, the research also found that most of the board tend to be non-executive directors (75 per cent) and of the 25 per cent remaining, most tend to be CEO or CFO and only 10 per cent are women. 

While boards should have a strategic plan for their organisations, which includes culture, in reality they lack the appropriate skills. In addition, owing to financial pressures, many boards have lost touch with the very affinity groups and specific networks that might help them to understand and manage their culture better. Managing culture in a complex, volatile and uncertain world is not an easy task, one which requires effective and inclusive leadership. A good first step for any board would be to examine its culture and seek to understand it so that it can be adjusted as necessary. Directors should actively consider questions such as: Is DEI helping or hindering performance? What insights are being received from employees and stakeholders? What metrics are used and are they appropriate? What is the gender pay gap? All these considerations will help the board to understand its organisation more readily and to mitigate or manage the risk involved in any sub-optimal or toxic culture, thereby avoiding crisis.

Best advice for leaders and organisations

The insights shared in this event have shed new light on the multifaceted nature of corporate culture from three very different perspectives. It is clear that culture is not just a backdrop, but a driving force that can shape the success and resilience of an organisation. A positive corporate culture can bring about growth, sustainability and longevity whilst a sub-optimal culture can have far-reaching implications which in extreme cases may lead to existential crisis. 

Organisations should take proactive steps to address these challenges in three main areas, which taken together underpin the creation and/or maintenance of a positive culture:

1. Governance: the board has a crucial role to play in fostering positive culture.
    
2. Strategy: development of a positive culture is an essential part of organisational strategy. It should be supported by effective and transparent processes and procedures that create a sense of fairness, trust and security.
    
3. Leadership and management training: good leadership is difficult to achieve at the best of times and even harder in today’s complex and volatile environment. Combined with the removal of the middle layer of management and an increasing lack of basic training in business and people management skills, the risk of creating a sub-optimal culture becomes obvious. Investment in leadership and management training plays an essential part in the creation of a positive culture.

As a final word, it is important to note that the communications function should never take the blame for a sub-optimal or toxic culture because that blame should lie at the door of the organisation itself. However since communications professionals regularly engage with employees and stakeholders, they are able to hold a mirror up to their organisations and flag any issues around culture. Perhaps most importantly, they can get ahead of any cultural crisis in the making through proper preparation and planning; and they can help to create and/or support robust processes that create a sense of fairness, trust and security.

Katherine Sykes is co-chair of the Crisis Communications Network where this blog was first published. Read the original post.