Research & Strategy

By Jaime Diaz Rio Varez - Content and Strategy Intern - 31 Jul 2019

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With increasing interest from investors, Executives are now beginning to see company culture as an asset that contributes to long-term value and success. In simple terms, company culture is the personality of the company; it defines the environment in which employees work. But with no “how to” guidelines, demonstrating and reporting against culture is a difficult challenge.

So, what is culture?

Company culture is unique and is defined as a combination of values, attitudes and behaviours; it looks beyond office etiquette and encompasses how a company values and interacts with its investors, employees, customers, suppliers and the wider community. A healthy culture is essential for business success; in fact, research carried out in the UK by Breathe shows that poor organisational culture costs the British economy a staggering £23.6bn per year and roughly a third of employees leave their jobs due to poor company culture. It is something that just cannot be ignored in today’s competitive environment.

Why is it important?

In the latest version of the UK Corporate Governance Code, the FRC has taken a stronger stance on culture reporting; it has made it clear that it’s the Board’s responsibility to define, and communicate, what culture means for the business from top to bottom. A healthy culture should be used as a competitive advantage and as a marketing tool during recruitment to attract the best talent.

Shareholders are keen to understand a company’s culture as well. Clear communication of the purpose, values and vision of a business allows investors to understand how Directors’ benchmark their decisions and helps build trust.

One of the most significant corporate scandals relating to culture in recent times, uncovered by The Guardian in 2015, was at Sports Direct, where employees faced extremely difficult working conditions, with the environment described as that of a “Victorian workhouse”. Employees would be sacked if they received six strikes (which included “excessive toilet breaks” or “excessive chatting”), were banned from wearing 802 brands whilst working and had to go through rigorous searches at the start and end of each workday. As a result, investors raised their concerns to the Board and higher working standards were implemented.

What can be done to improve culture reporting?

Boards must determine, manage, evaluate and transmit the company’s culture clearly across the business with integrity and by leading through example. Different stakeholder groups may have different views of a company’s culture; therefore, it is the role of the Board to ensure that there are positive views about the underlying culture within the company. We thought it may be a tough task to start with, so here are a few recommendations:

  • Communication! – Communication is key in healthy working environments. Make sure that your organisation has the appropriate communication channels where employees can freely voice their opinion. Land Securities is a great example of a company that has taken a strong stance on culture, implementing various schemes (E.g. Real Estate Balance) with the aim of improving engagement, diversity, wellbeing and rewards for employees.
  • Recruitment, training and induction – One of the first things that a prospective candidate for a role sees is the values that embody the company. It is essential that culture encourages a welcoming and collaborative workplace where employees feel comfortable.
  • Employee engagement – Identify, measure and assess what ways your company could engage with employees, but make sure there is more than a once-a-year survey. Experian is an example of a company that has adopted successful engagement practices through innovation. Its employees are incentivised to create compelling new ideas through collaboration across the business, leading to the best ideas being funded by Experian.
  • Linking culture to strategy – It is inevitable that culture is going to affect how the company is run. Make sure you link the culture to other parts of the annual report. British Land, in its most recent annual report, links its culture to the overall strategy of the group, and explains the role culture plays in its business model and its attempts at becoming a more inclusive organisation.

All companies have their own culture; however, they must identify and reflect on their culture before taking any further steps. Rushing this process will not help them in any way. Investors, although they do not hold a strong position in determining the culture of a company, must use culture reporting as an indicator of the company’s long-term prospects as well. It is not as simple as hosting yoga classes or having team -lunches; a company’s culture runs a lot deeper and, in some cases, may not always be acknowledged. Culture must be thought through and everyone in the company should believe in it.

Explaining your business’ culture is challenging and can require time and resource. To see how we can support you on this journey, please contact daniel.redman@design-portfolio.co.