Leadership. People policies. Governance. Purpose. In this week's StarBlog, Jo Geraghty, Partner at Culture Consultancy, explores how these four factors set the tone for a healthy business and how compliance can help firms achieve them
For many employees, compliance with the growing number of workplace regulations is viewed as a painful, monotonous process that gets in the way of their work—especially if they don’t understand the reasons behind the rules in the first place. Therefore, it's crucial for organizations to embed compliance into the fabric of their culture, so that rules are followed and good behaviors are emulated across all levels of the business.
While culture varies from firm to firm, there is no single "good" culture. The difference between what can be considered good culture and bad culture depends on multiple factors. In the UK, the FCA has identified the following four key drivers that influence business culture:
- Leadership – How leaders should act both in and away from work
- People Policies – Used to incentivize the behaviors of employees
- Governance – The decision-making process at every level of an organization
- Purpose – Why a company exists and its contribution back to society
These factors are about helping a business set the tone for what’s expected from its employees and to instill in them the attitudes and behaviors that will ensure the business’ long-term success.
HOW DOES COMPLIANCE SUPPORT CULTURE?
Somewhat automatically, we tend to think that compliance falls into the area of governance. But compliance needs to be more than just a box-checking exercise that’s siloed away from other areas of a business. Compliance is about enabling organizations to do more and better business. With significant increases in regulation, many firms have reacted by deploying more manual processes and paperwork to keep up and mitigate risk. Why is it that firms choose to react this way?
Essentially, it's down to the fact that people are at the heart of a company’s culture, in the sense of how they interact with each other. It's part of human behavior to seek order and to understand what’s expected of them. It's also human behavior to conserve energy, reputation, and ego. As a result, people will often try to find shortcuts and cover things up, and if they can get away with things they’ll continue to do so. But with manual processes it can be harder to identify these instances of problematic behavior.
That’s why when we think about the four drivers that influence business culture, in the context of creating a culture of compliance as an integrated part of working, firms need to understand the value of each for bringing a more ethical and sustainable structure to a business. For example, Purpose can be used together with compliance and regulations, like the Senior Managers and Certification Regime (SMCR), to hold individuals accountable for their actions. Not only will this help businesses make better and more aligned decisions, it will also enable them to learn from harmful practices that may be prevalent throughout the organization.
Similarly, from a leadership perspective, compliance can be used to create more transparency. Firms need to be able to determine what their culture is today and how they can take actionable steps to resolve issues. Often, firms fail at this hurdle by only setting behaviors expected from their employees and not their leadership. If bad behaviors and attitudes are widespread among a leadership team, it’s almost a certainty that these will filter down into the activities of more junior employees. This makes it vital for firms to instill a culture of compliance from the top down, with clear communication lines at all levels to ensure that all employees can see the correct procedures they must strive to meet.
This leads us into People Policies, which can be used to facilitate an open and honest culture of feedback and fairness. However, people need psychological safety when speaking up, to know they can do so without fear of repercussion. Nobody wants to work in a blame culture when things go wrong. Businesses thus need management lines to have in-the-moment discussions about the risks taken when an individual carries out his or her duties. This is where compliance provides significant value. By taking the right steps and putting the right procedures in place, not only will employees feel more comfortable in having autonomy over their work, but the firm will gain more and better insight into their workflows.
With Governance, the role of compliance is really looking at the "how" of the decision-making process. Some people in a business will want to think and make decisions quickly, while others will want to take their time. But in all cases, reaching a decision must be a mindful process. Compliance can give firms the due diligence required by carefully looking at the different aspects involved before a decision is determined. This in turn will help to promote the attitudes of risk-evaluation that are so crucial to the health of the business.
However, businesses must not become complacent with their cultures. A company’s culture will change over time with new personnel and changing ideology. Therefore, a business must continue to listen to its employees and evolve along with new trends and new regulations. Likewise, people must be educated on why they should want to remain compliant with both internal and external rules. By choosing to lead a business forward with compliance at the center of firm culture, firms can create a real difference in their long-term success and the overall wellbeing of their employees.
Want to learn more about how your organization can use compliance to build a culture that emphasizes the ethical and sustainable performance of a business? Join Jo Geraghty for her talk at Synergy '22 in London!