Mind the gap – essential steps for embedding an ethical corporate culture throughout an organisation

When it comes to corporate culture do managers look through rose-tinted glasses? According to GoodCorporation’s latest UK survey of workforce perceptions of organisational culture, senior managers and above are far more likely to feel their organisation has an ethical corporate culture than their non-managerial counterparts.  While 72 per cent of senior managers consider their organisation has an ethical culture, this falls to just 54 per cent among blue-collar workers.

In fact, blue-collar workers felt less positive than those in managerial posts about every culture indicator examined in the UK survey, in some cases by almost 20 percentage points. Less than half (47%) the of those in skilled, semi-skilled and unskilled work felt proud to say they worked for their organisation, compared to two thirds (66%) of those in managerial positions.

The gap was similar when workers were asked if they felt they could grow and develop in their organisations. While 57 per cent of those in managerial roles did feel this applied to them, fewer than 40 per cent of blue-collar workers felt they had the potential to develop within their organisations.

There were also significant gaps and low scores among blue-collar workers when asked about the ethical tone the organisation sets and their belief in managers to do the right thing. Less than half of blue-collar workers feel their organisation sets an example in the way business is conducted, compared to over 64 per cent of those in clerical or managerial roles. And only 42 per cent of blue-collar workers feel their managers would not bend the rules to get things done, compared to 53 per cent of white-collar workers.

What is organisational culture?

Whether by default or design, every organisation has a culture; it is the ecosystem that determines behaviour and ultimately dictates how operations are conducted. It can influence recruitment and affect how objectives are achieved, yet it often remains a crucial if intangible asset.

Organisational behaviour is under greater scrutiny than ever before, with the spotlight focused on unethical practices. Whether it be managing staff through Covid, responding to #MeToo allegations, addressing accusations of bullying or mitigating environmental impacts, it matters what kind of culture is created. Highly successful businesses can be tarnished overnight, and often for good, if allegations of unethical behaviour hit the headlines. Brewdog, with its reputation for clever marketing that often captured the public mood, found itself on the front pages for all the wrong reasons this summer. An open letter signed by former staff described a culture of fear that permeated the organisation, suggesting that toxic attitudes towards junior staff “were simply an intrinsic part of the company”. The cocktail of COVID mixed with a toxic culture is thought to have contributed to the company’s £7.4 million loss, in what co-founder James Watt describes as the “toughest year” in the company’s history.

Brewdog is not alone in discovering the hard way that a toxic work culture can exert a hefty price. According to HR software provider Breathe, a toxic workplace culture costs UK businesses around £15.7 billion per year. The company also reported that in 2020, one in five employees left their jobs because of poor workplace culture.

Culture is clearly a critical component in staff retention. In our assessment work, we see how robust, ethical cultures, which support staff to do the right thing boost morale and improve employee relationships. This, in turn, enhances reputation while also improving productivity and contributing to sustainable growth.

However, as the Brewdog case shows, if perceptions of culture are not consistent or embedded throughout the organisation, any positive benefits are compromised, resulting in reputational and financial damage.

Key steps to embedding an ethical corporate culture

Step 1: Regularly review and monitor the code of conduct: Instilling the right code of conduct, or code of ethics, is critical to building a robust and organisational culture. Ensure that it contains the latest in best practice to maintain the highest standards of behaviour and support compliance with all relevant regulation. The code should be a living document that permeates the whole organisation like writing in a stick of rock, so keep it under review and regularly monitor how well it is implemented on the ground.

Step 2: Lead by example: Senior management should set the tone and lead by example, seeking opportunities to articulate company culture, reinforce values and illustrate how the organisation conducts its business. This is borne out by our assessment work when we see first-hand that unless good examples are set by senior managers, it can become a struggle to embed good practice further down the chain of command.

Step 3: Involve middle management: Middle management is crucial to ensuring that culture is understood and embedded throughout every layer of the organisation. Ensure that embedding culture and the code of conduct forms part of management training to enable managers at all levels to convey the right messages around culture, behaviour, expectations and support.

Step 4: Communication and training: Place a high priority on the training and development of staff. In our experience, organisations that are committed to growing and developing staff build loyalty that helps strengthen culture and ensure high standards of behaviour. In particular, regular training on the code of conduct should be carried out, ensuring it engages the workforce at all levels, includes references to culture, and spells out expectations of ethical behaviour very clearly.

Step 5: Create a speak-up culture: In an organisation with a healthy, ethical culture, staff will feel able to raise concerns, knowing they will be taken seriously and the concern dealt with fairly. Make sure that all staff are aware of the speak-up systems available, possibly using ethics ambassadors to act as advocates for the system to promote its efficacy.

More generally, it is also important to listen to staff and encourage the sharing of views and ideas. Whether and how this is done can be a revealing indicator of workplace culture. In the UK, according to the GoodCorporation survey, while 61% of workers overall feel their organisation values the opinions of employees and actively seeks their views, this falls to 48% among blue-collar workers. Managers should be concerned that less than half of the non-managerial workforce feel this way. Such a gap can have a damaging impact on culture, exacerbating worker dissatisfaction which may impede productivityand growth.

Step 6: Measure and monitor culture: The UK Corporate Governance Code requires listed companies to assess and monitor culture to ensure that policy, practice and behaviours are aligned with the company’s purpose, values and strategy. Any activities and actions taken by the Board in this area, should be included in the annual report. However, according to the FRC, many organisations have found this a challenge and few reports have effectively responded to this requirement.

Understanding the indicators of an ethical corporate culture

Before culture can be measured and monitored it needs to be understood. However, culture can be intangible and hard to define, particularly when there are no clear links to an organisation’s core values. From our experience in assessing and evaluating the practices and procedures that govern how an organisation conducts its business, there are clear culture indicators common to most enterprises.

• Whether ethical behaviour is driven from the top of the organisation,
• The role of senior management in leading by example;
• How stakeholders are treated, be they staff, suppliers, customers or shareholders;
• The use of effective speak-up systems,
• How health, safety and wellbeing are managed across the organisation, and
• The training and development provided to employees

GoodCorporation believes qualitative and quantitative analysis of these ethical KPIs can provide an accurate assessment of workplace culture that can be measured and monitored over time. Our ethical culture measurement system provides business leaders with a detailed evaluation of these culture metrics, alongside quantifiable data. These analytics can produce a net ethical culture score for use in board reports, annual reports, viability statements or ESG reports for investors.

Analysing culture in such a systematic way enables boards to keep organisational culture under review. This ensures that any weaknesses in culture can be identified at the earliest opportunity and that gaps in perception between sections of the workforce are noted and addressed.

Whatever the approach to building, embedding and monitoring culture, it is vital to ensure that the values and expectations are consistently applied throughout the organisation. Failure to do so may expose the organisation to risk, potentially resulting in significant reputational damage.