The response by national governments and regulatory bodies to the corporate and political scandals of recent years has been a process of ever-increasing regulation. Businesses, as they battle to regain the trust of the public, need to understand how culture and not just rules influences employee behaviour and the propensity to do the right thing — even when no one is watching.
The theme of culture and values in business has been attracting increasing attention in recent weeks. In November, Financial Reporting Council (FRC) Chairman Sir Win Bischoff told some of its members that culture and purpose were “very high” on his organisation’s agenda. The FRC, an independent regulator charged with improving corporate governance, is now working on a project to gather insight and identify best practice in how company boards can shape and embed culture.
This follows news that Lord Hill, the EU Commissioner for Financial Services, has called for feedback on the cumulative impact of an influx of EU regulations over the past few years. Lord Hill has made clear he thinks rules, without values, are not enough, and cautioned too many rules can lead to a culture where people take decreasing personal responsibility for their actions. There’s no doubt in my mind that the motivation for regulation to protect taxpayers, shareholders and employees was well-intentioned. But can culture and ethics be imposed by rules? Can we guide behaviour with procedure and protocol?
I believe regulations are a necessary and critical part of well-functioning businesses and capital markets. But I also think that culture trumps structure. This means the leadership of a company need to be able to live the culture, display it in their everyday activities, explain what it means in practical terms to people and challenge behaviours that go against it. Trying to instil principles and values through checklists and tick-box exercises in isolation is unlikely to succeed. I believe the challenge for all organisations, including our own, is that a reliance on such checklists can mean losing sight of the ultimate aims – to instil company values in all employees and live those values every day.
Even businesses with a strong ethos can quickly find themselves deviating from their intended paths if they lack strong leadership and culture. Fast-paced expansion, particularly internationally, can risk diluting even the most engrained of company values. How do you replicate a local culture across a global organisation? For Deloitte, as an international network of member firms with over 220,000 people serving clients in more than 150 countries, part of the answer lies in having a global purpose that goes beyond profit. Our purpose — to make an impact that matters for our clients, our people and society — defines who we are and gives our people a distinct framework for the future, guiding them in the choices they make every day.
Companies need leaders who demonstrate the values, attitudes and culture of their organisations, but also find ways to show all their stakeholders how they are living their purpose. For example, at Deloitte we use our annual Impact Report to demonstrate how our work makes an impact that matters, whether that’s by creating a digital hub for innovative start-up companies in the former Olympic Park, working to improve the quality of our audits, increasing social mobility through our recruitment programmes or helping social enterprises get the support they need to grow to scale. The report reveals how we are looking to put purpose at the heart of both our culture and our future strategy.
Beyond the report, we seek to embed purpose and culture by talking about them. We use leadership interactions to remind our people that we define our success by the positive impact we have and that we each have a personal responsibility to display the ethics and values that underpin our purpose – by simply doing the right thing. We measure progress on this, calling out behaviour that is not aligned with our purpose, culture and values — and deal with it.
I believe profits and good values are not mutually exclusive — you only have to look at recent corporate scandals to see how a lapse in ethical behaviour can do serious damage to the bottom line. As Sir Win said, “If a business gets its culture right then many good things follow, financially as well as reputationally”. Our research shows companies with a purpose beyond profit are more assured in their prospects, and as a result, invest heavily in initiatives leading to long-term growth. Such a sense of purpose inspires confidence that can lead to a competitive advantage, particularly in times of economic volatility.
At Deloitte, we recognise we have to constantly work at creating an environment where everyone can understand what the right thing to do is, and that purpose and culture are important tools to help us encourage the right behaviour and attitudes. But this isn’t a box we can tick off on our to-do list. There is no finish line to cross. To be a firm where quality, integrity and impact are central to everything we do demands a long-term, continuous commitment to our values, our culture and our purpose.