A Thinking Business publication
In May 2023, the Confederation of British Industry announced it was hiring a team of ethics advisors to lead an overhaul of its operations following the appointment of a new director general.
The embattled business lobby group, which is meant to provide a voice to those in power for British companies of all sizes, is teetering on the brink of collapse after a series of claims of harassment and sexual assault in its ranks. In the wake of the allegations, the CBI has admitted that it has in the past hired “culturally toxic” staff and failed to fire people for misconduct. Some of its most high-profile members have deserted the organisation, including John Lewis and BMW, while a raft of others like Tesco and Sainsbury’s have suspended their engagement.
Coming hard on the heels of allegations of bullying in the civil service by former Deputy Prime Minister Dominic Raab, and a damning review of the culture and standards in the Metropolitan Police by Baroness Casey, organisational culture is once again top of the agenda. What is clear is that people are no longer willing to tolerate toxic behaviour in businesses that they engage with and are increasingly prepared to speak up.
Rebecca McGuirk, an employment partner at Trowers & Hamlins, says: “Getting culture right is not about having the right words on a piece of paper, it is about walking the walk. You can have great high-performing individuals in your business but if their values do not align with the culture you want, you cannot afford to be reluctant to deal with them. Failing to address issues means you can end up with a toxic culture in a very short space of time, if people think they can get away with things. And people won’t tolerate being associated with organisations like that.”
In the same way as the CBI is facing desertion by its members, other businesses risk losing the backing of customers, suppliers, investors and other stakeholders if they are not deemed to be good people to deal with.
In a market where there is much more demand for talent than supply, getting culture right can have an especially significant impact on employment.
“If your culture isn’t right at the moment, then employees will leave because they know they can walk into another job,” says McGuirk. “If businesses don’t behave in the right way, it is easy to tell others about it. People are much more willing and able to share their experiences online or on social media, so there is no doubt that this can directly impact on the performance of your business.”
There is also growing evidence that potential employees consider workplace culture when looking for jobs. A landmark 2019 survey by Glassdoor of 5,000 workers in the UK, US, France and Germany found 77% would consider a company’s culture before seeking a job there and 56% felt a good workplace culture was more important than salary.
Culture also plays a big role in employee turnover. Research by the MIT Sloan School of Management found that toxic work environment complaints were the number one reason driving turnover in a variety of industries, overshadowing other issues.
Experiences like that of the CBI should serve to remind business leaders of the importance of taking culture seriously. “Many leaders don’t appreciate the importance of this and its ability to impact on the bottom line,” says McGuirk. “If you’re going to take this seriously you need your HR director to have a seat at the top table with a genuine ability to feedback on what is actually happening across your organisation.”
The HR role is evolving as culture moves up the agenda. Danielle Ingham, another employment partner at Trowers, says: “HR and people teams have a valuable role to play here in being more robust about dealing with problematic individuals and addressing cultural issues bubbling under the surface. With this in mind, we are seeing the HR role steadily evolving from day-to-day operational issues towards taking on bigger strategic challenges like culture.”
There is also a growing focus on the 'psychological contract' that exists between employers and their employees, representing an unspoken set of ethics and shared values on which both can rely. It is important to make sure that this contract remains as strong as possible for a wide range of reasons, not least employment, retention, reputation and wellbeing.
Ingham says: “Sometimes maintaining that psychological contract can involve doing things that are difficult, like having tough conversations about things that might be going wrong and what can be done better. Fundamentally, if an employer is not delivering on what they said they were going to do, that chips away at the culture and it is hard to come back from the damage that causes.”
Often a strong corporate culture is driven by authentic leadership setting the right tone from the top. McGuirk says: “People in leadership roles want to deliver good, positive messages but actually in reality the state of the economy means that everyone is having a difficult time right now. More leaders should be prepared to have those honest conversations and give the complete picture, because trust is fundamental to that psychological contract.”
In a recent poll conducted by Trowers & Hamlins looking at trust in leadership, the vast majority of their respondents felt that fewer than a third of employees had full trust in their leaders.
Each employer will be at their own starting point on the journey to getting culture right. Ingham says: “Every business needs to start by establishing what they want their culture to look like, thinking about things like values and ethics and how they want the working environment to operate. Involving employees in those conversations is useful in bringing everyone along on the journey.”
She adds: “Your policies should support what you are saying about your culture, so if you are saying that you are flexible, inclusive and support social initiatives, those values and practices need to feed through into those documents. But living these things in practice requires a constant cycle of checking in on what is happening on the ground.”
Embedding a solid company culture that is an asset to the organisation is not an overnight job. McGuirk says: “As a leadership team, it is about having a really hard look in the mirror and asking if the culture is really what you think it is. Organisations need to find out from their colleagues what they think about the business culture, and then keep revisiting that and checking in to make sure it is always what you would like it to be.”
Surveys show the younger generation of workers value culture even more, making this a topic that is only going to keep growing in importance.
