Seven Key Drivers of Good Culture

Culture is a set of shared values or assumptions. It can be described as the ‘mindset’ of an organisation. Culture is the ‘unwritten rules’ that govern how things actually work in an organisation. It shapes and influences people’s attitudes and behaviours towards, for example, customers and compliance.

While there are several industry guidelines in terms of what are the key drivers of a 'good' risk culture, I am sharing below the 7 key factors or drivers that organizations should take into consideration:

First – tone from the top:

The board and senior management are responsible for creating a culture where everyone has ownership and responsibility for ‘doing the right thing’. The board and senior management should set the values and principles of an organisation’s culture and ensure they are reflected in the organisation’s strategy, business model, risk appetite, and compliance and governance frameworks. The board and senior management should lead by example by demonstrating the conduct that supports the organisation’s values.

Second – cascading values to the rest of the organisation:

Senior management needs to ensure the organisation’s values are cascaded and understood throughout the organisation. This is important because quite often the message gets lost in the middle and is not received by the frontline. It is important that middle and frontline managers model the organisation’s values, because this is how new and junior employees learn ‘how things are done around here’.

Third – translating values into business practices:

Senior management should ensure the organisation’s values are incorporated into all of its business practices. For example, how problems and mistakes are identified internally, elevated and fixed. Translating the organisation’s core values into business practices is important, because it ensures there isn’t a gap between the organisation’s desired values and the actual conduct that occurs.

Fourth – accountability: – Senior management should ensure the compliance and governance frameworks that are in place are monitored and enforced.

Fifth – effective communication and challenge:

The board and senior management should promote a culture of open communication and effective challenge to allow current practices to be tested. The board and senior management should encourage a positive critical attitude among employees, and promote an environment of open and constructive engagement.

Sixth – recruitment, training and rewards:

The board and senior management should include behaviors and attitudes that lead to good conduct and outcomes for customers as part of the selection of all staff. The board and senior management should ensure training is available to maintain staff knowledge about the organisation’s values and the attitudes and behaviors expected of staff.

The board and senior management should also ensure that the company’s remuneration and incentives (including promotions) across the organisation are linked to good conduct and good outcomes for customers. Rewards play a big role in driving culture and conduct, because they impact on priorities and act as a motivator and reinforcer of conduct. It is therefore crucial that organisations recognise performance in a way that not only promotes good conduct, but penalises poor conduct as well.

Seventh – governance and controls:

Under the board’s stewardship, the leadership team should promote, monitor and assess the impact of the organisation’s culture on conduct and make changes where necessary. It’s important that there is direct access to the board and leadership team. It’s also important that there is a process in place for periodic reporting to the board on culture, conduct and compliance issues.