Michael D. Moberly   June 19, 2012

Society for Human Resource Management Survey…

Company culture and its management are obviously on the minds of HR managers as SHRM commissioned a survey in early 2012 that asked 770 HR leaders to identify significant workforce management and staffing challenges.  The challenges the survey respondents identified were:

• employee engagement
• employee retention
• effective performance management
• employee recruitment, and
• company culture management

To the point of this post, a full ninety percent of the respondents stated that (company) culture management is either important or very important!  That finding is particularly instructive insofar as it should prompt management teams to further recognize that devoting time, energy, and resources to developing and sustaining a positive company culture will deliver impressive and measurable returns.

Most importantly in my view, it can now be stated, with considerable authority, that a well managed company culture, whereby employees, management teams, c-suites, and boards collectively recognize, respect, and are committed to sustaining a principled base of intellectual, structural, and relationship capital, and values (intangible assets) can elevate a company’s overall performance.

Supplementing this view of course, is the economic fact that 65+% of most company’s value, sources of revenue, and building blocks for growth and sustainability today evolve directly from intangible assets one of which is a positive and principled company culture.  It’s certainly not a stretch then, to infer that a principled company culture can also serve as a catalyst for internalizing and enhancing other factors noted in SHRM’s survey, i.e., employee engagement, retention, performance, and certainly, recruitment of new employees.

What is a company culture…?

Based on the fine work of Dr. Edgar Schein, a company culture consists of progressive stages, and will emerge and become observable…

• as employees (collectively) recognize and begin to act on a shared system of values, norms, beliefs, and attitudes that defines and clarifies what is important.
• as employee’s at all levels recognize they learn as they’re solving problems and, if the problem solving methodologies work well enough, employees will consider them valid and worthy of being taught and passed along to new employees, because…
• they represent the correct way to perceive, think, and feel in relation to addressing (internal, external) problems that their company routinely face, which, in turn, leads to efficiencies, competitive advantages, and reputational value, etc.  (Adapted by Michael D. Moberly from the work of Dr. Edgar Shein)

For most companies, the initial step in developing a principled company culture involves…

• determining what attitudes and beliefs need to (should) be established, and
• having a clear understanding how those attitudes and beliefs will be translated and ultimately operationalized, preferably as consistent and positive behaviors throughout a company.

But, as aptly pointed out by Dr. Kenan Jarboe in his Athena Alliance monograph appropriately titled ‘Intangible Asset Monetization: The Promise and the Reality’, there are six factors considered by financial markets (i.e., asset buyers, sellers, and investors) with respect to determining the ‘suitability’ of an (intangible) asset.  Of those six factors, one is an assets’ transferability.  In other words, is a ‘company’s culture transferrable?  Or is it so (company, business unit) specific that it cannot be replicated or sustained through a market change or significant economic downturn as we’re experiencing today?

Unfortunately, the contributory value of a principled company culture seldom, if ever, appears on management teams’ conventional mba oriented dashboards, in part, I believe, because those dashboards remain largely focused on tangible-physical assets vs. intangible (non-physical) assets such as a company culture.

Too, for some management teams, c-suites, and boards, a principled company culture, remains somewhat of a managerial, financial, and competitive advantage mystery in terms of understanding how best to utilize – exploit this influential asset relative to enhancing and measuring employee engagement, retention, performance, and recruitment.

A much desired objective of course, is to build a resilient, self-perpetuating, and principled company culture that is readily scalable and supports development of structural and relationship capital to consistently deliver measurable performance and returns.

But, building a principled company culture is not something which evolves exclusively in a top-down fashion, nor is it a characteristic owned and executed solely by a management team or c-suite as aptly noted by Jennifer King (Software Advice Blog, June 12). Instead, a well-grounded and principled company culture provides permanence, depth, and confidence among employees and their abilities.

A risk intelligent company culture…

My professional preference would be that a company’s culture would also be a risk intelligent culture.  An important step toward developing a ’risk intelligent company culture’ is recognizing that risk is not solely an external phenomena, i.e., all risk does not emanate from outside a company.

An equally important step in developing a risk intelligent (company) culture is rooted in recognizing that company value can be favorably affected by integrating aspects of risk management with human resource management, e.g., a significant percentage of (company) risk evolves from various employee behaviors and actions, including management teams and boards.

In other words, according to Deloitte’s, The People Side Of Risk Intelligence: Aligning Talent And Risk Management, risk touches virtually every aspect of employee (HR) management, and employees touch virtually every aspect of risk management.

A risk intelligent company, Deloitte’s report points out, executes at the point in which there is convergence of…

• risk governance – how a company treats (identifies, assesses) risk and assumes responsibility for risk oversight and strategic decision making.
• risk infrastructure management – how a company assumes responsibility for and understands how to design, implement, oversee, and sustain an effective risk management program.
• risk ownership – how and when employees assume some degree of ownership (responsibility) for identifying, assessing, monitoring, reporting, and mitigating risk.

In light of the economic fact that U.S. businesses lose an estimated 7% of their annual revenue to various forms of occupational fraud, a risk intelligent culture (workforce) can be a strong advantage.

In a risk intelligent company (culture), employees, management teams, c-suites, and boards collectively assume an obligation to…

• understand the adverse consequences of unattended risks
• how existing risk management policies are being interpreted and practiced internally by employees

Too, when management teams, boards, and employees collectively assume responsibility for cultivating company-wide awareness (culture) about risks is a prelude to creating a risk intelligent company culture.

Lastly, and perhaps most importantly, it’s important to recognize two realities insofar as developing a ‘risk intelligent company culture’…

• any change in (company) culture generally precedes changes in employee behavior
• cultural and behavioral changes are less a product of formal risk policies, controls, and pronouncements, than they are the result of effective (employee) incentives and rewards.

As pointed out by former Harvard researchers Matthew Bunn and Anthony Wier, a ‘good company culture is comprised of 20% equipment and 80% people’.  Certainly, no argument here!

(The inspiration for developing this post is attributed to a fine piece authored by Jennifer King at Software Advice) https://blog.softwareadvice.com/articles/hr/culture-chief-1061212/