Three days of peace and music. That is what started on this date some 44 years ago, when the Woodstock Music Festival opened on Max Yasgur’s farm in White Lake, a hamlet in the upstate New York town of Bethel. The estimates of those in attendance was upwards of 500,000; although since it turned into a free concert, there was no formal record of ticket sales. As to the culture of the event; Yasgur himself said in a stage announcement, “You kids have proved something to the world. That half a million kids can get together for 3 days of fun and music and have nothing but fun and music.”
How does one measure the effect of something like Woodstock, which is still identified as one of the great cultural markers of the 1960s? I thought about that question when reading an article in the July edition of the Compliance Week Magazine by Jose Tabuena, entitled “Can You Audit Corporate Culture?” He begins his piece with some ways to look at corporate culture. He writes that “Academics define corporate culture as the organization’s values, visions, norms, working language, systems, symbols, beliefs, and habits. Organizational culture affects the way people and groups interact with each other, with clients, and with stakeholders. Although a company may have its own unique culture, in larger organizations, there are diverse and sometimes conflicting subcultures that co-exist due to different characteristics of the management team. Complicating matters for global companies is that organizations can have very differing cultures over geographic regions or across functions.” He also recognizes that many Chief Compliance Officers (CCOs) view it as a “soft issue that leaders aren’t sure how to address.”
But this difficulty does not mean that a CCO should not try to do so. Tabuena believes that “an important feature of a good culture is that the majority of employees can be positively influenced by values and environments that reinforce strong company values. Such a climate arises when the workforce believes that certain forms of ethical reasoning and behavior are expected norms for decision making. The ethical climate of an organization serves many useful functions in organizations. It helps employees identify ethical issues and address those issues by giving answers to “What should I do?” when faced with an ethical dilemma.” Interestingly, Tabuena see the corporate tactic to blame the ubiquitous ‘rogue employee’ is an “attempt to deny the flaws in the system and the culture that spawned the bad acts in the first place.”
Some of the techniques for measurement include employee interviews, focus groups and employee surveys to measure corporate culture. This is because through “identifying cultural strengths and areas needing improvement, a cultural assessment can guide the creation of communications plans and culture-building initiatives that are tailored to the company’s needs. In many cases, an effective strategy may be to target weak spots while simultaneously anchoring the overall message to positive values already strongly shared across the organization.” It is important to understand that corporate culture will be uniform across geographies, functional areas or operating systems. But this can be useful in comparing the results.
Tabuena set out areas of corporate culture measurement for the internal auditor to consider in any evaluation. They included:
Operational Pressures. These can greatly influence a company’s culture, making it periodically necessary to determine whether the company is on track. Measurement is essential but it also can be difficult. However, measurement is worth attention because human behavior is notoriously difficult to predict. Even in a company that astutely manages cultural change, it’s rare to have addressed everything the first time out. Internal audits and other forms of evaluation and measurement allow for course correction and reinforcement as needed.
Retaliation Factors. Tabuena refers to certain studies which suggest that the highest indicator of workplace misconduct is fear of retaliation and the confidence employees feel when raising issues. While employee fear of retaliation is not only significant in and of itself, it may well be a proxy of other problematic cultural factors such as specific or even general distrust of management. Measurements would review data on employee willingness to address matters with their immediate supervisor or to use the compliance hotline, additionally employee views on what would happen if they reported misconduct can be meaningful. An even better approach would be to measure a company on how issues are reported and ultimately addressed.
Rewards and Incentives. Tabuena writes that employee recognition, reward, and incentive programs can convey positive cultural messages. He cited to the example of Wal-Mart, which recently announced that it will begin basing a portion of compensation for top executives on the company’s ability to meet compliance goals. If executives do not meet their compliance objectives, they risk having their annual bonuses reduced. Therefore one measure to develop is the degree to which ethical business practices have been factored into executive-level performance evaluations and/or compensation criteria.
Management Operating Style. Tabuena notes that an examiner should question employee turnover and retention for information where turnover has not achieved acceptable levels. Through employee interviews, he believes that one can ascertain whether the turnover rate is attributed to organizational transition or stress stemming from management’s philosophy and operating style, which might include such things as inappropriate compensation packages, unreasonable sales goals, requirements, etc.
Talent Management System. It is an axiom that a company can actively recruit new hires based on culturally consistent, desired behaviors and reinforce these when people join the company. All of this can be done through a rigorous hiring process, which incorporates a company’s ethical values into the process. However, to measure this area, you should sample the records of employees who have had poor performance evaluations in the past years, and determine whether those employees had appropriate qualifications relative to their job descriptions. The review should be performed with an eye toward ascertaining whether the company’s hiring practices appropriately matched employee qualifications, skill set, and delegated authority to their formal position and job description.
Tabuena ends his article by reiterating the need for companies to have a high-performance corporate culture for doing business ethically. He believes that having one is key to staying competitive, stating “Beyond ethical climate, the collective corporate culture can be an important driver of financial results and an element of other key business issues, such as talent acquisition and management and innovation-fueled growth.” Strong words indeed to encourage a company to have the strongest corporate culture for doing business ethically and in compliance.
As to Woodstock, how about this for a measurement, it was the greatest rock and roll music festival ever.
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© Thomas R. Fox, 2013