A blame culture, extreme obedience, pressure to succeed or achieve unrealistic targets – in the top trumps of business failings, culture almost inevitably emerges as a significant root cause of misconduct.

The toxic management ethos highlighted by MPs during the investigation into the Post Office scandal, or the culture of financial deviance highlighted in academic analysis of the fall of Carillion are cases in point. But corporate collapses and newspaper headlines aside, a poor culture is bad for business.

Poor culture is typified by low morale, disengagement, increased stress and burnout, and a failure to attract new talent. The result is often reduced productivity, high employee turnover, and lower service and quality standards – all factors that can damage the company’s reputation with stakeholders and cost the business dearly, or even put it out of business altogether.

Boardroom disconnect

Your corporate mantra may extol the virtues of a positive culture and those at the top may believe they’re leading by example. However, a disconnect between the boardroom perspective and the reality at the coalface can prevail. It's the tone from the middle that really dictates the cultural reality of your organisation.

Peter van Veen, ICAEW’s Director of Corporate Governance & Stewardship, says: “The challenge facing boards is how do they know if they have the right culture? And how do you then monitor the ongoing health of the company’s culture?”

The UK Corporate Governance Code provides an added impetus, requiring boards to assess and monitor culture to ensure it aligns with the company's purpose, values and strategy. FRC guidance encourages using both quantitative and qualitative data to ensure culture is embedded.

Staff surveys

Van Veen says the staff survey is probably the most useful weapon in your armoury when it comes to taking an organisational pulse and getting to the bottom of any cultural issues you suspect may be lurking. “It builds a picture of the whole organisation,” van Veen says.

Your choice of metrics is key to giving you the insight you need and ensuring this doesn’t become a checkbox exercise, van Veen urges. For that very reason, he is cautious about recommending a standard set of KPIs.

“What is crucial is to ensure the metrics highlight the key areas of disconnect or concern in terms of values and behaviours,” he says. For example, do staff feel supported? Are they able to focus on the long term or does the short term always takes precedence? Do staff trust their line managers? Do they think the leadership leads by example? Do they feel comfortable raising concerns? “It all boils down to asking the right questions,” van Veen adds.

Taking an intersectional view

An intersectional view that takes into consideration connecting metrics is key. Triangulating staff surveys with data points across areas of HR including staff turnover, remuneration and incentives helps build the picture further, as well as including insights from Compliance and Internal Audit teams on trends and patterns.

Are the issues location specific? Are a small number of managers the cause? Or is it something more fundamental and widespread? “Is the way bonuses are structured leading to risky behaviour, for example? Where there's a long sales cycle, you don't want to incentivise people on very short-term goals,” van Veen says.

More granular analysis can highlight where the behaviour of managers is creating a negative work environment, or it may highlight something more fundamental about the company’s vision no longer connecting with staff.

Ensuring an objective perspective

Using an independent third-party organisation to survey staff with a guarantee of anonymity will help to reassure staff that honest feedback, no matter how negative, will not come back to haunt them in the future.

“External providers can provide an objective view for the board and for leadership as to the health of your culture, that's quite hard to do internally,” van Veen says. They can also benchmark the results in the context of other organisations.

A survey asking a dozen or so questions once a year will probably work for most organisations, although more regular surveys can be beneficial during or after periods of significant flux.

The value of lived experiences

Of course, measuring culture through surveys or conduct metrics will only tell you what people say, not necessarily how people behave or the reality of their lived experiences. “Real culture lives in the day-to-day experiences of non-managerial and customer-facing staff,” says Duncan Lancashire, a Director of Fusion Coaching. “Their perspective shows whether values genuinely shape behaviour and whether people feel psychologically safe.”

Without engaging those voices, culture measurement can give the illusion of a healthy culture while deeper issues remain hidden, Lancashire says. “Facilitated staff workshops reveal the nuances data can’t capture. For instance, metrics may show appraisals link to company values, yet employees might say this rarely happens. 

“Combining hard data with these human insights gives a far richer and more accurate picture of culture, and repeating the process annually allows leaders to track genuine change rather than just compliance,” Lancashire adds.

Avoiding false positives

Further analysis of the findings of staff surveys when supported by a broad range of data from across an organisation and regular deep dives can also prevent false positives in your interpretation, says Rafal Budzinski, the founder of Candeo Coaching & Consulting. “For example, a higher whistleblowing score might be because people feel comfortable raising concerns or because there's an issue they want to raise. For that reason, boards can't just rely on a single score in their culture dashboards to understand what’s going on.”

Act on findings

The requirements of the Corporate Governance Code have led to many approaching culture measurement as a compliance exercise. But culture audits are counterproductive unless any issues flagged up are addressed, as people will feel as if they're not being listened to.

“If management fails to act on the review’s findings because it doesn’t like what it uncovered, it risks not only disengaging its workforce but also seriously denting the social contract by creating a culture of mistrust,” Budzinski says. “Good governance depends on a positive culture grounded in transparency, trust and challenge, enabling innovation and sustainable performance.”

Bear in mind too that the combined complexity of human nature and businesses mean that culture is sometimes a feeling rather than a number, Budzinski warns. “While increasingly more elements of culture can be measured thanks to greater adoption of behavioural science and AI tools, some can only be observed, so it's important for boards to go out into the business to talk to people in a non-orchestrated way to see how the culture feels.”