James Paterson speaks to Jenni Hardy about culture and the HR function – April 2016.

James: We’re going to talk about culture, and behaviour, and how you would know that you have a good culture. Can you please take us through some of the thoughts you have about how to approach this based on your own experiences in HR?

Jenni: In my experience culture is significantly influenced by the strategy of an organisation and its leadership; these are the key transformational influencers. The culture is also affected by the external environment, so what industry sector the organisation is in, what markets and its competitive environment etc.

Then how you measure it, and how you see it, how things work around here, is best evidenced by the observable behaviours, what goes on around here. This can also be complemented by an annual employee survey.

As mentioned before, the culture will be influenced by the CEO and the direction that he or she sets, in terms of objectives and values. When done well, expected values will articulate the sorts of behaviours they want to see; but this will – of course – be influenced by day-to-day management behaviour and the behaviour of the staff around you, creating sub-cultures. Sub-cultures will comprise of factors such as “Am I fairly rewarded”, “Am I recognised”, and “Do I feel my views are heard”?

From my experience in HR, some leaders take these survey results seriously but others pay lip service to what these surveys say.

Can you explore what good looks like from your perspective?

In one business area I worked in the senior leader took the employee engagement survey results very seriously, in fact indeed individual bonuses were impacted by the outcome of those results. However the measure of performance was not simply whether one manager had better results than the other, it was more to do with what had been done to understand the reasons for the survey results and then what action plans had been put in place as a result of this, and how were they progressing. So I believe good practice is where managers use a culture survey as a tool, a source of data, but the main focus is on how it is used to bring to life and progress cultural issues. This can involve focus groups that need to critically think through “what is it that is really going on here?” and “What is the change of leadership style or process improvement that would improve business outcomes”, and “What could we measure over a period of time that would demonstrate to us that there was a positive change taking place?”.

Now where I’ve seen it not so good is where there’s perhaps a halo effect for some countries or functions who are doing well in terms of staff feedback, and because they are generally more positive, its easy for them to look at their results only at face value and say we’re fine because we are above average. Likewise I’ve seen managers getting negative feedback on their results without taking into account important contextual issues, for example changes in personnel or a reorganisation.

So for me the difference between a good culture and a less good culture is not just about the results of a culture survey but whether managers take these results at face value or properly try to dig beneath the surface, understand the drivers behind the feedback and then take the right actions as a consequence.

Can you say more about the proper construction of survey questions appropriate action planning so that any actions taken will have an appropriate impact on business management and performance?

I would distinguish between the “what” and the “how” when thinking through employee questions and feedback. The trick is to always bring the 2 together. You would never introduce, in my opinion, the “how” without the connection with, “and this is going to get us to be able to perform better in the following ways”. An example I can think of is where a function introduced a team recognition approach that was local, only for 150 people, but it was where managers lower down in the organisation were able to nominate teams or individuals, in a short space of time, where they had seen a particularly good piece of work. And to manage this there was a cross sectional review panel, that voted on what they thought were the best examples of where recognition was really deserved, and one criteria for this was how the behaviours observed impacted the performance of the unit. Keeping that connection helps to show how required behaviours, and a better culture, can improve the organisation.

With your experience in HR, can you talk through other factors that you would take into account when thinking about the health of a company culture, perhaps more tangible things you would see from the perspective of an HR professional?

Yes, I think there are 5 key areas to pay attention to.

The first one concerns remuneration policy and practice. So if a CEO or senior manager says certain performance and certain behaviours are critical when assessing the performance of staff that will set an expectation in the organisation that will drive certain behaviours. The starting point is to look at the way that remuneration strategies and policies are thought through in the first place, for example in terms of the elements that make up the remuneration, the weighting of the factors that drive this and also considering how behaviours will be factored in.

In Risk and Audit circles we would think of this as a design level question.

Exactly. For example, if you look at the remuneration policies that might be in place for senior managers and sales staff of a business unit it would be quite common to pay a bonus based on the increase in the sales year on year. But of course each target market could have very different dynamics, making it potentially unfair to measure everybody in a same way and not take other factors into account. How the remuneration policy and bonus criteria are set can tell you a lot about the values of an organisation, and also the real culture that is being sought.

So to recap we can learn about the culture of an organisation by understanding the remuneration strategies that are proposed at a design level.

Yes

And then there is the question of how well these practices are implemented in practice.

Precisely. This is where the personal, subjective, judgment of a manager might influence proposed remuneration levels, even if the “official” remuneration process would lead to different results. However, the challenge arises when a manager “interprets” the rules, this can send a different message through the immediate organisation, that staff can often feel, which might be that ‘the most important driver of performance should be to do what your manager wants’ in which case this becomes an implicit signal about what behaviour is really wanted.

Understood; in other words actions speak louder than words. And using your example, the message that might be sent could be that pleasing your boss is more important than challenging the status quo and improve the business?

Yes

Super, so lets discuss your next area.

My second key area concerns how the organisation recruits and promotes its staff. From a design point of view the criteria to recruit and promote individuals might include the extent to which there is a cultural fit with what the organisation is looking for, and you might try to draw this out through a robust interview process. However, beyond that, after the person is recruited or promoted, its important to follow up 3 to 6 months later, to determine whether the impression they gave matches what is then seen in practice by employees & customers – in other words is the actual performance in line with what was presented or hoped for?

The message I get is that you need to work through both the criteria that are selected in order to recruit or promote the right sort of staff as well as being able to check and learn whether these were in fact present subsequently.

Correct. And building on this, remember that the experience and ways of working you are looking for will depend on the specific role you are recruiting in your organisation, since the accountabilities for a sales role in one organisation may not be the same as those in another due to the precise way each organisation is designed.

This then leads to another important point – which is to what extent does the organisation involve HR and other colleagues in recruitment or promotion to key roles. In my experience the genuine involvement of ‘a second opinion’ in the promotion or recruitment process is an essential good practice; so that leaders and managers are constructively challenged about recruitment decisions or promotions.

You are highlighting the need for rigour in selection and the role of a second line function such as HR to help reduce potential biases when recruiting or promoting someone.

Yes, I’m highlighting the importance of rigour, depth and challenge in promotion and recruitment, supported by others than the manager making the decision, so that you don’t simply have clones or the easy option being appointed.

Its very interesting to hear you outline how the strength of second line functions such as HR can say a lot about the health of the company culture. So what was next on your list of priority areas to pay attention to?

My third area concerns how an organisation manages turnover, specifically what the results of exit interviews tell you about managers and the organisation culture more generally.

People leave organisations for many reasons, but if there’s a particular hotspot with a higher turnover rate, you can look at the business and ask what is it that’s going on within that organisation and how local management decisions might be influencing what’s happening. Of course there could also be competitive or external reasons (such as salary differentials) that might explain why people are leaving. The key thing is to try to understand the underlying drivers. So if I see that the organisation has a robust approach to this area and they don’t just let things happen then I’ll feel that the organisation is not failing to learn from experience.

So can we way that if an organisation doesn’t have a robust process for understanding staff departures, it’s missing something quite fundamental.

Totally. I realise that resources can be a consideration, but the benefit of looking into staff turnover is that it can highlight very important organisation level issues. For example it could highlight the organisation is not properly specifying role requirements, or recruiting with the right level of rigour.

I recognise this from my time in HR, and have seen some organisations paying a lot more attention to the recruitment phase, introducing case studies as a recruitment tool to reduce the chance of costly recruitment disappointments.

Now what about the fourth priority area to bear in mind?

This is leadership behaviour and values. For example when a CEO comes into an organisation and says “These are the 5 things that are critical to me”, you need to watch what happens next – in other words their words and behaviour. How are those things different or the same?

One example I can give is when a new leader, comes in and says “it’s critical for us that we need to manage our money/manage the cash flow in a more rigorous way, so we’d like you all individually to spend the company money like its your own”. And they say employees should be critical about how they spend money in terms of their expenses, or the need to follow procurement guidelines. So this comes out as a really strong message, and there might be policies that come with it, in terms of the need to use low cost travel options.

In a healthy culture all staff and managers will understand the need to follow these new guidelines. However, its critical to then observe the behaviour of senior leaders especially, a few might go against the procurement policies, and so the organisation has to decide what is done if they don’t comply with these new requirements.

So it’s the old chestnut – if you are going to set values, it is crucial that they are lived throughout the organisation.

Yes and moreover its also about the extent to which it might be acceptable for staff to challenge those who are apparently not behaving in line with policies to clarify whether there are some mitigating factors or reasons for what is observed.

To take a personal experience, I remember seeing a colleague getting on the plane and going into business class, and I decided to make a make a light-hearted joke of the fact that they were not following policy and travelling in the back. However they explained that they were travelling home from Asia, so this was in line with policy that enabled me to say “Oh right, ok fine”. So it was by encouraging open conversation between colleagues to drive compliance and ensure inappropriate behaviour is not perpetuated.

So what you are highlighting is that a crucial aspect of a healthy culture is to be feel OK to ask a stupid question, rather than moaning to colleagues in the coffee room after, or waiting to put this concern down as in a culture survey.

Exactly

Which highlights that even if an organisation has got processes that will pick up cultural concerns the real goal is to have a culture in which it is ok to talk about behavioural concerns in real time.

Absolutely, – you want a “real time adjustment” culture, not a culture that is waiting for the next survey to come along during which time issues may have built up into something much bigger.

Great and what about your final key indicator of a healthy culture?

To me this is the organisation approach to diversity and inclusion. This covers many aspects of the organisation: How the organisation embraces representation from different backgrounds, experience, hierarchy etc. So is it genuinely an inclusive culture? It is also links to the earlier point ‘does the organisation’ actually embrace diverse views, and how can we demonstrate that people feel their opinions are valued?

Further, it needs to look at the talent assessment process (which I discussed in my second area) and assess objectively whether it is without biases. Overall it is also about having a culture in which the caretaker – or secretary – is seen to be on an equal level to senior managers in terms of the basic respect with which their views & contributions are given.

So what you are saying is this business of diversity, and inclusion, and making people feel valued, is a key mechanism for maximising employee engagement and as a result giving them encouragement to do their best at work and not just “go through the motions”. And if we link this back to the quality of management and risk management in an organisation, the benefit of diversity is that the organisation should get better, richer, perspectives on the decisions it is planning to make as a result deeper insights into the potential upsides and downsides in relation to what is being done.

Exactly.

And presumably a leading HR function should play a crucial role in driving these good practices in the company and not be timid in holding leadership and management to account in relation to these cultural and behavioural qualities.

Definitely.

And this means that the HR professionals in an organisation need to have an ability to work in both a support and challenge role in relation to the management of the business.

Linked to this comes the need to drive clear accountabilities between management and HR, but equally a culture in which constructive challenge is seen in a positive light.

Great. Now any other areas you want to discuss?

Yes finally I’d like to say a few words about the cultural factors that need to be borne in mind when managing an extended enterprise with outsource suppliers, for example.

Firstly all, when considering an outsource partnership it can be helpful to consider the cultural fit between your organisation and the outsource provider. However, I’ve learned over the years that expecting a complete cultural match should not necessarily be the goal. Of course there need to be some shared long term business goals and some similar values, but in fact it can be important to recognise that 3rd parties will often not have the same cultural drivers and that can be a good thing if the difference is mutually understood because they are in a different industry with different values, and differences in their strategic objectives, employee base and management style. To me good practice is being able to have an open adult conversation about differences and how they need to be managed to achieve success.

As I see it, the goal is to see whether two cultures work together, can they deliver bottom line value for both sides, can they increase each other’s performance. And again, the critical cultural priority should be one of on-going review and dialogue and not bottling things up or escalating issues because they are too difficult to discuss and find a way forward.

Great Jenni. And with several of my clients I have seen an increasing interest in the culture of their third party providers and partners, not simply considering whether they believe in compliance with regulations, but do they value the relationship and seek a win/win outcome.

Exactly.

Jenni. Thanks so much for your great input.