Culture Is Not a Workstream

Organizations are urged to build a good culture, then often treat it as a separate initiative, a program of workshops and values statements sitting above the day-to-day business. Vernon Dennis of Howard Kennedy argues that this is why so many culture efforts stay aspirational: Culture isn’t a detachable workstream but the product of how a business actually operates, from its incentives and controls to how leaders respond when bad news arrives.

Business schools, management consultancies and regulators will extol the virtues of a good culture in the promotion of corporate long-term sustainability. However, while easily said, seeking to characterize a business’s culture is a Sisyphean task. It is ephemeral, shifting and changing, and like the wind, culture cannot be seen but is felt, and its effects are plain to see.

Culture is often said to be a reflection of a business’s character, how it acts and behaves — ultimately, what defines its personality and corporate identity. In that way, it can be identified as something unique and recognizable to the business, but by its nature it eludes definition by a set of rules and procedures.

This creates a business vulnerability where culture can easily be viewed as intangible and unconnected from the day-to-day machinery of governance and strategy.

Culture is not, however, a separate business workstream; it is an expression of how the business actually operates and determines whether governance structures are effective in their design, oversight and execution of strategic direction.

A “good culture” is often associated with work-life balance, flexible working, fairly and equitably rewarding hard work and progressive DEI policies. But this narrow view can potentially block development, as on this measure, culture is considered an “add-on” or a diversion from essential business goals or an obstacle to profit. It also threatens to cloud corporate strategy by engaging with broader political and ideological debates.

Instead, culture should be understood as the outcome of wider internal factors unique to each business. Within formal terms, these are processes, procedures, rules, reporting lines, controls, remuneration structures and policies. Informal features are customs, assumptions, company stories, habits, leadership signals and attitudes. Culture is a product of the relationship between them.

It follows that culture is not fixed. Nor is it capable of being defined by management in isolation by a culture program. Employees quickly become aware of where value is recognized, when shortcuts won’t be taken, the priorities that rank the highest and which issues are not drawing attention. Those lessons may come from formal communication, but more often they come from observation as to “how things are done around here.”

A useful test is to ask how the organization behaves in practice. How does management respond to bad news? Are concerns welcomed or quietly discouraged? Are policies applied consistently? Are incentives aligned with the stated purpose of the business?

For that reason, culture should not be treated as a detachable workstream. A program that sits above the business, rather than within it, will almost always struggle. It may produce elegant language and workshops, but unless it is reflected in governance, incentives, leadership behavior, controls and day-to-day practice, it will remain aspirational rather than operational.

Culture is the consequence of the business’s operating model: its governance arrangements, controls, incentives, leadership choices, risk appetite, reporting structures and informal norms. If those elements are misaligned, a separate culture program will not correct the underlying problem. It will read as a statement of aspiration and, at worst, look like box-ticking.

Culture must, therefore, be embedded within the business’s DNA and reviewed as part of the board’s continuing responsibility to monitor, direct and correct the organization’s trajectory. It often becomes visible at moments of stress. When markets tighten, liquidity reduces or scrutiny increases, the real culture of the organization tends to reveal itself.

The role of a culture program

A best-practice culture program is not a standalone campaign but should form part of an ongoing examination of whether processes, policies, incentives and behaviors are consistent with the company’s purpose and values. In design, the program may begin with a clear vision of desired culture, but in practice the program will have substance only if it seeks to continually ensure that business activities align with those stated values. For example, a business that professes values of integrity and long-term sustainability, while disproportionately rewarding short-term revenue, may unintentionally encourage conduct that subverts its stated intended values. In that case, the weakness lies not in the language of the program but in the operating reality beneath it.

Boards must, therefore, pay close attention to the signals that shape behavior. People notice who is promoted, whose conduct is excused, which targets dominate management discussion, how mistakes are handled and whether concerns are welcomed or treated as inconvenient. Those signals either reinforce the intended culture or quietly undermine it.

Culture programs can address these issues and are key in translating strategy into conduct. Policies, controls and values statements will be ineffective if everyday behavior points in a different direction. Conversely, where culture is aligned with purpose and governance, it strengthens resilience, improves decision-making, supports long-term sustainable performance and reduces the risk that the business will revert to damaging behaviors under pressure.

Culture programs also have an important risk-management function. Where employees cannot speak up, challenge is discouraged or commercial success excuses poor conduct, problems may develop long before they appear in formal reporting. A culture that is misaligned with stated purpose and values can override even well-designed rules and processes. The greater the gap between stated values and lived experience, the greater the risk that the program becomes ineffective or even damaging.

Culture programs tend to fail when they misunderstand culture itself. If treated as something that is fixed, that can be set by management, rather than as the evolving product of the business’s systems, incentives and behaviors, there is a risk of inauthenticity and misalignment. Businesses also falter when “good culture” is defined too vaguely by reference to abstract attributes rather than the specific conduct required for that organization to deliver. Programs also lose credibility when they adopt fashionable language without connecting it to the business, its stakeholders or its strategy. Employees quickly discern rhetoric from reality, and stakeholders are increasingly alert to superficial claims that are not supported by substance.

Instead, successful programs are ones that are specific, embedded and continuously reviewed; an authentic reflection of where the business is and the direction it seeks to travel. They start by identifying the organization’s purpose and values, then test whether policies, incentives, controls, leadership behaviors and informal norms support them. Where there is misalignment, directors should act to address it. The most effective programs resemble a continuing governance discipline rather than a time-limited project.

In practical terms, culture should be defined by reference to business-specific behaviors rather than generic aspirations. Incentives must support the desired conduct, leaders must model the standards they expect, policies must be enforced consistently, and feedback and whistleblowing channels must be effective. Programs should be tested, refined and challenged as the business changes. Cultural indicators should then be reviewed as part of ordinary governance, risk and compliance processes.

Above all, program design must keep in mind that directors are not required to adopt a particular social, environmental or ethical agenda for the sake of adopting it. If they take a position on such an issue, it should be because it is relevant to the business, its stakeholders and its long-term sustainability and because the organization is prepared to embed that position in how it operates.

Conclusion

Culture is far from a peripheral concern that exists as functionally separate from a business. Indeed, it is the reality of how a business operates on its most fundamental level. It necessarily cannot be defined by language nor consigned to a singular function. It must instead be carried through every facet of operations.

The key takeaway in terms of strategy is that culture must be considered a foremost concern for governance and oversight. In order to succeed, cultural programs must be more than the sum of their messaging and instead support the business in engaging with its own operations, to constantly be reviewing and correcting where it is misaligned with its goals.

“Good” and “bad” should not be the operative words in discussions around company culture. The real point is if the prevailing culture is being recognized and integrated into the organization’s core strategy. In doing so, culture is not simply an asset but part of the machinery that is pushing the business forward and building confidence and worth over time. Otherwise, an organization’s culture has the capacity to become a vulnerability that steadily erodes the value of the business.