The power of culture:

Risk reduction?Value creation?Find out what applying a cultural lens to your organisation could reveal

Can we measure culture? In a word, yes. Measuring and reporting on culture has historically been labour-intensive and the results hard to interpret. However, increasing access to Big Data, new ways to apply data mining tools to culture and the skills, capabilities and experience of our Corporate Integrity team is changing this. We’re digitising the ‘nose of the auditor’. As a result, companies now efficiently obtain a considerably richer and more accurate picture as to the cultures that influence behaviours and generate value—from an insightful, connected and responsive partner they can trust.

1 For example, see Annual Study of Intangible Asset Market Value 2015, Ocean Tomo, March 2015, http://www.oceantomo.com/2015/03/04/2015-intangible-asset-market-value-study/

Exponential data growth

Cultural assurance

Data mining and analytics

Cultural assessment

Culture is now regarded as a key intangible asset. By assessing culture with objective, evidence-based tools and techniques, we’re helping clients to make the intangible tangible, drive long-term sustainable growth and reduce risk.

In today’s world, intangible assets can represent up to 80% of a company’s value1.

Measuring the effectiveness and value of culture – and potential risks – is one of the issues that is now fundamental to a company’s performance, yet is absent from most corporate reporting and auditing. The right approach to assessing culture is now critical for boards, auditors, investors and regulators.

Hywel BallManaging Partner Assurance, UK & Ireland, EY

21 Cultural assurance

RewardAn increasing number of organisations are also turning to culture to drive performance.

Aligning mechanisms, beliefs and capabilities with an organisation’s purpose and values can reduce barriers to success that are often hidden, enhancing the potential for achieving key business objectives.

This can lead to significant benefits for organisations, including:

• Driving efficiencies and reducing costs

• Fostering high performing teams• Helping to enter new markets

with confidence• Attracting and retaining the

best talent

RiskMany of the biggest corporate scandals resulted from poor decision-making, rationalised by intelligent people working under intense pressure.

In such circumstances, even people with good intentions can sometimes behave in ways that undermine an organisation’s purpose and values.

Historically, companies have focussed primarily on rules to influence workplace behaviours. However, decision-making is also driven by local values and beliefs. By applying data analytics and leading edge psychometric and culture assessment tools, organisations are now scanning for hidden cultural indicators of risk, leading to benefits including:

• Identifying and mitigating potential threat

• Protecting trust and reputation • Increasing stakeholder confidence• Reducing the cost of monitoring

the compliance and control environment

Is leadership aligned to the rest of the organisation?Values-based surveys offer actionable insights into people’s perceptions and experiences, highlighting where employees’ beliefs as to a company’s purpose and values may be misaligned with those held by its leaders. An even richer picture emerges when survey tools are paired with cultural analytics, such as applying sentiment analysis to review the content of written communications. Sentiment analysis can highlight unseen pressures that may impact behaviours, providing leadership with an early opportunity for intervention.

Our research identifies three areas that must be aligned for sustainable performance:

What do leaders and influencers believe is the organisation’s purpose and values? Do they live the values and work toward the purpose when under pressure?

People’s behaviours are influenced by their personal beliefs as to the ‘real’ purpose and values of the organisation. How will those beliefs impact employees when making decisions that bind their organisations?

Do the mechanisms (policies, procedures, KPIs, reward systems, etc.) further the organisation’s objectives? When employees are under pressure, do the mechanisms encourage them to make decisions in line with the organisation’s purpose and values?

Leadership

BeliefsMechanisms

Sustainable performance

1.

3.2.

43 Cultural assurance

MechanicalPerformance and operational architectures

Organisations have historically relied on mechanisms (e.g., reporting structures, operating models, policies and targets) to influence employee behaviours. But recent scandals demonstrate that although mechanisms are an essential part of influencing behaviours, they have significant limitations when relied upon exclusively or too heavily.

Even the best intended rules can be overwhelmed – and sometimes incentivise undesired behaviours – when culture is ignored. Increased digitisation, globalisation, more flexible ways of working and teaming with third parties have also heightened organisations’ need for a tangible understanding of the cultural contexts in which their people are working.

HumanSocial and political architectures

Relationships and power structures also influence behaviours and decision-making in critical, but often overlooked ways. Many organisations attempt to guide these structures through codes of ethics, values statements and training. However, the impact of these is often limited. To achieve greater influence over the values and beliefs that inform behaviours, organisations need to better understand the political and social domains that shape the environments in which decisions get made.

Who are the key influencers in my organisation? Understanding human interaction is a critical component to reducing risk and driving performance. Social network analysis uses contextual information (metadata) to build informal organisational charts, determine the strength of relationships and identify the influential members within your networks. The results can help mitigate risks before they materialise, and identify subject matter experts and others best positioned to promote important messages and initiatives.

How do economic and performance

objectives drive behaviour?

Performance architecture

Operational architecture

What values govern relationships and what behaviours do these drive?

Social architecture

Political architecture

How do organisational frameworks, systems and

processes affect behaviour?

Where does power lie and how is it used? LEADERSHIP

LEADERSHIP

LEADERSHIP

LEADERSHIP

IndividualHow does the

environment affect decision-making?

Social

Polit

ical Performance

Opera

tiona

l

ENV

IRO

NM

ENT

ENVIRONMENT

ENV

IRO

NM

ENT

ENVIRONMENT

65 Cultural assurance

Historically, most organisations have measured performance by assessing economic results (the ‘What’).

However, experience demonstrates that to encourage sustainable performance, organisations also need to focus on the ways teams achieve those results (the ‘How’).

Overlooking the ‘How’ can unintentionally drive behaviours that put organisations at risk. Where employees’ beliefs and values are misaligned with the organisation’s purpose, pressure to perform can sometimes compromise the quality of decision-making. By contrast, where alignment exists and pressure is thoughtfully applied leadership can effectively support the achievement of sustainable results.

Local cultures affect how individuals make decisions.

Understanding how political, social, operational and performance architectures interact within teams, and making necessary adjustments, is critical to influencing how employees exercise judgment.

Neither people nor teams are static. To sustain high performance, organisations need to assess and understand the underpinnings of teams that achieve great results with high integrity. Replicating those teams across the organisation, can drive even greater levels of high integrity performance.

Where are your teams today?

What How

Perform

anceH

igh

Low

IntegrityHigh

Low

Which teams use risky behaviours to hit their targets? Which teams act with high integrity?Our integrated cultural assessments enable organisations to gain a comprehensive picture as to team dynamics and the ways they impact on performance and risk. Often involving a range of evidence-based tools and techniques that can include interviews, discussion groups, psychometric surveys and mechanism reviews, cultural assessments can provide leadership with granular insights from the ‘front line’.

87 Cultural assurance

Human

Resources

Mer

gers

&

Leadership

What business

challenges would a clearer lens on culture

help you address?

Acqu

isitio

ns

Leadership

Understand if the culture you have is the culture you need to help meet your organisation’s objectives

Get a better understanding of the value of culture to your organisation, and the values that shape that culture

Understand how ‘tone from the top’ is being received and interpreted

Gain confidence that your culture safeguards your brand, board and firm’s reputation

Understand the sub-cultures within your organisation and how to influence these

Ensure that your culture is enabling your people to do the right thing

Give visibility and confidence in your organisation’s culture to your regulators and other stakeholders

Ensure leadership development programmes are fit for purpose

Enable a culture that promotes innovation

Enhance the effectiveness of business transformation and performance improvement programmes

Compliance

Risk

Inter

nal A

udit

Finance

ValueNo single function in an organisation owns the understanding and management of culture.

Rather, corporate integrity, and applying a cultural lens to risk and performance, is strategically important to a range of business areas and their functional heads, with each standing to derive significant and unique value through investing in.

Human Resources

Attract and retain the right talent

Improve staff engagement

Enhance the effectiveness of HR transformation programmes

Finance

Map cultural indicators to value

Understand where behaviours and values impact the bottom line

Gain assurance that your organisation is delivering sustainable performance

Provide a clearer picture of profit vs. integrity in your organisation

Understand if the suppliers you work with align to your organisation’s values

Enhance finance transformation programmes

Internal Audit

Gain a clearer picture of culture for reporting and future benchmarking

Identify where rules and procedures need to be adapted to better suit the culture of your organisation

Identify cultural risks and opportunities that the board should be aware of

Risk

Gain confidence that your culture supports employees when they have to make difficult decisions

Understand where pressures are being applied to people that may result in higher risk behaviours

Pinpoint where risk management policies can be improved through consideration of culture

Know that you are taking a realistic approach to risk assessment

Compliance

Understand how the culture of your organisation is impacting the level of compliance

Balance people, principles and policies more effectively in your compliance framework

Fully empower employees to speak up

Strengthen employees’ awareness, buy-in and trust in compliance processes

Mergers & Acquisitions

Understand the differences and similarities in organisational cultures pre-merger

Effectively plan for cultural integration

Identify areas of cultural strengths and weaknesses

Ensure that the positive aspects of an organisation’s culture are retained

Shape a new, fit for purpose culture post-merger

109 Cultural assurance

About our Corporate Integrity teamOur Corporate Integrity team are highly experienced in all aspects of cultural assessment and organisational change and development.

The team brings together a diverse group of industry experts including forensic analysts, psychologists, psychometric experts, facilitation, coaching and counselling professionals, and risk, compliance and governance specialists.

Throughout the assessment, diagnosis, reporting and change phases of our work, we leverage a team with a wide-ranging skill set and comprehensive credentials. We work together with you to ensure the development of your own skills and capabilities, as well as helping you embed continued learning and development across your organisation.

Hywel Ball Managing Partner Assurance, UK & Ireland+44 (0)20 7951 2474 hball@uk.ey.com

John Davies Executive Director, Corporate Integrity+44 (0)20 7951 0585 jdavies1@uk.ey.com

Loree Gourley Director, Regulatory & Public Policy+44 (0)20 7951 6428 lgourley@uk.ey.com

Contacts

Kevin Hills Partner, Head of Corporate Integrity+44 (0)20 7951 5873 khills@uk.ey.com

11

About EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

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