Blogs

Jo Geraghty

Director

Perception, governance and culture

Date added: 16th Sep 2016
Category: Culture of conduct/ethics

Governance and culture are inextricably intertwined but how much is governed by perception

O wad some Pow’r the giftie gie us, To see oursels as others see us!”

Robert Burns

How much of business is governed by perception; by what we think we see and know rather than by fact? It’s a question which we have explored before when we’ve looked at the way in which successive layers of management can filter information, either through fear or self-promotion or simply because they are not in tune with the overall strategy of the organisation.

As a result, the leadership may be fed a distorted view of the business; leading to decisions being made and strategies formed which have little chance of succeeding, or leading to announcements being made which have to be later retracted. And when filtering happens as messages are percolated down through the organisation then bold initiatives conceived by the leadership can become pale imitations at best by the time they are translated into actions on the ground. Either way, the cost in time and reputation and wasted expenditure can be substantial.

Why is management filtering so prevalent in some organisations? Quite simply, it’s down to the culture. When the leadership demand results but don’t care how they are achieved, when people are targeted on volume rather than outcome, when promotion is a matter of visibility, when silo operations and mistrust prevail; then it is hardly surprising that departmental leaders and line managers and team leaders all put their own self-serving slant on information flow. And even when this isn’t the case, unless a strong culture actively seeks to engage employees in the strategy and values of the business then misunderstanding can lead to misinterpretation.

But we’re talking here about organisational culture; surely things are different when it comes to perceptions of corporate governance which is largely the preserve of the executive team? Not necessarily if the latest good governance report from the Institute of Directors is anything to go by. One of the key conclusions from the study was that “different components of corporate governance have different impacts on practitioners’ perceptions of it.”

Now it has to be admitted that the findings were largely based on a perception survey, but the results do highlight the different ways in which corporate governance is perceived, and the consequent effect on actions. For example, when looking at board effectiveness the results vary widely across customers (-3.6%), suppliers (26.6%), media (-29.9%) and others. Perhaps more importantly the survey found that “measures of board effectiveness have little effect on the corporate governance of a company, as perceived by stakeholders.”

What the report is in effect showing us is that corporate governance isn’t simply something which is ‘done’ by the executive team but is very much coloured by perception and by relationships with the organisation. And this highlights another important aspect of organisational culture.  It isn’t there simply to ensure things are ‘done right’ within the organisation or to build engagement with employees. A strong and positive organisational culture not only looks inward but also reaches outward, seeking to embrace and deliver positive experience for customers, investors and other stakeholders.

Governance and culture are inextricably intertwined. Only when organisations stop ticking boxes to satisfy a code and start building a strong and inclusive culture can perceptions and reality start to converge.

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