Companies are getting on the bandwagon – corporate culture matters.  Business ethics is important.  My worry is whether this new acknowledgement is viewed as a short-cut for compliance investment.

CEOs and the board are troubled by (and even resisting) the resources needed to implement an effective compliance program.  Unfortunately, this attitude reflects a fundamental misunderstanding of the importance of an ethical culture and robust compliance controls working, in tandem, to promote an effective ethics and compliance program.

With that initial understanding, let’s turn to the fundamental question – how do you define a culture that aligns with, and inspires, your employees?  Let’s go back to the fundamental question every company has to answer – what is our purpose?

I am always inspired here by Simon Sinek, a motivational speaker, who explains the importance of defining your company’s mission.  See Here and Here.

Frankly, Sinek’s message applies to much of life and helps to focus attention on purpose and inspiration.

A company has to define its mission beyond just making good products or providing efficient services.  Instead, companies have to inspire managers, employees and other stakeholders with defining a purpose beyond simple commercial activities.  Such inspiration is essential for the marketplace and for defining a culture.

A company’s culture reflects its values, its moral fabric and the reason its exists.  I know this sounds like mumbo jumbo, but corporate culture reflects the company’s ability to bring individuals together for a common purpose.

Harvard Business School Professor James Heskett has written about the importance of business culture in his seminal book, The Culture Shock: How to Shape Unseen Force That Transforms Performance, (here) in which he estimates that a positive corporate culture can account for a 20 to 30 percent difference in corporate performance.

As Heskett explains, the culture cycle begins with the communication of shared values and behaviors and includes the development of realistic expectations in employees and meeting them in ways that establish trust, engagement and ownership; policies and practices that lead to an innovative organization; and measurement of the results in terms of employee retention and referrals, returns to labor, and relationships with customers as well as financial results.

A company’s culture can be defined in six categories:

1. Vision: a culture starts with a vision or mission statement which captures the company’s purpose.
2. Values: a company’s values should be concise and simple.
3. Conduct: the company leadership has to demonstrate its commitment to its culture with conduct not with words.
4. People: the company has to infuse its recruitment process to hire personnel who are consistent with culture.
5. Narrative (Story-Telling): the company has to develop a unique and powerful narrative to reinforce and promote its culture. A unique narrative can be a short-story that is frequently retold and referenced by corporate leaders, incorporated into publications and communications, and added to the company’s sustainability objectives.
6. Environment: The company’s offices, architecture, working environment and space should be consistent with its culture and used as a means to reinforce its culture.

Bringing employees together through a consistent and motivational message is critical in today’s marketplace to improve corporate performance.  No longer can companies rely on quarterly financial reporting goals to define and incentivize its workforce.  Long-term sustainable growth while minimizing risk is the preferred strategy for corporate growth and economic success.  Such an approach is the best way to harness employee innovation and productivity.