Boards are still failing to fix culture in their organizations; though financial services is leading the way

By Billy Bambrough is City A.M.'s deputy news editor

Defining corporate culture is still an issue at many companies, new research has revealed.

Nearly one in three (31 per cent) of boards across the public and private sectors have not established or articulated what sort of corporate culture they want, according to the Chartered Institute of Internal Auditors.

It was also found that even when companies define their corporate culture many fail to check staff behaviour is reflecting the values.

Just over a third (36 per cent) were found to follow up with employees. However, nearly 20 per cent of respondents said they would include cultural aspects in their audit work in the coming year.

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The financial services sector was found to be outperforming other industries when it comes to culture – put down to increased scrutiny of the industry following the financial crisis.

A whopping nine out of ten heads of internal audit at banks and other financial services firms surveyed reported that they currently analyse organisational culture in their audit plans.

Earlier this year industry watchdog the Financial Conduct Authority (FCA) attracted criticism when it scrapped plans for probes into culture, pay and behaviour within the banking industry.

Ian Peters, chief executive of the Chartered Institute for Internal Auditors, said:

Managing culture is a vital issue for boards, to ensure not only that they are setting the right tone at the top, but that all employees are acting in accordance with the organisation’s ethics and values.

Auditing culture is not an exact science. Many organisations struggle to define their culture, let alone incorporate it effectively into their risk evaluation and assurance processes. But it is essential that they do so.

As we have seen recently in the automotive and retail sectors, scandals can hit any industry, and whatever other factors come into play, culture always plays a significant role in the issue.

The research shows that the most popular methods for auditing culture are conducting interviews and behavioural observation and that common proxies used to audit culture include: staff surveys; whistleblowing activity; customer complaints handling, and the use of values statements.

Audit chiefs also reported that reliance on their professional judgement and experience were key when auditing culture (85 per cent and 71 per cent of respondents to the survey respectively).

A separate report into corporate culture is set to be published by the auditing watchdog the Financial Reporting Council in July.