Art of cultural leadership

A war for talent is raging across UK plc, driven by the lowest national unemployment rate in decades. For companies to attract the very best people, generous remuneration packages are no longer enough. For today’s young career climbers, a positive corporate culture is at least as important. For many of the youngest new starters, it is their biggest consideration.

In a 2018 survey by consultancy group Deloitte, corporate culture was found to be the second most important factor for millennials in considering where they want to work.

Yet corporate culture can be a slippery concept to identify from the inside, let alone to improve. It is built on a company’s long-term strategy, the way it communicates with staff and the outside world, the diversity of its workforce, and how it sets goals, rewards staff, embraces sensitivities and deals with misconduct.

Companies seeking to recruit the very best talent need to dedicate time and resources, nurturing their corporate culture, which demands a dose of introverted navel-gazing followed by a concerted and sustained drive to improve.

The Deloitte survey found that 52 per cent of millennials (born 1983 to 1994 in their analysis) thought that corporate culture was “very important” when choosing an employer, while 57 per cent of Generation Z (born 1995 to 1999) agreed, making culture their biggest consideration.

As organisations expand globally, they must adopt a strong focus on culture

Staff benefits

Argo Group, a specialist commercial insurance business, is one of the growing number of global organisations investing in its corporate culture. The effort began by securing leadership from the top when responsibility for cultural development was allocated to a C-suite executive.

“Recruitment in our industry is now incredibly competitive,” says Matt Harris, group head of international operations at Argo Group. “The talent war makes hiring the best people one of the biggest challenges confronting us.

“It is vital to present a clear vision and purpose, and articulate them to potential candidates. Delivering and reinforcing those messages is equally important from a retention perspective. It is critical that our people understand the role each of them plays in achieving our corporate vision.”

Argo ensures this by aligning its corporate objectives with those of its workforce. It is equally important, Mr Harris says, to invest in employees’ future careers, rather than just in training them for their current roles.

“If you can’t explain how a person contributes to the corporate vision, or if you fail to compensate them appropriately or to contribute to their development, they will go elsewhere. But when you show people you care about their careers, you will benefit from improved levels of engagement within a positive workplace culture. When you get that right, you see people delivering consistently to the business and ultimately to its customers,” he says.

Shareholder benefits

The rewards of a stronger corporate culture are not only reflected in happier, better quality staff. Shareholders also see a direct benefit in the form of improved financial performance: up to three times better for companies with the strongest corporate cultures. This finding led management consultants McKinsey & Co to conclude that corporate culture is “one of the most essential drivers of business performance”.

The recognition of culture as a key financial driver is another reason why shareholders and investors are demanding companies do more. Businesses are responding by ensuring personal remuneration is linked increasingly closely to business outcomes. This helps to match up corporate objectives with personal ones.

“Across financial services, shareholders and boards are demanding that compensation packages are aligned with business results and corporate performance,” Mr Harris explains. “Executive compensation has shifted over recent years, with a much heavier weighting on variable compensation relating to the delivery of specific business goals.”

Cultural enrichment

As businesses grow and begin to operate in multiple international locations, maintaining a cohesive corporate culture can become increasingly difficult. Now based in London, Mr Harris has worked around the world, with stays in India, Indonesia, Malaysia, New Zealand and Singapore.

He says a truly global corporate culture, one that is inclusive and diverse, can only be achieved through the awareness of regional and cultural sensitivities. “As organisations expand globally, they must adopt a strong focus on culture,” he says. “The behaviour and actions of the leadership group have the biggest influence on how you build that culture.”

Argo’s group head of international operations says organisations
need to be welcoming of international regional sensitivities. Embracing them strengthens global brands by bringing local working approaches into
line with global goals, targets and business strategy.

Merger planning

Interweaving cultural nuances is tricky when companies grow organically, but it is even more difficult with mergers and acquisitions (M&A). Organisations that fail to consider corporate cultures in detail before proceeding with M&A risk wasting considerable time and resources dealing with subsequent conflicts, which is a leading cause of value leakage in the aftermath of
such deals.

Mr Harris has witnessed corporate culture consolidation many times during his career. The most successful outcomes were driven by management teams with clear ideas about their leadership objectives and clear communication throughout the newly
merged business.

“When you bring two companies together, two separate cultures may co-exist for a period of time until the new cultural identity develops,” he says. “So in an M&A situation, it is important to define the expectations early to everyone. The longer that takes, the longer you’ll see two separate cultures and tribes working in isolation.”

Personal touch

Rapid evolution of technology has focused many senior executives on the role it can play in shaping the behaviour of the workforce. However, while technology can assist with workflows, support training and enable flexible working, it cannot replace a key ingredient to building a culture: human interaction.

“The fundamental nature of the insurance industry is to take care of people after an unfortunate event,” says Mr Harris. “To manage that effectively requires a whole lot of empathy. It is critical, therefore, that we have people in customer-facing roles with the skills that allow them to deal with our customers with empathy.”

In the end, then, corporate culture is all about people. It must start form the top, and extend to every office and desk. When it is right, the rewards benefit everyone, from the shop floor to the boardroom to the shareholders’ purse.

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