UK Bribery Act

Culture building means concentrating on core business activities—formal and informal incentives, communication, performance management, hiring, promotion, succession planning, business planning—that every organization must engage in.

Doing culture is different from doing compliance. A company’s culture—its shared incentives, attitudes, and goals—is shaped and maintained by the totality of practices in the organization. An exclusive or over emphasis on compliance will help to shape one kind of culture, but often as an unintended, and regretted, consequence. Companies that set out deliberately to foster a sustainable culture, on the other hand, will engage in a different set of exercises.

Culture building means concentrating on core business activities—formal and informal incentives, communication, performance management, hiring, promotion, succession planning, business planning—that every organization must engage in. But it means doing these things with an eye toward instilling sustainable values, improving trust, and increasing employee engagement and involvement. (See the LRN “Culture as a Strategy” paper for a discussion of the importance of culture, and guidance for building a values-based culture.) Building and strengthening an organization’s culture requires understanding the culture, understanding how people in the organization behave, how they get information, are rewarded, and relate to one another, and then shaping business practices to guide and reinforce appropriate behavior.

Dov Seidman, LRN’s founder and CEO, uses the following example to make this point: Virtually any CEO of a company of sufficient maturity can call up quickly a list of the company’s top performers, where “performance” aligns with traditional concepts of productivity and potential. And it is important that companies attend to these variables and reward employees for them. But how many of these CEOs could call up a list of their most ethical employees, those who are most trusted, those who most embody the values that the organization espouses? (In LRN’s recent Ethics & Compliance Survey, only 54 percent of companies responding say that they celebrate acts of ethical leadership.) Attending to these aspects of hiring, promotion and incentive structures is a large part of what it means to build a values-based culture.

Building culture in this way is different than doing compliance, in part because it need not entail additional costs. Compliance activities are imposed on the organization; culture is ingrained in the organization. The costs of compliance means that there is a point at which an organization can have too much. Building a sustainable culture is an unalloyed good.

The rules an organization imposes on its employees are simply no match for the incentives that constitute the culture.

More importantly, building culture, if done properly, will generate far greater benefits than compliance activities, because it is culture that ultimately drives performance and the success of an organization. The rules an organization imposes on its employees are simply no match for the incentives that constitute the culture. As Lou Gerstner, former CEO of IBM, memorably explained, “I came to see, in my time at IBM, that culture isn’t just one aspect of the game; it is the game.” Elaborate and sophisticated compliance programs are of little use if the reality of the organization, i.e., the culture, is that those who raise concerns will be ignored, or worse, and the rewards for doing the right thing are dwarfed by those for short-term money-making. In common parlance, culture eats compliance for lunch.