Can a number be put on culture?

3 minute read

HR directors need to get involved in corporate governance now or they may find themselves being held accountable for something that is impossible to measure

Corporate governance

“When I heard the changes to the corporate governance code coming out of the Financial Reporting Council (FRC), I was concerned. We shouldn’t have accountants attempting to quantify company culture.” So said one HR and business leader to me recently.

She has a point. While I believe it can only be seen as a positive move that the FRC is taking an increasing and genuine interest in information beyond the financial, culture is a tricky beast to measure, manage and influence – as people experts know all too well.

This is why it is so critical that HR directors get involved in this agenda. To shape it; to point out the complexities and why ‘putting a number’ on culture may be neither desirable nor possible; and to take full advantage of this unique and timely opportunity to lead the people agenda at the highest levels of business.

In case you aren’t aware of the revisions to the code – or need a refresher – the recently updated Corporate Governance Code requires PLCs to provide information on employee engagement and how they are capturing employee voice. For large private companies, the Wates Principles provide similar guidance. The FRC has taken an ever-increasing interest in people issues since the release of its 2016 paper Corporate Culture and the Role of Boards (on which the CIPD was a partner). There appears to be a recognition now that culture is a critical enabler of sustainable long-term performance.

When I was editor of HR magazine, I took a keen interest in corporate reporting and corporate governance. It was clear to me that changes in the business context, shifting towards more ‘conscious’ models of capitalism in the wake of the global financial crisis, provided an opportunity for the HR function to influence strategic business decisions that had for far too long been focused on short-term financial metrics.

I was perhaps a bit ahead of the curve, but about five years after I predicted this shift, there are numerous indicators of the context evolving: gender pay gap reporting, pay ratio reporting and ongoing debates over executive pay, increasing interest from investors in ESG (environmental, social and governance issue). And just a few weeks ago a group of US business leaders made headlines for announcing a shift away from a pure focus on shareholder value to committing to drive value for all stakeholders – customers, employees, suppliers and communities (as well as shareholders).

This shift provides a huge opportunity for the HR function, a chance to ride the zeitgeist and influence at board level. It feels unprecedented and exciting – a ‘now or never’ moment. But it also means people professionals need to step up to seize the opportunity and operate at this level. It means seeing increased regulation as less of a burden, more of a chance to show expert leadership on people and culture issues and demonstrate the value a focus on both can bring to an organisation. It requires fresh skills of the profession, some of which may not always come naturally: an analytical capability, influencing skills, the ability to create an inspiring and compelling narrative, and the drive and capacity to look upwards and outwards, to horizon scan and recognise risks and opportunities at a macro level.

And we at the CIPD are on that journey as well. I joined the CIPD in January to build our connections with and proposition for leaders in the people profession. This agenda is one to which we are fully committed. Recent outputs in this space include my colleague Edward Houghton’s great work on assessing what investors really want from human capital, and our report and recommendations around remuneration committee reform, which we want to see broadened out into a more holistic ‘people and culture committee’, with a focus beyond top pay. We are also pleased to be partnering with the FRC to gather insight and feedback from senior HR professionals around the reporting and measurement of corporate culture, and the adoption of the revised corporate governance code.

Culture has never been of such strategic importance to CEOs and boards. People professionals should be culture experts. Let’s use this expertise to become architects of value through people, creating long-term sustainable organisations for the good of all stakeholders.

Katie Jacobs, pictured below, is senior stakeholder lead at the UK's CIPD. She was previously editor of HR magazine, and of Supply Management, the magazine of the Chartered Institute of Procurement and Supply. 

Katie Jacobs

Published 3 October 2019

This shift provides a huge opportunity for the HR function, a chance to ride the zeitgeist and influence at board level. It feels unprecedented and exciting – a ‘now or never’ moment

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