ACCA (the Association of Chartered Certified Accountants) sent questionnaires to 120 thousand members, specialists in the area of accounting and finance management. On the basis of their answers, a report has been prepared with the title Corporate Culture and Behavior. According to it, 76 per cent of financial specialists who are gathered in an organization believe that a corporation culture has a stronger impact on employees than codes and regulations. However, its influence is not only positive, but also – unfortunately – destructive. The report prepared by ACCA shows that mistakes in management of a company are made by the most experienced managers.
First sin: lack of example following from the top
Over 60 per cent of respondents claim that the biggest influence on a corporative culture has the example, especially from a chairman. The specialists from Great Britain, Singapore, Hong Kong and Malaysia attached greater importance to the example following from the very top in comparison to other respondents. The New Yorkers, in turn, ignored this element in the survey.
The example following from the top actually may not make any effect if many units take part in the process of communication. In such cases, the message of a leader often undergoes deformation, loses its sharpness or does not reach all employees and collaborators, for instance, subcontractors in a big international corporation. It has been considered that the more composed is the structure of a certain organization, the less influence – at least on the functionality of the whole – has an example following from the top – comments Ewan Willars, chairman for strategy in ACCA, who is going to present the report titled “Corporate Culture and Behavior” on this year’s CFO European Summit.
The part of ACCA interviewees pointed out that in big companies the example may follow from many independent sources – 60 per cent claimed that within one organization, separated “subcultures” develop which results from different styles of management. Therefore, the ways of functioning of various subcultures in a company may significantly differ from each other.
In order to avoid such stratification, the management board should promote clear as well as coherent values and supervise their observance. Moreover, the atmosphere on each level of an organization should reflect the one which dominates on the top. It is also good when the top of a “pyramid” uses the experience of the whole structure, for instance, a well-developed internal communication network and emergency tools.
Second sin: fear of criticism and unanimity of a group
When the Prime Minister of the United Arab Emirates, Muhammad ibn Raszid Al Maktum, wrongly parked his car in the Dubai Mall, the biggest city center in the world, he was reprimanded by a parking attendant who did not recognize the driver of a high government official. Not only did the parking attendant take any blame for the bad treating of the PM but he even received an official praise.
In a Japanese corporation culture, it is the rank and file employee who criticizes the words or activities of a member of the board, it is of everyday occurrence. In Europe and United States such behaviors are still rare, especially in the banking sector whereas the greatest independence of members of the board (and not chief executive officers), managers and another specialists hired in a company could significantly modify decisive processes. Members of ACCA, who participated in the survey, jointly agreed that it is worth to examine the real level of “the freedom of speech” in a given company – i.a. through external audits, case studies based on informing about irregularities or deepen interviews with former employees.
In order the mentioned solutions will work, clear rules have to be marked out. Management boards should not forget about the fact that activities of certain units are determined from each other and each member of an organization should obey the same regulations. The introduction of two separated packages of rules, for instance, for managers and rank and file employees would certainly stir up resistance and enhance dysfunctional behaviors – thinks Ewan Willars.
The problem in creating the atmosphere of a creative criticism may be also caused by a groupthink syndrome – the preference of a group’s integrity to everything else, which results in the fact that the main motivation while making any decision is the eagerness to quick and peaceful achievement of unanimity. People who work in groups sometimes drown their own doubts and blindly listen to the leader, the result of which may be an aware fighting of the groupthink, for instance, through precise analysis of work’s effects in a group by its own members.
Third sin: too extensive regulations and lack of sanctions
The good law is needed but the number of regulations – not necessarily. Too extensive regulations stir up resistance and sometimes they become difficult to enforce. It makes that people cease to respect them. This rule works in both legislation and organizations – says Ewan Willars.
The excess of regulations did not work in last decades when banks have been earning on looking for new solutions to circumvent the regulations since 80’s to the first decade of XXI century. They hired policemen who dealt in finding – consistent with the law – solutions which would allow them and their clients to efficiently circumvent the regulations and increase the capital.
ACCA survey presented differences in the approach to regulations of specialists from various parts of the world. In well-developed countries, such as Belgium, Great Britain and USA, quite restrictive regulations of construction law and OSH are (due to the lack of essential problems in these matters) perceived as insignificant formality or even bureaucratic difficulty. However, well-developed economies (the United Arab Emirates, India and Hong Kong) are just now introducing such standards and they believe in a deep sense of all those regulations.
Nevertheless, the respondents from different countries agreed that the culture of responsibility favors the generation of positive behaviors and the lack of sanctions for breaking the statute has a destructive impact on organization – an institution which is not managed by coherent and uniform rules cannot function efficiently.
Fourth sin: target cult
Motivational system, which is depended on results, is strongly connected with a corporation culture. It determines behaviors of employees and performs an important role in the realization of company’s aims. According to these assumptions, over a half of financial specialists believe that rewarding good results has a positive impact on the outcomes. At the same time, 65 per cent admit that employees may tend to submit false or color reports while competing in order to get better remuneration. Sometimes, such dysfunctional behaviors spread to the whole organization. In Great Britain, the pressure considering manipulation of the effectiveness tools so that results of this grade would correspond to assumed aims of a company (so called targets) is widely experienced on the level of both the management board and rank and file employees.
In 2008, the British Health Committee examined a certain case of a hospital in Mid-Staffordshire, in which the death rate of patients brought to emergency room by the ambulance service was definitely too high. After a few years of investigation, it turned out that the politics of this institution was dominated by the realization of numerical and financial aims. The system rewarding results drove negative behaviors: intimidating, isolation from other organizations and lack of criticism against implemented procedures. The choice of out of financial rates such as, for instance, satisfaction of clients, may have more positive impact on the attitude of employees and effectiveness of the whole organization. Negative effects of choosing bad effectiveness measures are not to be overestimated – comments Ewan Willars.
Some respondents believe that target culture may have a positive impact on effectiveness of a company only when performed tasks are mechanical and they do not require much intellectual engagement. In other organizations, the similar systems are not enough – there, aspects related to self-realization and autonomy in realization of work motivate more than external factors. Corporate Culture and Behavior report was prepared in April of the current year on the basis of results of the survey which was globally conducted among 120 thousand members of ACCA. It will be fully presented on the CFO European Summit 2014 conference.