Culture & Compliance Chronicles: Measuring Culture

The latest installment of Ropes & Gray’s podcast series, Culture & Compliance Chronicles, explores company culture in times of crisis. In part two of a three-part discussion, litigation & enforcement attorney Amanda Raad talks with three partners at EY—Maryam Hussain, Melissa Myatt and Katharina Weghmann—all of whom study decision-making in the corporate context. In the last episode, the group considered what the research says about the drivers of firm culture. In this episode, they shift to how companies can actually define and measure culture. They explore innovative approaches that go beyond the usual employee surveys. They also discuss why now is a particularly unique moment for companies to study their cultures, and how focusing on particular aspects of culture can make the inquiry less overwhelming and more fruitful.

Transcript:

Amanda Raad (Ropes & Gray): Hi everyone. Welcome back to Culture & Compliance Chronicles, a podcast series focused on the behavioral sciences approach to risk management. I’m Amanda Raad, a litigation & enforcement partner and co-chair of Ropes & Gray's anti-corruption and international risk practice. In part two of this three-part discussion, I’m once again joined by Maryam Hussain, Melissa Myatt and Katharina Weghmann, who are all partners at EY. We've talked a fair amount amongst this group about the importance of culture and of understanding people and why people make the decisions that people make, but we haven't spent as much time talking about how you actually do this. So, how do you actually measure culture? How do you actually understand what the root cause of any particular issue may be? And so we'd like to turn to that and talk about the practical examples of how you accomplish the goals that I think we all agree are very important. First, why don’t we start by thinking about how you measure culture and what are some of the tools for measuring culture?

Maryam Hussain (EY): An area in which it's unreliable is when you're asking people to describe issues in the past because there is a ton of research that shows that the way we remember the past is not as it happened. So if it led to a successful outcome, we remember it as a series of genius actions that we took that led to this big success, and if it was a failure, is was error and someone else's fault. So, to entirely rely on asking direct questions, frankly, quite often, where the correct answer is obvious is going to be of limited use, not necessarily because people are deliberately gaming the system, but because simply, the human mind doesn't work that way. One of the approaches that I've seen be successful is if you talk about innovative approaches, there is a tool called SenseMaker, and this tool enables employees to tell micro-stories. Those stories are structured to elicit a perspective around the part of the culture that the organization is worried about⁠—you might be decision-making, you have to identify what the issue is⁠—and those stories are then gathered at scale. So you have qualitative information around narratives people are telling, but not the directing question, at this statistically significant scale. And the benefit of that is it gives you feedback from the organization, but also then those metrics can be used ongoing to measure the direction of travel of the culture of the organization.

Melissa Myatt (EY): I've seen that deployed through the NHS actually, and looking at how hospitals were managing their intake and processing of patients, patient satisfaction, the employee survey across nurses to not only identify where they could make their services better, but also drive improvements in their financials and the feedback they were getting from their patient population as well. So, it had a broader knock-on effect in many parts of the business and across many objectives of the business they were running.

Maryam Hussain: Especially for an organization like the NHS with this myriad of complications. And, arguably, some of the challenges come from various stages in the evolution of the organization having very business-process oriented, linear processes, whereas it's not the reality of how the NHS operates. So using SenseMaker to get that feedback from the legions of doctors and nurses and patients, in fact, really enabled the management to get a true sense of how the environment in which these individuals were operating, and then what would make a difference to foster a positive culture. I know, for example, one of the questions that they asked was around hygiene. This was in Wales, and it was a project run by Professor Dave Snowden, who is the creator of SenseMaker. Patients observing the nurses and doctors around various hygiene processes picked up issues in that way, not because the doctors and nurses were being deliberate in oversight on their part, but because there are certain things that had faded into the background because it had been done in a certain way for so long. Just having a patient-perspective made them salient again.

Melissa Myatt: In terms of practicality, in an environment where we're all working in a completely new way, all of our norms are disrupted and using something like that and getting stories from a lot of people feels like at the surface it would take a lot of time and be really cumbersome. One of the opportunities I think organizations have through this crisis is to really focus on and measure their culture, not just now, but as we start to move into our new normal and then even beyond all of that, to see how it's been affected or changed over time. Therefore, how leadership teams and management in organizations can redefine their strategies in ways of working going forward, which many are coming out of the immediate urgency of the crisis response are now starting to think, "How do we get back to the new normal? What will the new normal be?" Are you seeing anybody actually using some of these techniques or tools as part of this crisis response?

Maryam Hussain: One thing that I'm seeing is an exercise, but it's not just one organization – it's pan-organizational, which is a structured way to get leadership to capture the basis on which they're making decisions right now. The purpose of that is to be a collective learning tool once all those stories are gathered at the scale post-crisis – what innovations came out, how decisions were made. The intent of that is to create a feedback loop and it's a major project that's been funded through the EU.

Melissa Myatt: They can keep the benefits the crisis did create and try to maintain those dynamics in a post-crisis stage.

Maryam Hussain: In particular, given the innovation that this is driving because of the new practices and behaviors that would actually drive a lot of learning and innovation to potentially build a new future.

Melissa Myatt: Conversations I've been having with heads of internal audit have been around how much assurance can we really provide if all of our audits over the next two quarters are done fully virtual or fully remote. Will we be able to provide that same level of assurance and what does the new assurance look like? And this contemplation of looking at the assessment of culture, the culture of the leadership team to form part of that assurance. So whilst they may not feel they have as much ability to look into the supporting documentation or go into the deep, underlying information and have a face-to-face conversation with management, there's other ways that they can supplement their work using cultural metrics to give audit committees or leadership teams assurance that the management teams are driving the business in the right way.

Katharina Weghmann (EY): I wonder, Melissa, just to your point, what role big data could play as well? I think you see a huge trend in using not only people analytics, but then an organization or embedded controls to monitor certain risk groups in an organization as part of the assurance services that need to be provided to organizations. I think, in addition to that, how can we use data points that go beyond perception? Could that also be a complementary approach, to look into data points that we haven't considered in the past that could be proxies for some of the things that you have just shared as part of your work? Could HR data, in general, be a good indication or early warning signal for certain risks in countries that you might not be able to visit as part of an internal audit process? I think that's where we can see a lot of our clients moving. And I think it's also a whole collective action movement happening right now, where we can see regulators moving also beyond perception, and where we also see that organizations are complementing some of their survey data with other data points.

Amanda Raad: I completely agree with the point that you should be using both data and people, and really combining the two. The only trouble I think, and it's really a challenge that I think can be overcome, is there is sometimes so much data out there that people feel overwhelmed and don't know where to start. So, everybody agrees, yes, data's a crucial piece of information, but then everybody spends so much time trying to find the perfect data set and worrying about whether or not you're looking at the right data set, you're looking at enough data, how do you interpret it, what do you do with it, and people spend a lot of time getting really tied up in those decisions. Especially right now where we have the opportunity to try new and different ways of thinking about some of these issues, the message I'd like to send and I've seen work really well for some clients is just start small, start somewhere, because it's going to change. As long as you take a data set, know what you're looking at, follow up on it with conversations with people and really trying to understand with people what the data actually means, then that's going to tell you something. And whether you tweak that slightly for the next round or expand that, that's fine, but it shouldn't be stopping us from looking at the information that we have readily available to us right now.

Maryam Hussain: I strongly agree with you, Amanda, because I actually think context-free data is dangerous. So, starting small, looking at your own data, and then once you’ve got the metrics, trying to understand what they mean, is really important. Sometimes I think what happens is, as you've said, there's so many pieces of data that get lost in analysis, and then you end up with a set of metrics which has then climbed up the organization, has gone up to board level, and most people are coming up with hypotheses and stories about what this data means without having actually looked at the reality and talked to enough people at an early stage to understand the organizational context that gives that data meaning for them so that they can understand the significance and take the right actions. Data analysis for the sake of data analysis, I think, sometimes, it is done and it's actually dangerous.

Melissa Myatt: It creates this interesting dynamic where we're seeing a lot of work is done around measuring culture and then it gets locked down and not shared because people are nervous about how it could be interpreted or how it could be used. It ends up becoming a secret project in a number of organizations, which equally I think is counterintuitive to the reason for doing it in the first place.

Katharina Weghmann: I think your observations are almost symptomatic for what we see in the work around culture and metrics, because we always tend to focus on what's easy or what we believe is easy to do or is giving us a sense of control, as opposed to at least going down that path. I really loved what you said, Amanda, around at least it being a small piece that we can accomplish or going down that road and going on that journey, and I think that's what I wanted to emphasize. I think the idea is really to bring different disciplines together and acknowledge the fact that this is not about an absolute number of, for example, my cultural index is 1.3, or in this or that country it has been going up for three or four percent. I think when we talk about culture, we cannot emphasize enough that we are talking about a complex and dynamic social system for which we need to get an understanding, and I think to acknowledge that it takes a real paradigm shift where the whole idea around that you can control it, needs to be broken down. I think it needs to be understood that we need to lean into the discomfort that the cultural journey brings with it, that we need to understand what are some of the dynamics that we can bring together through different disciplines, through different functions, whether that's internal audit, compliance or legal, and what those different perspectives bring to really understand and get deeper insights into culture. The notion that we expect culture to be absolute or that we can perfectly capture culture, I think that's really the symptom of the problem that we need to overcome.

Melissa Myatt: Really, the only way I've ever seen this work is, Maryam, like you said, you break it down into what's the specific issue you're trying to understand or address. If you just go fishing for what are the cultural dynamics, it's too big of beast, and like you say, Katharina, it's too complex. But if you can home in on specific teams or features of your organization that you want to understand better, optimize or seek to avoid risks going forward, I think that's the only way it works – breaking it down into those smaller chunks.

Katharina Weghmann: Completely agree. If I may add one more point to that, I think there are already a lot of insights that we can take from scientific research and where we can be sure that there are certain topics that we should focus on and measure, whether that is in diversity and inclusion, or speak-up culture. I think there are a lot of insights where we can be quite certain about that we can already start measuring that go beyond perception, but that we are quite reluctant to look into because I think some of those insights might be hurtful and might also not be so popular to report back to regulators or supervisors as well. And I think it takes a lot of courage to go down that path and maybe engage with some of those topics that we could measure potentially, but we are not doing right now.

Amanda Raad: You really have to be willing to create a safe zone to, as you suggest, take out the judgment from the findings, to understand that sometimes a culture exists not because somebody wants it to be that way or that was the goal, and sometimes decisions are made completely based on unconscious motivations that people aren't even aware of. But the idea that we are afraid to look to see what the reality is, is really scary, because it's going to lead to continued problematic decision-making. I think you're exactly right, that sometimes people are afraid to look, either because of their fear of what people will think of the data and how people will respond to it, but in particular, how regulators will respond to it. We get real competing messages from regulators because regulators say you have to find a way to make sure your program works and to make sure you're doing the right thing, but at the same time, of course, they can sometimes be concerned about some of these findings. And I think we need some encouragement that people should feel safe to look at some of these potential cultural issues and be protected in doing so.

Maryam Hussain: I think one of the questions would be, to this point of culture as a priority, to go back to the specifics: what is the element of the culture that is a priority for your industry and, in particular, your organization? For example, in life sciences contexts, historically, there were a lot of issues around marketing to health care professionals. In the financial services sector, perhaps excessive risk taking. For one of the clients that I talked about, there’s this issue that they have their own quasi-government organization, this excessive deference to authority. So, to home in on the element of the culture, that's really important to drive the right behaviors for a particular company and to get the conversation to be specific around that. And that's relevant to whether or not it will be acted upon, be it uncomfortable or not, because you can always come back and say, "There's a reason why we're looking at this. We're underperforming as a business or we're having regulatory issues." It makes it less likely that people will step away from it because it's focused on a specific problem. I think the challenge with all of this is: how do you make sure that you've got a methodology in place that is robust? So this methodology of having gathering qualitative information at a scale I think is a credible one because the scale makes it credible from a statistical perspective and the qualitative information, the stories, mean that each number is backed up by an actual employee experience. That's where I've seen it be effective, but it needs to be based on an actual problem that the organization is facing. Otherwise, it becomes a theoretical conversation.

Melissa Myatt: I think, in some ways, that's the easiest route in because I think you learn the most about your culture when you're focused in where something went wrong. But there are broader positive applications too, and it's potentially that link that gives it that sense of nervousness.

Katharina Weghmann: This completely resonates with me, Melissa, because I think this downward risk of culture and then embedding this into our internal audit processes or early warning signals, I think that's just one lens to look at it. What are some of the positives correlations we see with culture? I think that talent feels attracted to a culture that is working well, that the people are more engaged, they're more productive, they're more innovative. This also relates to your point with agile ways of working that you have mentioned that I think is quite fascinating, that we can see that culture seems to be an interconnected space that can help some of those elements to move forward. I would love to make one provocative thought that given that we are currently in the COVID-19 crisis: it is also an invitation to maybe challenge our taken-for-granted views around ethics and culture because this could really be a moment also for reflection, and lets us think about how we operate as a business and also make executives think about, “What's my perspective in business and society, and how does this relate to how I want to operate as an organization? I think this is really now also a time in which we can think about those issues really deeply, and also understand how culture can be a significant driver in this discussion of interconnecting business and society, and how they relate to each other and how we want to operate in this world, and with some of the biggest questions that we face.

Amanda Raad: I completely agree with that. Now is the time because we also have the opportunity to think fresh about how we approach challenges within organizations and opportunities within organizations. So what better time to reevaluate these issues and really think about where we are and where we're trying to go.

Katharina Weghmann: I just wanted to agree, and add to this that I sometimes wonder how useful is it to talk about the business case of ethics in business when, in fact, business ethics is the currency in which we're dealing with around the world. I mean, integrity and ethics and, in turn, culture is really what keeps us all together and what keeps our system together overall in a global business environment. I think sometimes it's quite dangerous to also talk about the business case of ethics because with the crisis we are in now, I wonder if this is not really the only thing that keeps us together, given that culture, at the end of the day, is about people – it's about the trust that we build with each other around the world, so I just wanted to throw that in here.

Amanda Raad: I think the challenge in so many organizations is that culture and ethics are mixed in with compliance, and compliance is thought of as a separate entity or a separate being from the business. So there's always this thought about: how do we integrate the two and how do we make sure they work together? I think that separation between the two is highly problematic anyway and I think that's what you're really drawing on is: these are one and the same and we need to figure out how to address them together. And it's unfortunate that I think we do have to call out this reality that, I think not for bad intent, but in reality just the way compliance programs have sometimes been built up, it takes more work than it probably should to make sure that it's one voice that we're speaking from.

Melissa Myatt: It's also a unique point in time where every business is facing ethical questions and dilemmas every day. “How do we protect our employees? How do we ensure we continue to provide products to the market, particularly some of those that are critical now?” Health care, food, emergency services, utilities – how do they maintain all of those services through this time and protect their people? I know a lot of the organizations across the pharmaceutical, medical device, health care sector are trying to do everything they can to accelerate new treatments, materials, products into the market, but are also getting a lot of demands from state governments. So, how do they grapple with that? How do they manage stock and how do they decide where they distribute potentially life-saving products? I think there's a lot of ethical questions that all businesses are facing now at the same time. Linking up, Maryam, with what you were talking about in terms of these stories and getting a sense of how people are reacting and the tone that leadership can set, I know there's a lot of COVID-19 crisis taskforces and it's represented by people across all of the functions. And what I've not heard a lot of from these groups is really the inclusion of, or the thinking about, culture. So they spend a lot of time thinking about the communication they're going to put out to their people, but not a lot of time getting feedback from their people on how they receive that and then learning from that in terms of the implications it might have for future decisions. I think there's a real interesting opportunity to, in a very simple way, start building in some of this cultural theory and feedback loops, to help them make more informed decisions.

Katharina Weghmann: One-hundred percent agree, Melissa. Also, I was just reading the Edelman Trust Barometer and they were doing a quite interesting survey around who are the most trusted spokespeople. What's quite fascinating about this is that the CEO of my employer is at 54 percent of what people expect to be the ones to guide them through the crisis with narratives and being quite active in how we should respond in the crisis. I think this opens up this opportunity to what you just said and also what Amanda said earlier – there's a tone from the top with how you can use culture in this crisis to navigate through. I think there is really an untapped potential for organizations that probably most of us are hoping for, and so maybe that's an indicator for things to pick up in that regard.

Melissa Myatt: I know I definitely draw conclusions and make assumptions about organizations based upon what I'm hearing their leaders say, whether that's consistent with what other people interpret, I have no idea. But there's a lot of power in the language they choose and what they talk about.

Maryam Hussain: And the actions that they're taking, not just for their businesses, but for the broader communities.

Amanda Raad: Internal and external reactions, and what the impact that's having.

Maryam Hussain: And I think for organizations it's really important to be cognizant that what we all do, what sort of organizations collectively do right now, determines whether or not all the value statements, mission statements, all of that stuff, is worth the paper that it's written on. It's at this time that the rubber hits the road and the actions will determine actually what this organization does do, as opposed to what it says they will do, and I think that's why some organizations are really standing out, as opposed to others.

Amanda Raad: On that note, we’ll wrap up part two of our three-part discussion with Melissa, Maryam and Katharina from EY. Please stay tuned for part three, where we’ll discuss remediation and its most important aspect – finding the root cause of the behavior. We’d like to once again thank our listeners – we appreciate you tuning into our Culture & Compliance Chronicles podcast series. For more information, please visit our website at www.ropesgray.com. And of course, if we can help you navigate any of the topics we discussed, please don't hesitate to get in touch with us. You can also subscribe to this series wherever you regularly listen to podcasts, including on Apple and Spotify. Thanks for listening.

For additional information about EY, please visit www.ey.com or contact Maryam Hussain at mhussain@uk.ey.com or Katharina Weghmann at katharina.weghmann@de.ey.com.