Culture: How Do You Measure the Ethereal?
The chatter around culture continues in financial services. Why? Because regulators have realised that culture is an important component of any financial institution. Yes, good governance, risk assessment and controls are important, but they alone cannot guarantee regulatory outcomes, cultural mind-sets and behaviours are equally as important. This explains the rollout of the UK Senior Managers and Certification Regime, as the FCA considers poor culture to be part of the reason for the 2008 financial crisis.
Why an emphasis on senior leaders? Culture represents learned behavioural patterns that influence how individuals in an organisation operate. It is the generally displayed behaviours of managers and this behaviour is socialised over time amongst employees and new joiners.
In my own experience, nearly all organisations will say that they have a ‘good’ culture, but how do you measure it? Culture is ethereal, making it difficult to measure and quantify. Culture is often talked about as coming from the top, but how do you know if ‘good’ practice is trickling down to the workforce? If you can’t measure it, then it’s difficult to gauge whether the organisational culture is reflecting senior management’s vision.
Perhaps the easiest way to ‘measure’ a culture is to measure what it’s not. Working in a toxic or bad culture will enable you to identify aspects of the culture that you don’t like, be it a lack of transparency or poor communication, or anything else. But this approach is too soft, too subjective and unscientific.
Studying a culture is challenging – for a start – many practitioners and organisational researchers believe that culture is too complex and rich to be captured by quantitative survey methods. Furthermore, qualitative methods, whilst providing richness and flexibility, are time consuming and costly, deterring their use by small- and medium-sized companies that could benefit most from managing their culture.
Are new approaches needed?
In surveying the literature, I have found two compelling approaches for measuring culture, a lexical approach for identifying the dimensions of organisational culture and using psychometric variables to identify the common cultural dimensions.
A Lexical Approach to Identifying Dimensions of Organisational Culture
This provides a comprehensive measure of organisational culture which was developed using a lexical approach, a method typically employed within the study of personality. It narrows down a list of adjectives through analysis and creates a nine-factor solution to organisational culture. These nine are: innovative, dominant, pace, friendly, prestigious, trendy, CSR, traditional, and diverse. Categorising 135 of the most commonly adjectives into these nine categories was found to predict employee commitment, job satisfaction, job search behaviours, and subjective fit better than earlier scales of organisational culture.
Using Psychometric Variables to Identify the Common Cultural Dimensions
This describes a new culture measure, known by its French acronym ECO, that can capture the commonality among cultural dimensions. ECO focuses on inter-organisational differences and acculturation processes and is formatted in terms of patterns of thinking and behaving. ECO identifies five fundamental core dimensions of culture: recognition-support, commitment-solidarity, innovation-productivity, control, and continuous learning. The study suggests that employees draw a substantial part of their culture from dimensions that are directly related to managerial concerns and are directly amenable to intervention.
This tells us that senior management is closely identified with culture and that it possesses the ability to shape and change the culture. This would invalidate arguments from senior management that are individually unable to change the culture, that it’s too big to change.
I am watching how these two different approaches are being used in research.
These approaches offer ways forward to measure culture, which is needed to understand its current state. In offering these new ways of thinking about and measuring culture, I hope to stimulate debate and further thinking around culture; I do not suggest that either is a panacea. The reality is that regulators – especially the FCA – are homing in on culture and trying to change it, which should put culture at the top of any financial institutions’ agenda but you need the tools to measure how it is now to develop a roadmap to a desired, future state.