Organisational Culture has always been an important factor to the bottom line success of a company, but also to the happiness, positive and constructive behaviour of its staff. With greater pressure than ever to deliver to shareholders and the executive boards, organisations can start to see the behaviour and atmosphere in a company change. This is not healthy for the individual as well as for the business.

This is an interesting extract from a paper by the Director of Compliance & Ethics at Serco Group plc. He shares six corporate culture warning signs that, if heeded, could have prevented the scandal at Serco altogether.

The Serco Culture Story

After a scandal had rocked Serco’s world, they realised they had to make a fresh start if they wanted to salvage the business. They decided to carry out a Cultural Audit using an outside agency, similar to what we do at Peak Dynamics. (see www.peak-dynamics.net/business/ to understand what a Culture Audit is.)

The good news was that the review found no evidence of an endemic corrupt culture and that there was a strong commitment to customer service.

“While there is a genuine commitment to service and providing value to Serco’s customers, there are a number of business factors and conditions occurring that collectively can create an environment in which employees may be tempted to make unethical decisions when dealing with customers.”

The six primary outcomes from the audit were all about culture and these could apply to many organisations.

• Too much focus on the short term. An unhealthy and significant pressure to deliver financial results and therefore a focus on the near future. This included setting unrealistic targets from the top down while reducing resourcing and support to deliver.
• Pressure to deliver with a lack of support. Lack of support for their enterprise-wide systems was not implemented properly, increasing pressure on those having to use them. To support financial challenges, they had introduced enterprise-wide systems but not applied them correctly and withdrew the previous support structures before they were properly embedded, adding increased pressure on those having to use them. So where efficiency should have been achieved, it led to greater inefficiency and increased pressure to deliver.
• Pressure to win business at all costs. This resulted in unachievable and unprofitable solutions.
• Resistance to deliver bad news. From a values perspective, the audit found resistance to deliver bad news, not just because it would typically lead to rigorous interrogation and grilling rather than constructive discussion, but also because staff, interestingly, did not want to disappoint.
• Internal silos. This was not helped by increasing an increasing culture of ‘us and them’. Both at a contract and support office level, but also between divisions and group.
• Erosion of values over time. Serco’s rapid growth, some through acquisition, had seen their values eroded over time along with a lack of clarity of purpose.

What did they do to address these issues?

As the Director of Compliance & Ethics explains, “if you consider these as possible filters through which the “tone from the top” had to fight, there was a lot of “noise” impacting the business and diluting the intentions that our code and governing principles set out.”

He goes on to say that, “the obvious immediate response was to look at our compliance programme, which is precisely what we did. The changes we have made have resulted in a significant positive impact on our employees, our business, and our customers.”

How are they doing today?

After a number of audit reviews, many factors identified in the initial audit had been addressed. They found that 91% of managers and 85% of all staff, either agreed or strongly agreed that Serco is committed to ethical business conduct. They say there remain areas for further improvement and these plans are included in their business integrity strategy.

“But the important lesson we have learned is that corporate culture is the biggest single determinant of behaviours in any organisation and it is on those behaviours that reputation is founded. Reputation risk is as important and as serious as strategic, operational or financial risks. To manage reputation risk, every employee must understand what is expected of them.”