The relationship between company culture and governance is symbiotic, and changes within one sphere are inevitably mirrored in the other.
Good governance sets the tone that helps attract leadership with the same values, and this will trickle down through the wider teams they manage and dictate the company culture.
By the same token, in growing and nurturing teams where collaboration, loyalty and transparency are encouraged, ensuring good governance becomes easier. If the governance is good then the culture is good, but a lack of governance leads to poor company culture.
There is no denying the two are linked and businesses need good governance if they are going to achieve a good company culture.
Good governance = good culture
You can’t have one without the other – good governance drives and creates and ensures there is a good company culture. If there is bad governance within the business, there will be bad company culture. Simple.
Just as a business needs the right products or services to be successful, it needs the right culture to survive.
Culture is at the heart of governance and clarifies right from wrong for all staff so they know what is expected of them and how business should be done.
If the governance is right, then the culture will be right, and the business will be right.
What exactly is company culture?
Company culture can be defined as the values and standards that guide the business and encourage the right behaviors from staff. In other words, it is the work that is done and how it is done.
It is the way people feel about the work they do, how they view the company and where the company is heading, and how they perceive their role in helping the company achieve its ultimate goal.
Fundamentally, company culture is how employees are treated and how this, in turn, makes them feel about the business.
If the culture is bad, the consequences of this are bad also. It can lead to low morale among staff, legal claims, financial loss, and a loss of trust among investors and clients.
If staff aren’t treated well, there can be scandals and damage to the reputation of the company – depending on the type of scandal, there may be criminal investigations, mass resignations, client loss, and huge expenses to try to undo the damage to the exterior of the company, which can also take years.
If the culture is good, the business will be successful thanks to the low turnover and smooth processes that are in place to maximize efficiency and minimize risk.
Company culture is the personality of an organization. Just as with people, a strong and supportive personality will get you far in life whereas a weakened or careless, or unsupportive personality will hinder your progress in life – and it’s the same with business.
By ensuring the company culture is positive, supportive, and forward-thinking, the personality of the whole company becomes attractive and good people will want to work for it and contribute towards its success, and investors will want to invest in it and contribute towards its success.
How do you create a healthy culture?
To develop a healthy culture for the business, this must come from the top. It needs to be led by the CEO and board and leadership.
The people at the top should be fully invested in the company and be the right fit for the desired culture and business behavior. Words and actions are what matter, and leaders must lead by example to promote the ideal culture.
As culture is nestled within governance, it is vital that the governance of the company is good.
As the manual for all that the company is, stands for, believes in, wants to be, and how it will achieve its goals, governance is the backbone of the business – from outlining the processes and how to make them efficient to identifying risk factors and how to manage these, and how all decisions are going to be made and by whom.
Governance defines what is expected of everyone in their roles and puts measures in place to support and empower staff at every level – from the CEO to the company cleaners.
There are processes in place to protect staff and reduce risk, enabling employees to carry out their duties to the best of their abilities and without the worry of potential litigation or negative repercussions.
Staff are engaged and want to work well, believing in the business and what they are doing – this reduces the potential for fraud, negligence, and lack of accountability.
Poor governance breeds a toxic culture. This is because poor governance has multiple knock-on effects on a company that lead ultimately to a bad culture. It makes company investors feel uneasy and start to question their investment in the firm. It leads to managers refusing to be accountable for their work and decisions, resulting in inadequate work and badly made decisions, that further unsettle investors as well as staff.
Staff aren’t listened to and don’t feel appreciated, and no longer want to work for the company. Many, especially the good ones, resign and the company will struggle to hire good replacements as the company’s reputation will be damaged by this stage, and it will be an unpleasant place to work.
Any new staff member that does join will quickly be affected by the bad company culture that exists and stops engaging. This can lead to burnout and more resignations, further impacting an already bad situation and making it harder for the company to bounce back.
Culture and the current climate
Right now, a recession is looming and there is a labor shortage. This double whammy threatens the success of every business in America – and especially those with poor company culture as these firms are already greatly weakened and damaged.
To weather the incoming storm and manage the challenges of the current climate, companies must create or maintain a healthy company culture.
Looking after staff is one of the greatest investments firms can make at any time but particularly in the current climate – and it will pay back multiple times over when employees are happy, hard-working, and keen to come to work every day.
Your staff are as much your business as your products or services, and by treating them well they are far more likely to be productive and make the right decisions, and less likely to want to leave.
Staff turnover will be lower, plus the company’s success both financially and reputationally will ensure any hiring you do need to do will be effective despite the current labor shortage.
By looking after the culture of your company, you look after the long-term success of your business and buffer it from the harsh economic environment we’re all experiencing.
Give your company every chance to survive and even thrive by installing good governance that creates a good culture and enables the business to run at its absolute best.
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