Organisational Culture

Policies describe what an organisation says it does; culture is what people actually do. It shows in what gets rewarded, who gets promoted, how bad news is received and whether junior staff challenge seniors. Leaders set the tone through their own conduct, and middle managers pass it on. A firm may have several cultures, one for each division or site. In governance and risk, culture is treated as a driver of conduct, and weak cultures sit behind many scandals, such as sales pressure leading to mis-selling. Supervisors and boards assess it through staff surveys, exit interviews, complaint data, incentive design and observation. It changes slowly, because habits persist. Risk culture and compliance culture are narrower versions that look at attitudes to risk and to rules.

Two branches of a lender operate under the same policies. In one, staff report errors within a day because earlier mistakes were treated as lessons. In the other, errors are hidden since a manager once shamed an employee in public. Audit finds far higher error rates in the second branch and traces them to how bad news is received.