Outside the box: Does our company appreciate the risks of culture

When the new MPs entered Parliament in July they went through an induction process that included a buddy system to help them navigate the eight acres and 100 staircases in the Palace of Westminster and advice on security. However, many analysts in the media raised the issue of Parliamentary culture. After a series of bullying scandals and accusations of sexism and cronyism, there were hopes that a new Parliament with record numbers of female, ethnic minority and state-school-educated MPs was the opportunity to improve the Parliamentary culture. Others, less optimistic about change, warned new MPs that the atmosphere could be hostile and daunting.

As internal auditors are aware, tone at the top is vital when setting the culture that an organisation desires. The Guardian highlighted the new Prime Minister’s conversation with his cabinet at their first meeting after the election: “At Saturday’s cabinet meeting he made it clear that politics would be conducted in an altogether different way under his leadership. ‘I had the opportunity to set out to my cabinet precisely what I expect of them in terms of standards, delivery and the trust that the country has put in them,’ he said.”

Journalist Polly Toynbee pointed out that “ His manifesto outlines a new ethics and integrity commission, modernising the House of Commons and “immediate reform of the House of Lords”. The desire for reform crosses party politics, she added. “A long list of former permanent secretaries, judges, the former clerk of the Commons and constitutional authorities from Dominic Grieve and Lord Sumption to the directors of the Institute for Government and the Constitution Unit just signed an open letter to the new government calling for toughened public standards.”

Many organisations and professions already have clear codes of conduct and ethics – including the internal audit profession. Both the 2017 and the 2024 IPPF include ethics, and Chartered IIA members are required to complete two hours of their annual continuing professional education (CPE) on ethical training. The Chartered IIA has also recently updated its Codes of Practice into a single code intended to be relevant to all organisations.

However, it is not enough for internal audit teams to behave with integrity and meet high standards of professional practice. Internal audit also needs to assess, monitor and advise on improvements to culture across the whole organisation – at all levels and in all places. Tone at the top is vital, but it’s also essential that people believe that wrongdoing will be detected and acted on.

Parliament is not alone in struggling to instil a culture in which everyone can thrive and perform ethically. A recent EY Global Integrity Report showed that many people will break rules to gain personal and financial advantage. At a time when politicians and businesses are struggling with the need to restore public trust, internal audit has a clear role to play.

What can internal auditors do?

Some internal audit teams conduct culture audits, while others incorporate culture elements into many (or all) of their audits. Some do both. The important thing is that this work is updated regularly and findings are acted on. This is a huge and complex area, but here are a few ideas to consider.

1. Be alert to red flags and monitor indications of a shift in culture – such as customer and staff complaints, employee exit interviews, reports on speak-up hotlines, etc.
2. Use AI to monitor tone and frequently used words in organisational communications to assess whether this supports or conflicts with the organisation’s cultural aims.
3. Discuss what internal auditors are seeing across the organisation and whether they feel that culture issues are adequately picked up in audit reports and recommendations.
4. Question internal auditors about their perceptions of organisational culture and how it affects their jobs.
5. Find topical examples to start conversations about aspects of culture and how it can be improved. Try to keep culture discussions current and active, so it’s their minds when they embark on new work.
6. Benchmark your team’s performance against others and talk to peers in different organisations about what they do to monitor culture.
7. Ask team members to attend conference sessions – for example, at the Internal Audit Conference in October. Read articles and reports or undergo training and then share that knowledge and start new conversations. The Chartered IIA published a report on Cultivating a Healthy Culture and also runs a course on Auditing Culture, so these are a good place to start.
8. Ensure managers are aware of the risks of a poor culture – from non-compliance, legal cases and crime, to the costs of disaffected staff leaving and poor customer service.
9. Ensure that bad behaviour is dealt with appropriately – and publicised. This gives a clear sign that senior management cares about culture.
10. Check that the desired organisational culture is understood and that all employees – and third parties – understand how to report wrongdoing and find reporting channels easy to access. Quizzes and communications highlighting and rewarding good behaviour are positive ways to get the message across.

This article was published in September 2024.