There was more trouble than beer brewing at BrewDog in June this year after more than 100 former employees signed or supported an open letter to the company’s founders, James Watt and Martin Dickie, accusing them of lies, hypocrisy and deceit. “You spent years claiming you wanted to be the best employer in the world, presumably to help you to recruit top talent,” they said. “Being treated like a human was not always a given for those working for you … we have never seen anything that has made us feel that BrewDog has lived the values it purports to uphold.”

The letter described “toxic attitudes towards junior staff”, a “rotten culture” that “belittled and/or pressured people”, and that often made them feel so terrorised that they would leave. “The single biggest shared experience of former staff is a residual feeling of fear – fear to speak out about the atmosphere we were immersed in, and fear of repercussions even after we have left,” said the signatories.

The message went viral: by the next day, it had made the transition from Twitter to every newspaper in the UK and beyond. The many grievances and suspect practices it listed were impossible to refute, so Watt – ever the master of PR – did the only thing he could to calm the waves of ill will heading BrewDog’s way: he promised to “listen, learn and act”, take responsibility and do better. Within days, he and his management team tweeted the first steps they would be taking on their road to recovery: right at the top was an independent review of their company’s culture.

Watt is wise to start there, explains Jennifer Jones FCA, a Business and Management Faculty Board Member, and Founder and Consultant at Metis, which advises organisations on leadership, business growth and continuous improvement.

But what is culture? Its definition can be somewhat woolly, but Breathe, which provides HR software to SMEs, sums up nicely the assortment of intangibles it encompasses in its 2021 Culture Economy Report: “Put simply, it is the environment that an organisation creates for its employees. It is the mix of its leadership, values, traditions, beliefs, interactions, behaviours and attitudes that contribute to the emotional and relational environment of the workplace.”

For Bayram Annakov, Founder and CEO of App in the Air, the virtual travel assistant that has six million users, it is a “constitution – a tool by which that group of people who make up the business interact with each other and with the abstract concept that is the company”. The principles and ways of running that business gradually shape it and become its culture, he says. Over time, this evolves and extends to other entities the company interacts with, including its customers, suppliers and partners – who, one hopes, share a similar set of beliefs.

Annakov, whose first few employees were friends, says this is how App in the Air’s culture developed. “It didn’t start by me drawing up a manifesto. Of course, I had my values, but in the early days, the people I first worked with were my close friends, so our mindsets were aligned. Once I started recruiting beyond my immediate circle, I had to think about my principles more explicitly. It was only once I had more than 70 staff that I felt App in the Air was big enough to need a clearly communicated company culture.

“Now, when I recruit, I have to assess whether the people I am interviewing will fit into our environment. Hiring is about so much more than finding people with ability; it is about finding staff whose ethos aligns [with the business] and who share the same vision. Company culture cannot exist in isolation. I consider it to be a living organism that is constantly responding to what is happening externally and internally and adapting accordingly. My employees’ role in the process is vital.”

At the same time, Annakov recognises that there are casualties along the way as culture evolves. Most often, the first to go will be the directors, the people who are held accountable for organisation culture. He says he is prepared for that.

Culture is critically important to recruitment, as a 2019 survey by Glassdoor – the job site that promotes transparency by publishing millions of company reviews by their past and present employees – showed: 77% of the 5,000 people questioned across four countries – France, the US, UK and Germany – said that they would consider a company’s culture before applying for a job; 73% said they wouldn’t work for an organisation whose values didn’t align with their own; and more than 50% said that a healthy working environment was more important to them than salary.

Although culture appears to be elusive and intangible, the good or bad results it can deliver are anything but: Breathe’s report, which surveyed 2,000 UK employees in December 2020, showed that 27% of those who left their jobs in 2020 had done so because of toxic culture, and estimated that such toxicity costs the UK economy £20.2bn per year.

Despite this, senior managers have been reluctant to address culture, perhaps because it is so tricky to pin down. “It’s one of those issues that leadership teams have ignored or only paid lip service to,” says Breathe CEO Jonathan Richards. “Yet an unhealthy culture affects every aspect of the business. We know it drives or keeps away good people, alienates customers and hits bottom lines. Beyond that, it can lead to bad or, in extremis, illegal practices, and can even bring down behemoths – Lehman Brothers and Enron being two cases in point.”

John Harte, Managing Partner at Integrity Governance, which helps to make boards more effective, considers culture to be one of five keys – the others being role clarity, relationships on the board, board processes and board diversity – that together create strong boards. He says he typically sees three board personalities: the ‘Jurassics’, who view culture as a fad that will pass; the ‘restless’, who know that it is important, but don’t know how to approach it; and the ‘effective enablers’, who are actively engaged in shaping and directing it.

Harte says:

He adds that successful boards enact their role in culture by inspiring it, ensuring alignment and demonstrating authenticity by both reflecting and exhibiting the behaviours implicit in the culture. “The three key success factors for effective management are adaptability, courage and candour, and COVID-19 has emphasised the importance of each one. Adaptability is critical for evolutionary success; directors have to be courageous in confronting reality, and they must be candid, accountable and honest.”

Problems arise when what is promised is unrecognisable from what is practised – a point the letter to BrewDog made over and over again. This particular issue, along with other concerns around misconduct, has already prompted governments around the world to introduce legislation that makes directors liable for company culture. In 2018, the Financial Reporting Council (FRC) amended the UK Corporate Governance Code so that premium-listed companies either have to report on their culture or explain why they haven’t done so.

This, says Jones, is a positive move because, one way or another, it compels senior managers to think about the issue. “The amended [code] states that the board is fully responsible for culture. It must ‘establish the company’s purpose, values and strategy, and satisfy itself that these and its culture are aligned’. Even if the directors decide against reporting, they still have to provide the FRC with their reasons for not filing, which in itself is a step in the right direction. Anything that gets leadership teams talking about culture and makes them question their practices is a good thing,” she says.

The reporting of company culture has also thrown up the issue of how to measure it. Typically, companies have relied on methods that tend not to give a true picture of the situation, often skewing towards the positive and failing to pick up on demotivation or fear. Jones says that staff surveys, for example, don’t give “concrete data to determine actionable results,” while workshops can be “over-generalised, simplistic, impractical and unfocused endeavours … that do not result in any statistical analysis to compare”.

So, how can companies more accurately assess their culture? “We’re seeing a shift towards data-mining technology that interrogates internal and external data,” says Jones. “This includes sentiment analysis, which looks at the unstructured responses in employee and customer reviews to determine the positive, negative and neutral attributes, and the feelings, emotion and intentions and sentiments. And big-data processing is also becoming prevalent. This assesses an organisation’s emails and Glassdoor reviews to analyse what the data says about its culture. By studying the language that employees use in these communications, it measures how culture influences the employees’ thoughts and behaviour at work.”

Importantly, says Jones, any accurate assessment of culture involves objectively measuring a business’s beliefs, and those of its staff, and this is where value metrics come into play.

There are various online systems, but one that is gaining ground is run by Barrett Values Centre, which, says Jones, “gains great insights into a company’s culture by posing just three questions to employees to ascertain their personal values, their perception of what the company valued, and their desired values for the organisational culture”. She adds: “An additional benefit is that the assessment can be evidenced by correlating the results to the company’s chosen performance metrics.”

More detailed still is Axiometrics^TM Partners, which identifies the internal valuing systems that influence people’s perceptions, decisions and actions, giving insights into why they do what they do and, from that, how they are most likely to react in any given situation. The result of measuring culture should lead to healthier companies run by more engaged, dedicated staff at every level of the business, which is, of course, the goose that lays the golden eggs in any organisation’s nest.

“A brilliant business is only brilliant because it employs brilliant people,” says Joanna Swash, Group CEO of virtual PA provider Moneypenny. “That’s my mantra, and one of the earliest lessons I learned. Culture and leadership are inextricably linked, so the directors must recognise and appreciate the value of their biggest asset – their employees.

“The leadership team must have integrity. It must have confidence and trust in its staff and must make it known to them that it is OK if they fail. If you empower your people with good training, if you let them know that it’s OK for them to make mistakes, if you give them purposeful work and encourage them to be open about what is holding them back, you are creating the perfect environment for them to come up with powerful ideas that could drive your business forward.”

But Rome wasn’t built in a day, says Swash.

Google might lead you to believe that there are almost as many different types of company culture as there are companies, but the four that prevail are outlined by business professors Robert Quinn and Kim Cameron in their 2006 work on the Organizational Culture Assessment Instrument.

1. Clan culture

Friendly, people-orientated and nurturing, clan or family culture organisations have collaboration at their core. Employees are highly invested in the company and in each other. Managers often act as mentors. They delegate well and empower their teams to fulfil their potential.

Salesforce has been at the top of ‘best place to work’ lists for years. The San Francisco-based cloud computing company, run by Marc Benioff, puts the principle of ohana – Hawaiian for family – at its core, which is extended not only to employees, but to their partners, their customers and to the community. The company also takes a 1:1:1 approach to giving, donating 1% of its product, 1% of its equity and 1% of employees’ time back to the community.

Pros: Happy staff who are generally well rewarded and have purpose in their working life. Strong relationships and an ‘all-for-one’ mindset. Harmonious and kind.

Cons: Sometimes, empathy and concern for staff can get in the way of making the right decision for the business. Also, employees can lose sight of why they’re there – that is, to work rather than to have fun.

2. Adhocracy culture

Deriving its label from ad hoc, this model is dynamic and creative with innovative and risk-taking leadership.

Google and Facebook have adhocracy cultures. Their quests for new ideas, for breaking the mould and being first off the block epitomise adhocracy. As Facebook CEO Mark Zuckerberg says: “Move fast and break things. Unless you are breaking stuff, you are not moving fast enough.”

Pros: An entrepreneurial, fast-moving and inventive culture with a huge potential for growth. Employees are encouraged to try new things.

Cons: The focus is on new initiatives, putting pressure on those who work more slowly. Also, the breathless pace of progress – the search for the next big thing – can leave staff feeling unfulfilled. Some employees may have wanted longer to work on their ideas.

3. Market culture

Here, the emphasis is on driving results, with tough and demanding leadership. It’s also called compete culture, built on a highly pressured structure that aims for ambitious targets.

Amazon has often been named and shamed for the relentless pace that it expects its employees to meet.

Pros: These cultures are dynamic and goal-orientated, which can be motivational.

Cons: Employees can suffer burnout and the leadership style can result in bullying.

4. Hierarchy culture

This is an old-school, highly controlled structure, with clearly defined procedures and several management tiers. It can be bureaucratic and traditional in its methods.

The civil service typically has a hierarchy culture, as do many departments of government.

Pros: There are well-outlined boundaries and career paths. Employees know who they are to report to.

Cons: It can be a rigid environment, so there is not much opportunity, innovation or seizing the day. The priority is process rather than people. Doing things by the book can also stifle creativity.

Fiona Murden is an occupational psychologist and an award-winning author of Defining You and Mirror Thinking. She has worked with some of the world’s most successful business leaders at companies such as Lloyd’s of London, HSBC, Network Rail and Selfridges.

“Toxic cultures start with toxic practices. One drop of malpractice can run like a dye throughout an entire organisation, staining it from top to bottom. It is also worth noting that toxic people have a disproportionately negative effect, overwhelming any positivity in a meeting, for instance. Leaders are the custodians of culture – how they manage sets the pattern for how the people beneath them manage, and so on. I can’t comment on BrewDog, but I was interested to read that the signatories felt that if they dared to air their grievances, they would be told that ‘that’s just the way things are’. They also mentioned that such attitudes had trickled down through the company until they were an intrinsic part of it.

“If you think of culture like a relationship – which essentially it is – then it is not difficult to work out what would break it and what would nurture it. Companies that treat the people they are in a relationship with badly – their staff, their customers, their partners – will fail. If they lie, cheat and break their promises, if they undermine and are self-serving, then sooner or later their empires will fall. Conversely, if they communicate, encourage, empower and trust, then they will thrive.

The ICAEW Library & Information Service provides full text access to leading business, finance and management journals, as well as a selection of key business eBooks. Further reading on improving company culture is available through the resources below.