Today, it is hard not to feel overwhelmed by events: Brexit, Covid, war in Europe, the death of a monarch, political turmoil, economic uncertainty, fuel insecurity, food insecurity, disrupted supply lines, freakish weather — the list goes on.
As auditors, we tend to focus on quantifiable business risks and overlook less tangible human dimensions. However, they are inextricably linked through culture. Human capital risks moved up into second place in the 2023 ECIIA Risk In Focus report, above geopolitical uncertainty and digital disruption. The report describes this risk area as “firmly cementing itself among the hardest challenges businesses face” and one of the “high-impact, interlocking risks that have thrown many businesses into a permanent state of crisis.”
The good news is there is something employers can do about it and ways in which we as auditors can help. This article traces some of the root causes and provides five practical ways internal auditors can help their organisations cultivate a healthy culture.
Growing Cultural Erosion — What the Data Says
The partial or total return to the office has been associated with unrealistic workloads, lack of flexible working conditions, job insecurity, erosion of trust, and increasing toxicity multiplying the anxiety, fatigue, and stress we already feel. Recent workforce data paint a stark picture:
- 42% say their level of exhaustion is greater than at any time previously.
- 1/5 feel stressed more days than they don’t.
- 46% say they are close to burnout.
- Reports of burnout have increased by 48% to record levels.
According to McKinsey, one-in-four employees are now experiencing high rates of toxicity in the workplace, a major contributor to burnout, and a significant factor behind the Great Attrition and the recent headlines around the Quiet Quitting phenomenon.
If workers weren’t ready for a return to the office, then employers have not done enough to address their concerns regarding their return either. Employers’ estimate of morale and well-being is on average 22% above employees’. Many employees have reluctantly reported back for duty only to find themselves stuck in meeting rooms or teleconferences all day. Consequently, actual attendance is as low as 50% of agreed hybrid working policies.
The net impact is very real: 13.7 million workdays are lost every year in the UK due to work-related stress, anxiety, and depression, at a cost of £28.3 billion.
Advancing Corporate Culture in the Office and Beyond
Fortunately, some employers are already demonstrating what can be done. According to the ECIIA report, “organisations must create a core, purposeful and diverse culture to accommodate, for example, hybrid working and inclusion, while remaining highly operational, productive and functional however people choose to work.”
To create such a culture, employers should consider:
- Treating mental health and well-being as a strategic priority and encouraging open discussions to remove stigma.
- Incentivizing employees to take their leave and mental health days as needed.
- Tackling toxic behavior directly when it is identified.
- Enabling genuinely flexible working patterns that are responsive to individual needs, ensuring time spent in the office is meaningful.
- Raising awareness and providing training to ensure managers are part of the solution not part of the problem – not having an ally or advocate is a significant contributor to stress.
Audit’s Role in Helping Organisations Cultivate Healthy Cultures
A joint research report by the Chartered Institute of Internal Auditors and AuditBoard, Cultivating a Healthy Culture, highlights the importance of focusing on organisational culture in a post-Covid world. It outlines the contribution auditors can make by working with senior management and the board, never forgetting auditors are part of culture and equally subject to external pressures and internal toxicity.
Download the full report for guidance on how internal audit can take a proactive role at all stages of the corporate culture journey. Additionally, here are a few suggestions:
- Lead by example. Look to members of the audit function to identify signs of toxicity, fatigue, stress, etc., address them directly, and promote the desired culture.
- Be proactive. Don’t wait to be asked by the board or senior management to look at culture — look for ways to embed consideration of culture into planned audits.
- Provide assurance on organisational culture. This may include:
- Developing a model or adopting and adapting an existing model for evaluating culture. The Chartered IIA/AuditBoard report has a helpful six-step model from the Irish Department of Public Expenditure and Reform.
- Assessing culture using auditors with skills in this area – if not available, then train or outsource, and work with subject matter experts such as behavioral psychologists.
- Identifying ways in which organisational culture may be alleviating stress, anxiety, depression, and burnout, as well as potentially contributing to them.
- Identifying the alignment between culture and governance, risk management, and internal control.
- Step up to offer insight and advice. This may include:
- Helping develop and communicate a new vision for the work environment.
- Offering to provide training and raise awareness.
- Supporting other functions, i.e. HR in developing the workforce strategy.
- Working with boards and senior management to help them acknowledge the significance of their role in shaping culture and the importance of it.
- Be champions for a healthy culture. Use your voice and platform to speak up against toxicity, abuses, and red flags.
With the pace of global events showing no signs of slowing down, we must be mindful of the consequences on mental health and well-being. Employers need to be realistic about morale and address culture as a serious strategic issue, and invest in creating an environment that caters for their employees’ needs. For our part, internal auditors can help our organisations be better by keeping people at the centre — whether that’s in the office or at home.