Leeds Building Society - internal culture audit
The culture audit was prompted by the publication of the CIIA’s “Culture and the role of Internal Audit” and the FCA Risk Outlook 2014. The Chief Internal Auditor felt the team was well-placed to conduct an audit of culture due to their independence and communication skills, enabling them to draw out the true beliefs and behaviours of colleagues. The CEO, on behalf of the Board, takes full responsibility for the culture in the Society and the Board were fully supportive of the audit.
When considering their approach, the Internal Audit Team (IA) read various guidance papers on how to audit culture. Due to the limited options available at that time, they developed their own models and approach.
The audit took a full year to complete and although resource-hungry, IA was committed to looking at culture in the round rather than focussing on risk culture alone. They considered culture to be wider than risk management and attitude towards risk.
At the centre of the model was the view that culture is the glue that binds strategy to outcomes, in other words, it is behaviours that drive actual business outcomes. The review was based on six themes in a ‘Culture Cluster’, setting the scope and approach for each component was conducted as an audit in its own right whilst leveraging other audit plan deliverables wherever possible.
The Culture Cluster themes were:
- Tone at the top
- Risk culture
- Member value
- Aspirational values
- Colleague advocacy
IA presented the scope and approach to the Board, which gave its full support.
The audit commenced by identifying expected and actual controls for each theme and creating an audit test plan, similar to a standard audit methodology. The controls were then categorised into three testing strategies:
- Enablers - the processes and frameworks in place to support the desired culture of the Society;
- Drivers - the incentives to encourage the right behaviours, such as recruitment to hire the right people, reward and performance management;
- Belief - focussed on what colleagues actually felt and believed in and considered actual behaviours.
The Enablers and Drivers could be audited mostly using standard audit methodology to test the controls and provide evidence of good practice. Belief was tested by talking to colleagues through both individual structured interviews and focus group sessions. These were conducted with a representative sample of circa 200 colleagues (15% of all colleagues) from Board to Branch, across all grades, departments and locations. Colleagues were assured of the confidentiality of the interviews and were given a full understanding of why the culture audit was taking place.
The questions used in the sessions were designed around topics to complete the testing, where standard methodology was not possible and a number of key themes from the Cluster to bring out actual belief. Experienced senior auditors were trained in advance of the sessions to ensure they were consistent and really got to the core of colleagues’ beliefs. The sessions ran from 1 to 1 ½ hours and responses were scored by colleagues on a scale of 1-6. Scores were recorded in a question bank database to enable analysis of the responses and to understand any themes arising.
In order to benchmark the results of the audit and describe the existing culture, the IA team developed a Culture Maturity Path. Colleagues were requested to score where they felt the culture was on the path, which ranged from exacting to exonerating on a scale of 1 -16. IA then asked every Board member where they thought the culture was and where they would like it to be for a comparison against colleagues’ views.
The results from the review were assessed to identify positive views on the culture of the Society and key themes for improvement. IA reported these results back to the Board in 2015 and the CEO has initiated a programme to implement changes which respond to the themes raised and to further develop culture. The results were shared, together with planned actions, to all colleagues via the Society’s intranet.
To continue their review of culture the audit team are now developing cultural indicators to consider throughout the audit plan in 2016. They plan to report against these in a Culture scorecard to the Audit Committee and Board.