Could your corporate culture provoke your next crisis?

By David Ferrabee, Managing Director, Change, Culture and Engagement, Teneo.

At the end of November the Chartered Institute of Public Relations’ Crisis Communications team organised an event called: “Could your corporate culture provoke your next crisis?” I was invited to participate along with Dr Hannah White, the Director of The Institute for Government, and Fiona Hathorn, the CEO and Founder of Women on Boards. More than 100 members dialled in, making it one of the biggest events they’d held this year.

Here is a written summary of my prepared notes. I covered most of this ground in my remarks and then in the questions that followed. The panellists approached the topic from different angles, as you can guess from their roles. However, the consensus seemed to be an easy ‘yes’ – your corporate culture could well provoke your next crisis.

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I have often said (tongue firmly in cheek) that many organisations seem to contravene the Geneva Convention. Their treatment of prisoners could well be unlawful. And while this may be an overstatement, I do believe that there is an epidemic of toxic culture in many organisations today. At the same time, I also believe that there are things that can be done about it. Corporate cultures very much do exist. They can be identified and understood, and, although they cannot be owned by the business, they can be managed and adjusted by the business.

Before we get into that though, let me start by defining ‘toxic’ culture. My simple working definition is that a toxic culture is one where people feel at risk in ways that affect their ability to work effectively. There are a number of things that can drive a corporate culture to become toxic. They include systems, processes and behaviours. By that, I mean that an organisational culture can be turned into a problem by the way in which the organisation works – the systems and processes it uses – as well as by the way people behave.

Recent news articles have reported extensively on poor behaviour at certain organisations. There seems to be an example in the press every day. Behaviour is easy to use to illustrate poor company culture. However, behaviours and cultures are driven by many things. They are not just about one or two people, the proverbial ‘bad apples.’ Company culture is created and sustained by systems, processes and people that influence ’the way we do things around here.’

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How can we identify a poor company culture?

Typically, it shouldn’t be hard to identify a toxic workplace. Current employees, exit interviews, HR or absentee data can quickly indicate the problem. Often leaders will be quick to discount the signs though. They will rationalise the indicative data in a number of recognisable ways. For example, they might say that the recent leavers were the problem. They were difficult people, or they didn’t fit the company. Or they might say that HR is the problem. They are too sensitive or always take the employee’s side. These kinds of responses does not tend to reduce the risk.

Over the years we have examined a number of difficult company cultures. There are certain things they often have in common. We have identified three different business situations where a poor culture can thrive.

1. A personality-driven culture – Where an organisation is led by a charismatic leader or a difficult founder who has a strong and challenging character. They aren’t even necessarily extroverted or visibly coercive. The poor cultural leader can even be someone who “presents” very well. It’s not uncommon for people to be charmed by a leader, only to discover poor behaviour in the day-to- day.

2. A dysfunctional team or company culture – Where the structure and acceptable behaviours in an organisation support bullying, harassment or unreasonable demands. Today, the traditional style of “command and control” leadership, for example, could also be one factor. In many offices people no longer expect to be simply told what to do, they often need to be told how and why to do something. In many organisations status and authority are assumed, rather than earned. That can lead to power being wielded unevenly. When a business culture assumes seniority, experience, or other extrinsic attributes, are the only basis for decisions you may have find a dysfunctional working environment.

3. A bad boss – We have all had these. They are people who exhibit antisocial behaviour and are not held to account for it. They might be coercive, overly critical, immature or simply disorganised. When you work for a bad boss, you can get into a toxic relationship. Leaders are meant to help support your success. We often define a leader’s role as “clearing the way for people to be successful.” If your immediate supervisor is a hinderance to your success, rather than a conduit for it, then the relationship suffers.

Most people who have worked for a few years, and held a few roles, will recognise these characters. They are composites, but I have met them in every industry and on every continent. They are ubiquitous. Why is that? I firmly believe that no one wakes up each morning and says, “I am going to go in to work and be horrible today.” And yet…

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What causes a toxic workplace?

There are three significant changes in recent times that have contributed to the increase in workplace problems. Each can compound the other. Additionally, they all have made a further insidious slide into our working world this century. They were multiplied by the global pandemic.

We don’t manage people anymore.

There has been an active effort to get rid of the middle manager. They have been called the clay layer, the permafrost, the dross… and many other horrible things. That is very unfair. Companies have been urged to fire all their managers by strategy and HR consultants. They have been told it will “increase their competitiveness”. Investors, private equity and venture capitalists have supported this move to get rid of the people managing the company. Cut costs.

In the same timeframe, we have seen the rise of what I call “The Cult of Work.” Late in the 20th century companies started trying to pay people in beer and beanbags. They created cool working environments to hide poor compensation and rewards. This approach allowed companies to save real costs by simply putting in a ping-pong table or allowing dogs to come to work on Tuesdays.

In the pandemic this blurring of work and life was increased, when people had to welcome their colleagues into their houses. Your fellow employees could now intuitively pick up if you were living in the middle of complete pandemonium, or, indeed, if your cat was your main companion. Work has

crowded in on people’s lives, without offering any great compensation in return. However, real conversations and connections were reduced as well. Along with office costs.

These workplace challenges were then compounded by the lack of management training for leaders. The role of ‘manager’ was allocated to people without training, and with little concern about their suitability. Line manager roles were handed out as part of the compensation process. In “The Cult of Work” we can all manage each other. We are all mates and reasonable people. It should be fine. It’ll be fine.

Nonetheless, it has not been okay. People have been alienated from their work. They feel removed from their businesses, and swathe of management decisions – Reductions in Force (RIFs!), mergers, demergers, bankruptcies, leadership coups – have all happened at a distance and without warning. Work can feel like reality TV. But in this show, you don’t know the rules, how to succeed or even how to participate.

Workplaces have changed.

We have covered some of this above. However, there have been some other significant and fundamental shifts in recent years that cannot be ignored. The demographics of the workplace have changed. There is more diversity at work – more age variation, more disparity of experience, and variety of economic circumstances. A lot of this is good news and represents progress. However, these kinds of social and demographic changes all require business systems, processes and behaviours to adjust as well.

Add to this all the changes driven by the global pandemic. Work can now be hybrid. Work can happen anywhere, at any time, or all the time.

There’s an academic estimate that working from home is equivalent to an 8% pay rise.1 As a result, asking people to come into the office is equivalent to asking people to take a pay cut. That sets a high bar for people to want to return.

If culture change were as well understood as procurement or inventory, then few companies would ever have a crisis of culture. But that’s not all, a review of company culture can also clear out many other barriers to success. Not just in people but in processes and systems as well.

Finally, the workplace has had to change in accordance with external social change. We have seen the rise of BLM, DEI, #MeToo, and LGBTQ+ advocacy in the office. The workplace also now needs to be aware of people’s mental health requirements. All of these changes have affected the dynamics of work. They create more opportunities for misunderstanding, they require greater openness, better management skills, and they require people to learn many things anew.

There is no judgment in this discussion – or there should not be. All the workplace changes I have outlined should be seen as positive. They take organisations forward. But they are changes. And change is hard.

We’ve put performance ahead of people.

You can blame it on the 80s, but ‘performance’ is still king. Older workers will remember Gordon Gecko in the film Wall Street urging people to understand that “Greed is good.” The need for businesses to focus all its energies on performance has also increased since the financial crisis of 2008. As a result, it can be easy to create an environment where there is low accountability, but high competition. People are set a task of out-performing others. Cooperation, coordination and

collaboration suffer. In this kind of environment teams can find that they are under-resourced, and yet expected to perform the same as if they were fully staffed up. When organisations show that they can still perform, but with fewer people, it becomes addictive. If people fall over, the business can find another person to fill that place. People have become a renewable resource. If you deplete one, you can find another.

Clearly each of the three issues I have outlined here can be argued with. “We don’t have that one here…” But they are each potential contributors to creating a culture that could be your next crisis.

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Why is any of this a problem?

This may seem like a silly question. (The answer is in the title of the article.) However, it is possible that leaders will rationalise their toxic culture as being an unavoidable product to their industry or say that it is beyond their control. So, let’s remind ourselves of some reasons why your culture can cause a crisis.

You can become the story – At its most dramatic a toxic workplace can become the story. If you have read the newspapers in the last few months, you will know. If your business culture becomes the story, the resulting reputational damage can be significant. I won’t list all the organisations who have made headlines in 2023, to spare their blushes. If you are unsure, do an Internet search. It is a long list. Saddest of all though is that these can all be seen as self-inflicted wounds.

Staff turnover – Your best people get fed up and go. People leave. People won’t join. Recruitment becomes difficult. The word gets out that your organisation is not a good place to work, and then good people become harder to find.

Here are some statistics from before the pandemic. In a survey for the American Psychological Association 22% of workers in the USA say they experienced harassment at work.2 And in the UK 64% of workers say they have experienced poor behaviour at work that has affected their mental health.3 Those are big numbers. Why would people stay at a job where they felt like that?

The market doesn’t like it – The evidence here is in the share price of any company that has faced toxic work culture claims. One might argue that the market isn’t worried about people unless it affects performance of the business. But a closer inspection of businesses that have faced recent claims show investors moving away suddenly, and then more consistently in the weeks and months that follow. Investors are worried about the reputational damage and the impact of a crisis of culture on the business’ people, suppliers, and customers.

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What can be done?

You simply need to get ahead of the problem. If you don’t want to end up with a culture crisis that is beyond your control, you need to ask: What measures have you put in place to address these issues? If you are a business leader, you should not be allowed to blame HR. If you are an HR leader, you should be prepared and able to answer questions about what was in place to manage a potential culture crisis. And your answers had better be good.

There are three structural and organisational ways that you can work to address cultural issues in your organisation. They are outlined below in ascending order of their impact. The solutions also get harder as they get more effective.

1. Values and behaviours

Most organisations have published Values. They can be found on the company website and in company literature. They are part of induction and in some cases, they are part of the performance management discussion. How much are you ‘living the values’? How much thought has gone into whether your values are right? Look at the values of many companies that have been in the news for toxic behaviour recently. Did their values save them?

Research I have undertaken twice in the last 20 years showed almost half of the FTSE 100 companies in the UK had integrity as a value. A little more than 1/3rd had innovation. Does that seem reasonable? What did it really say about those companies? What behaviour did it really drive within them?

Are your behaviours leading indicators of what it is like to work in your company? Or do they risk being lagging indicators of what went wrong?

Values and other published company ‘behaviours’ are all fine and well, but history has not shown that they can eliminate poor behaviour or help your business avert a culture-related crisis.

2. A company ‘ombudsman’

These are sometimes referred to as a ‘whistleblower’ programme. Or as a compliance programme, which is a legal requirement in many industries. But the idea of an ombudsman is healthier and more proactively positive. There are ombudsmen available through the Ombudsman Association in the UK. There is a similar organisation in the USA. However, companies can create their own as well. IBM, Walt Disney, Intel, Microsoft, and many more, have their own internal ombudsman, or something similar.

You can think of it as a canary in the coalmine. An early warning system.

If an organisation doesn’t want to do that, employees still have options. In the UK they can use the Advisory, Conciliation and Arbitration Service (ACAS). In the USA it gets more complicated with things like the NLRB, the EEOC and the OSHA. If an employee isn’t happy with that, they can also pursue an employment tribunal or independent legal action. To be clear, these are all less attractive options than an ombudsman for both employee and employer.

3. Managing organisational culture

The third option is to implement a programme to manage your company culture. I am happy to admit that I am an advocate because I have implemented them in some of the world’s best companies. The process of understanding and the adjusting your culture is a very enlightening and healthy one. You work with your own people to have them identify things like power structures and control systems. You get a reading on what the stories are that people tell and the rituals that they find important.

You can very quickly generate a lot of data. And data is always helpful in decision-making. With a relatively small adjustment here, or a minor change there, you can change the subtle ways your culture works. You can free up resources, liberate managers, and deepen employee engagement.

If culture change were as well understood as procurement or inventory, then few companies would ever have a crisis of culture. But that’s not all, a review of company culture can also clear out many other barriers to success. Not just in people but in processes and systems as well.

All you need is the will to look at your culture, and the active support of senior leaders.

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Conclusion and next steps

If you think you have no risk of your culture being the basis of your next corporate crisis, then I suggest you think again. The economy looks likely to pick up again in Europe soon, as it has already started in the USA. When people feel they can move away from a job that they are not enjoying they do. There is no looking back. When a journalist finds a story on your business that they can put a simple label on, they will.

Think about your business. Think about client and customer feedback. Think about the market and what 2024 holds for your business. Consider how important your people are and what they will need to be able to do in 2024. Then let’s talk about culture.

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Footnote

1 The Financial Times, Monday 11 September 2023, Tentative truce on return to the office, Andrew Hill and Emma Jacobs

2 APA poll reveals toxic workplaces, other significant workplace mental health challenges, July 13, 2023. Apa.org

3 Protecting your people: the importance of adopting a people-centric workplace culture and tackling toxic behaviours, Culture Shift, October 2021 (https://info.culture-shift.co.uk/protecting-your-people)

Image is AI-generated.

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