18 Nov 6-Item Alert Checklist When a Cultural Crisis is Looming — and How to Avoid it

What are organizations putting at risk in the 21st century? Culture is at the heart of today’s biggest scandals, especially in today’s world of extreme transparency, when it’s only a matter of time before what’s broken on the inside is revealed to the outside. This has never been more apparent as organizations become more multicultural and global. 

In Silicon Valley, many employees come from different parts of the world, or come from a generation influenced by their migrant parents who moved to the United States a little over 40 years ago, and are bicultural in their mindsets. This is yet to be factored in all the studies, but for now, culture in the broader sense is already fraught with so many challenges. 

Recent corporate scandals such as sexual harassments, employee discrimination, financial mismanagement, cheating of customers, inattention to safety, or poor behavior in the leadership ranks have long-lasting effects. Unhealthy cultures can demoralize employees. 

The result: they alienate customers, ruin reputation and destroy value, according to a new study by United Minds, a Weber Shandwick company in partnership with  KRC Research. Its findings reveal that one in five employees has been through a recent culture-related crisis – an incident that is emblematic of troubling attitudes and behaviors across the broader organization.

Top leadership being accused of significant wrongdoing (8 percent); company being accused of endangering lives or health due to carelessness or bad intent (7 percent); company experiencing criticism for sexual harassment or racist behavior (6 percent); company cheating or misleading customers (6 percent) and company being involved in financial wrong-doing (4 percent).

As a result, companies find themselves doing reactive clean-up when they need to implement a proactive cultural vigilance. Good things Boards and CEOs are listening, according to the study. 

Leaders have been left with no choice but to address growing employee activism, scrutiny from regulators and an increasing acknowledgement that a healthy culture yields better business outcomes. Only about 28 percent of employees strongly agree that there is alignment between their company’s actions and its stated values — a finding that should alert companies.

When do you know when a corporate crisis is looming? The list below from United Minds needs to be addressed by companies and global mobility professionals as they prepare for next year.

1. Inadequate investment in people 

What is the single most important thing an employer can do to avoid a cultural crisis? An investment in employees is an investment in a healthy culture, and ultimately in better business outcomes. 

Getting to better: Starting in 2017, Uber decided to use corporate education to strengthen its culture. Employees were offered the opportunity to take a series of classes in leadership and strategy taught virtually by Harvard professors, with 6,000 employees trained in the first 60 days. The investment had both symbolic and practical value, signifying the company’s commitment to people development while equipping employees to better deliver against company goals.

2. Lack of accountability 

Twenty-seven percent of respondents believe their company is not always vigilant about holding people responsible for misconduct. When this perception persists, employees may use it as both as a justification for not reporting poor behavior (why bother?) and as a reason to be less careful about their own actions. 

Getting to better: Shortly after his appointment to CEO of Volkswagen, Herbert Deiss made clear that the company’s long-term success was dependent on the firm’s culture becoming more “open, honest and decent” and added that any misconduct would be punished relentlessly. 

3. Lack of diversity, equity & inclusion 

With matters of sexual harassment and gender discrimination at the fore, more than half of companies revisited their policies, while others appointed diverse Board members, established Diversity & Inclusion (D&I) Councils, strengthened their Employee Resource Groups and tackled non-inclusive ways of working. Even with substantial improvements, however, diversity leaders still identify organizational culture as the number one challenge standing in the way of their D&I objectives.

Getting to better: Google and Amazon have both made policy changes to advance cultures of diversity, equity and inclusion. In late 2018, Google ended its practice of forced arbitration for claims of sexual harassment or assault. In February 2019, Amazon hired Rosalind Brewer, the African American former CCO of Starbucks, as the only non-white member of its 10-member Board. 

4. Poor behavior at the top 

It’s no surprise that employees take their cues from those in authority. Which is why it’s troubling that 32 percent of employees say their leaders don’t behave in ways consistent with company values. Indeed, far too many executives are rewarded on what they achieve without factoring in how they achieved it. When the conduct of senior leaders, rainmakers and highly valued employees – the very people that should be role models – is called into question, people often look the other way. 

Getting to better: A string of CEO departures all for impropriety has come and gone. So significant was this trend that for the first time in 19 years the number-one reason CEOs were ousted from their jobs was not poor financial performance, but ethical lapses, according to PWC.  

5. High-pressure environments

The top three factors affecting how employees feel about their jobs all have to do with workplace pressures: 1) maintaining work/life balance, 2) competitive pressures and 3) client or customer demands.Thirty-seven percent of employees say their companies are not always vigilant about managing these types of pressures.  

Getting to better: Wells Fargo has put in place a new compensation program focused on the customer experience. Further changes were made to ensure that entry-level bankers were incentivized based on team rather than individual performance, and that a larger percentage of incentives were tied directly to customer feedback. 

6. Unclear ethical standards 

Research shows that company values – which should provide a north star for employee behavior – often don’t exist, aren’t known, or aren’t enabled by systems and processes, making them challenging to live. Among employees who know their employers have company values, roughly 1/3 don’t feel confident explaining them.

Getting to better: Emerging from a very public scandal, a med-tech company needed to reset expectations of its people and align around a global value system that would transcend geographic boundaries and local cultural norms. Their approach? Engaging employees globally in co-creating five core values that would drive critical behavior shifts and resonate in each market around the world.

Companies must be vigilant in all these areas, especially in a world that is more transparent than ever. A strong corporate culture can withstand today’s volatile business environment.