If Volkswagen’s emissions cheating scandal, Wells Fargo’s fake-accounts scandal, and Uber’s sexual harassment scandal have a common thread, it is that each of these controversies has been blamed on a fundamentally toxic element within the organizational cultures of these companies, so each company has embarked on a major culture overhaul in its wake. In a feature at the Wall Street Journal last week, Joann Lublin observed that scandals like these were opening directors’ eyes to how significantly their companies’ cultures affect their performance, and took a look at what some companies’ boards were doing to manage culture issues more directly.
Even though the evidence is mounting that culture problems can do severe damage to a company’s reputation and bottom line, “few boards currently have an explicit focus or formalized approach to cultural oversight,’’ Helene Gayle, who sits on the boards of Coca-Cola and Colgate-Palmolive, told Lublin. Gayle was the co-chair of a blue ribbon commission appointed by the National Association of Corporate Directors to prepare a report on culture as a corporate asset and come up with ideas for how boards can manage culture more effectively.
The report recommends that boards work with the CEO and senior management to “establish clarity on the foundational elements of values and culture,” and take a proactive approach to culture management. That means making oversight of culture (including the board’s own culture) a full-board responsibility. Culture management needs to be embedded in the organization’s business processes, including rewards systems and CEO selection and evaluation, and in the board’s interactions with management.
This recommendation concurs with the conclusions of our latest research on culture at CEB, now Gartner: Many organizations try to change their culture by changing their people, but these interventions are often ineffective, despite massive investments of time and resources. The most effective culture change efforts we’ve seen focus instead on crafting systems and processes that allow everyone to live the culture.
From getting certified as a B Corporation in 2012, to its proposal for a social safety net for gig economy participants, to its expansive parental leave policy and other generous employee benefits, the online handicrafts marketplace Etsy has made a point of positioning itself as a socially responsible business that takes good care of both its employees and the users who rely on it to sell their creations. Since going public two years ago, however, Etsy’s growth has stalled and its stock price has fallen considerably as investors balked at a business philosophy that appeared to them insufficiently profit-minded. Now, Max Chafkin and Jing Cao report in a recent Bloomberg Businessweek feature, activist investors are stepping in to push the company in a more pro-growth direction, which means rethinking some elements of its culture and particularly spending less money on compensation and employee perks:
The answer, as [tech investor Seth Wunder] saw it, was that the company had been careless with its spending—Etsy’s general and administrative expenses amounted to 24 percent of total revenue. (EBay and MercadoLibre.com, the Latin American online marketplace, each spend about 10 percent of revenue on such expenses.) Etsy had been hiring like crazy, having increased its staff 55 percent since the end of 2014, and doling out all manner of perks: an elegant Brooklyn headquarters with Manhattan views, art installations, and a “breathing room,” along with salaries and benefits common at much, much more profitable tech companies. Wunder’s Black-and-White Capital began buying Etsy stock, eventually acquiring 2 percent of the company. The stake is relatively modest—Black-and-White is Etsy’s 16th-largest shareholder—but it was more than enough to launch an activist campaign.
In a world of constant connectivity, it can be difficult for knowledge workers to separate themselves from their work and carve out genuine personal time. Employers can exacerbate this “always on” problem when they create an expectation that employees will respond to work-related emails at all hours simply because they can. At Quartz, Anne Quito passes along some solutions to that problem from participants in a workshop at last month’s TED conference:
The most insidious of all emails are those sent while we’re not in the office. German companies Volkswagen and Daimler AG have taken proactive measures to help employees safeguard their time off. Volkswagen’s Blackberry servers stops delivering messages after an employee’s shift and Daimler has a voluntary “Mail on Holiday” program that automatically deletes incoming messages when employees are on vacation. “As employees come back from holidays, they start with a clean desk,” explains a Daimler human resource representative to Quartz.
A manager who works in an Australia start-up says he turns his mobile phone off during the month he goes on annual leave. For bosses and clients who insist on keeping contact, he gives his out-of-office email as his out-of-office contact. “I say if you need to contact me, here’s my wife’s email address.” It’s an offer no one has ever taken, he reports. “It can be done—disappearing for weeks at a time.”
I would be in big trouble if all the emails I received while on PTO were deleted, but the off-hours struggle is real! Rather than going to such an extreme as deleting everything, something I’ve found useful in the past is setting expectations with my team about what communications will be important to send, and which are safe to omit.
As many employers rethink their approach to performance management, one approach many organizations are trying is to replace or supplement the traditional annual performance review with more frequent check-ins. As companies work to meet the demand among their employees for more continuous and detailed feedback, Sarah Kessler at Quartz takes a look at the growing market for technological systems that enable these more frequent conversations:
Startups like Lattice, TinyPulse, and Zugata take the concept to the extreme with quick reviews that are often meant to be completed every week and sometimes coordinated automatically. TinyPulse CEO David Niu, whose customers include Facebook and IBM, promised that a new product launched in February would capture “all the real-time data people crave to measure performance, all while keeping it fun.” By fun, he meant, for instance, that managers and employees can assess progress on their goals with a Tinder-like swipe-to-rate system. …
At First Round Review, New Relic’s CIO Yvonne Wassenaar shares how her company used simulations to navigate a challenging period of growth and change:
Wassenaar, then the SVP of Operations, set a goal: Drive understanding and alignment across the top 30 company leaders so they could all more effectively execute and support each other in the move to enterprise. To prepare the simulation, Wassenaar partnered with BTS consultants and asked for input from the finance team, with about 15 people who were interviewed in advance of the exercise. The process took about six weeks.
The setup of a simulation was simple: Teams competed against each other running the company over a three-year period. “Done right, it’s a lively and engaging process. We played three rounds, and each round of the game represented a year. In each round, teams made a set of trade-off decisions and investments that were run and scored against expected trends built into a premade forecast model kept secret from participants until the simulation. To keep it interesting, we threw unexpected events that required teams to react, like a competitor making a hot acquisition or a sudden security breach,” Wassenaar says. “After the simulation, the teams were scored and ranked by highest revenue, profitability and customer satisfaction. Then the teams debriefed and examined their performance. At the end of the ‘three years,’ the team with the highest weighted score won.
At Entrepreneur, leadership consultant Matthew Wride examines trust in the workplace through the lens of a Nobel Prize-winning economics theory “on how markets operate when transactions involve asymmetrical information“:
Asymmetrical information is the enemy of trust. Unsurprisingly, trust is eroded when we believe others are withholding information or where we do not have enough information on our end to move forward with conviction. We hesitate, just like the used-car buyer who frets over whether he is getting the deal of a lifetime or a bucket of bolts and a set of blown valves, worn rings and a barely-working water pump. …
In our view, trust is best fortified and grown through expectation alignment. …
Interestingly, my firm has found that the nature of a person’s expectations is less important than whether there is alignment between the parties. Again, the used car market illustrates this point all too well. If we buy a low-priced car and it breaks down, we become less upset because “we got what we paid for.” On the other side, nothing is more frustrating that than paying top price for a late model Honda Accord, only to find yourself stuck with a costly repair bill. Just like we don’t relish surprises with our used cars, employees do not thrive when there are too many surprises at work. They prefer consistency and predictability.
This is one of several articles and studies our team has come across reinforcing the value of trust for organizational performance and highlighting the challenges of nurturing trust in today’s environment. Trust has also been a key theme in several of the best practices we’ve published in our recent research on enterprise contribution and enterprise leadership.
Only one third of mergers and acquisitions are clear successes, and as with any type of enterprise change, one common cause of failure in M&A is when skill or capability gaps are overlooked. Accordingly, the learning and development function has a role to play, particularly when it comes to making sure the leaders involved in the change have the right skills sets to lead the kind of major culture change a merger or acquisition entails. At Chief Learning Officer, Potentious CEO Keith Dunbar offers some suggestions for how CLOs can contribute to M&A success:
- Understand acquirer and target collective leadership capabilities. Ideally, during the due diligence phase, the CLO at the acquiring company should look at up to two years of previous leadership assessment data for both his or her company and that of the target. That will provide a representative view of both organizations’ collective leadership capabilities.
- Identify individual leaders with the right M&A leadership skills. Some leaders are better leaders because of how they use their skills. The same thing applies to M&As. Identify leaders in both companies who have the right M&A skills to enable an efficient and effective integration.
- Develop a deal-specific leadership integration plan.With insights gained during the first two steps, CLOs are positioned to do what they do best, enable learning and relationship building. Knowing what the collective leadership capability and individual leader components look like, CLOs can develop specific leadership integration plans that leverage M&A leadership strengths and mitigate risk areas. The types of interventions available to CLOs to mitigate leadership risk areas include leadership engagement workshops, mentoring, executive coaching and leadership development.
An additional key opportunity for CLOs is to increase the transparency of that leadership capability data so that leaders from both organizations can understand their strengths and development areas relative to their peers and teams in the new integrated organization. This not only helps support the effective composition of leadership teams during the acquisition (and beyond) but also enables leaders to better understand when and how they can support, or seek support from, colleagues with different mixes of skills.
One great example of this in practice is Cisco’s leadership model, which builds clouds of leadership capability, rather than trying to optimize individual leaders for all competencies. CEB Corporate Leadership Council members can read our case study on Cisco’s capability clouds here, and can also check out our guidebook for managers leading their teams through the M&A process.