Summary: Ineffective company culture can reduce profits and pose risks to the sustainability of a business. Risks to be aware of include failure to invest in employees, uneven accountability for misconduct, lacking diversity and inclusion, poor behavior from leaders, high pressure environments, and undefined values and behavioral standards.
According to Deloitte, 94% of executives and 88% of employees believe that workplace culture is an important factor in business success, and their research finds that having a distinct company culture contributes to employee happiness and their likelihood to feel valued by their employers. Having a strong, positive, and recognizable company culture could increase revenue growth by 400%. Additionally, having a strong employer brand can halve the cost per hire while attracting top talent. The impact of company culture on employee satisfaction, productivity, and business success can be easily seen in organizations such as Google.
Conversely, a poorly-defined or toxic business culture can pose many risks to the growth and sustainability of your business as demotivated employees turn to unethical and even illegal means to manage their jobs.
You Should Know The Six Signs Of Company Culture Liabilities
Harvard Business Review conducted deep data analysis in order to find which factors were most likely to result in a company culture crisis. HBR found the following six signs, in order from strongest correlation to weakest, to be the most determinate in whether company culture could be a liability:
Inadequate Investment In Employees
Employees have grown to expect more than basic compensation in the form of salary or hourly wage from their jobs. Other forms of investment include benefits like health insurance or discounted gym memberships and college tuition assistance. Employees also favor businesses that offer career development which may include various training and networking opportunities. Companies that do not abide by these types of expectations tend to have disgruntled employees who feel a lack of support in their jobs, quickly increasing vulnerability to low quality work, passive-aggressive tendencies, and perhaps even of becoming insider threats themselves.
Lacking Accountability
Companies that do not ensure that adequate and equally-applied consequences for misbehavior in the workplace put themselves at risk. Similarly, if employees feel like they may suffer recourse for reporting violations, company culture can quickly become toxic and unethical. If employees feel as though consequences are applied unevenly or unfairly, they may neglect to report others because they think it won’t matter, and they can become less ethical in their own behaviors as a result, quickly creating a snowball effect.
Neglect of Diversity, Equity, and Inclusion
Sexual harassment, gender discrimination, and other inequalities among workers can cause major upheavals in company culture. Stereotyping and microaggression are major factors in why people leave specific industries—such as the tech industry—that are known to be rife with these sorts of mistreatment. Two-thirds of people surveyed about leaving on this premise indicated that they would not have quit their jobs or industry if employers had made an effort to fix these behaviors and standards.
Poor Behavior Among Leaders
There is a trickle-down effect of behavioral cues from top leaders within an organization. If those people who are appointed to guide and serve as role models participate in discriminatory and unethical behaviors, then it is likely that the rest of the company will begin to follow suit. In HBR’s survey, a third of employees believed leaders in the upper echelons of their company acted in ways discordant with company values. It is believed that the pressure to achieve results as a business leader may cloud judgment on how results are achieved, causing executives to turn to misbehavior.
High-Pressure Environments
Just as C-level employees may turn to risky behaviors under intense pressure to perform, companies who lack vigilance about these types of high-pressure environments may experience employees at all levels who tend toward unethical and aggressive tactics, resulting in misconduct ant best and illegal behaviors at worst. Sales teams especially are prone to this sort of risk, where values can be compromised for expedient growth and profit. Unrealistic deadlines and poorly-structured incentive systems add to this form of risk.
Unclear Ethical Standards
If employees are offered insufficient guidance on how to behave, expectations generally set by company values, then they are sure to misstep. Companies who fail to set a global value system among their employees fail to offer the systems and processes that employees need to feel confident in their actions. Employees aren’t able to follow guidelines they are not aware of.
How To Mitigate Risk Stemming From Company Culture
There are ways to prevent all of the risks listed above as well as some extra steps you can take to further protect your company culture from becoming a liability. For those risks listed above, you can begin by taking the following steps:
Invest in your people with a variety of benefits and career development opportunities that extend beyond their basic compensation.
Deliver disciplinary action fairly and equally. You can also share non-personal information regarding disciplinary actions taken within the company. Updating or implementing whistle-blower policies to prevent backlash and humanizing your HR department through socialization with employees in other departments can also help ensure employee compliance.
Find ways to incorporate diversity and inclusion in your workplace. In some companies, this may take the form of an advisory board with members from underrepresented groups.
HBR suggests that values should come above all else in the case of executive misconduct, and boards should be tasked with making these difficult decisions. Ensure that leadership is aware of the consequences of unscrupulous activities and expect them to uphold ethics over profit.
High-stress, high-competition environments contribute to misconduct, but you can appoint wellness officers and provide on-site services to assist with employees’ mental and physical wellbeing. Training in decision-making can also assist employees in making good, ethical choices.
Formulate a clear set of values to guide your company culture, and uphold these values equally across all employees. You must enable and enforce these values in order to mitigate risk in your organization.
Other ways HBR suggests a business manage company culture risks include securing visible commitment from topmost leaders to uphold company values, begin a cultural vigilance team, define or refresh behavioral expectations, design a strategy for cultural vigilance and uphold this strategy as well as weave it into planning and development processes throughout the organization.