Home' HR Monthly : February 2017 Contents 6
When barbarians are at the gate, corporate boards and chiefs
immediately jump into action to understand and communicate what
they believe their companies are worth, and to advise shareholders
whether to accept or reject the barbarian's offer.
However this behavioural response is in marked contrast to the
same group's tolerance of their own internal barbarians, viz those
employees whose behaviour trashes a sound business culture. So the
considerable sabre rattling from corporations in response to advice
from Australian Securities and Investment Commission (ASIC) and
Australian Prudential Regulation Authority (APRA) chairs, Greg
Medcraft and Wayne Byers, that both regulators will soon examine
board and CEO accountabilities for organisational culture, is
surprising to say the least.
The two most common criticisms of this new regulatory initiative
have been that culture is too hard to get a handle on, and thence to
demonstrate cause and effect relationships that boards could be held
responsible for; culture is soft HR stuff, and the markets want to see
hard financial numbers delivered. Both criticisms are flawed.
The Deloitte Human Capital Report in 2015 defines culture in
an organisation as "the way things are around here," viz its values,
behaviours and the organisational rules of engagement among
employees. Australian of the Year, David Morrison defines it more
pointedly as "the stories we tell each other about ourselves". All
recruits to an organisation will know the practical substance of these
two definitions within six months of starting a new job.
Further, employers have a fiduciary duty to deliver a fit and proper
workplace for the conduct of work by their employees, and also one
that is safe in terms of physical and mental health.
To ignore culture is bad business. A review of the Hay Fortune 500
world's most admired companies, or the Aon Hewitt best employers
survey demonstrates that positive culture and business performance
show strong positive correlations. Culture actually drives performance,
or as Peter Drucker said "culture eats strategy for breakfast".
Despite the widespread board fear factor on measuring culture, it is
easy to assess effectively and quickly. There are many online surveys
that can give timely information on culture through answers to a half
dozen simple questions, such as: Do you know this organisation's
values? Have you been bullied or sexually harassed at work? Are you
led by managers, whom you respect?
FedEx, for example, has regular reporting with answers to these
and other key questions on business performance and culture, with
a focus on 'hotspots' where there are poor results. Such data is
rolled up into regular board reporting, and at the locational level
for management attention. FedEx runs a simple traffic lights system
on all locations, updated weekly with green indicating all is well up
to red where head office intervenes and managers have to produce
There are a number of barriers to tackling poor culture. The first
is a lack of courage by boards and CEOs to investigate and take on
the most sacred of the internal barbarians -- those leaders with high
business writing autonomy who deliver positive short term business
results, but who demonstrate inappropriate values and are poor
cultural exemplars. The worst cultures are often found well away
from head office. The recent cases of misadventures, bullying, and
harassment by foreign exchange dealers at ANZ in Sydney and New
York are typical examples.
Doing nothing to address negative root causes is almost worse than
the disease, and breeds deep cynicism among employees.
Australia has its own recent cultural and performance
exemplars -- like Telstra and Qantas. Both
organisations have dramatically improved customer
service standards, culture and performance.
The recent attempt by the Commonwealth Bank
to reward senior executives for people and culture
performance was admirable, but the subsequent
voting down of their remuneration reports by proxy
advisers was short-sighted. Those who stated that
the metrics around culture need to be more
objective, have a point that can be
ASIC and APRA will soon be asking
the right questions of Boards and
CEOs on culture. The chance to be a
first mover has passed, but the risks of
failing to become a rapid imitator are
The barbarians inside
Failing to address cultural problems within an organisation makes bad business sense.
BY PETER WILSON AM FCPHR AHRI CHAIRMAN
To read past Perspective columns by Peter
Wilson, visit bit.ly/hrmonline
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