Is Your Company’s Culture Corrupt?

Is Your Company’s Culture Corrupt?

Good companies are often infiltrated at all levels of the organization by crooks, and some companies are inherently crooked, but even good companies can find themselves inadvertently creating a corrupt culture that promotes unethical practices both internally and externally. Many researchers have studied the phenomenon and have identified critical elements that make an entire company go bad. What’s frightening is these characteristics are rather common, especially in organizations that tout themselves as performance driven firms.

So is your company’s culture corrupt?

Leadership is often the first to blame in any situation, but even more so when the company’s culture goes bad. In the article “Culture Corrupts! A Qualitative Study of Organizational Culture in Corrupt Organizations,” authors Campbell and Goritz analyzed corrupt organizations to identify the underlying cultural factors that create a corrupt environment. The authors found that two crucial components created an organizational culture that supports corruption. First, “[c]orrupt organizations perceived themselves to fight in a kind of war . . . [and] perceive themselves as a military force rather than as an ordinary company” (Campbell & Goritz, 2014, pg. 298).

As we all know war brings out the best and the worst in people. Starting with such an extreme approach drives the organization to win at all costs, which leads to the second key component of a corrupt culture—how they reward employees.

Corrupt organizations tie organizational survival and success to employee job security and success. Under these circumstances, the “employees’ moral and ethical concerns become less important than the concern to survive, with the consequence that employees begin to perceive corruption as a positive behavior.” In short, this creates an environment where “the end justifies the means,” and the only thing that matters is results, not how they are obtained (Campbell & Goritz, 2014, pg. 301). The leadership sets the tone by “[setting] their goals in a way that these goals are only attainable through corruption, and they distribute rewards” and apply punishment in a way that supports corruptive means (Campbell & Goritz, 2014, pg. 302).

I have heard many organizations push their sales team with the “come back on your shield mentality” or quoting the Art of War and the conference table. This is a toxic behavior, and ultimately a foolhardy and shortsighted approach to business.

The recent issues at Wells Fargo serve as a prime example. High demands were placed on employees to secure new accounts. Rewards and job preservation became closely tied to this goal. Over time employees found themselves pressured to meet these goals by any means necessary, which meant securing new accounts without the consent of the customer. Now Wells Fargo is drowning in the legal and economic repercussions of a decision that started out innocently enough, but that ultimately lead to an enterprise wide display of unethical behavior.

Many people can’t understand how Wells Fargo was able to let the situation get so bad. The answer is fear and silence. Fear and silence infect the whole organization and it is through fear and silence that immoral persons are able to falsify numbers, engage in conflicts of interests, and other unethical behaviors. The buck truly stops with leadership. The recent HBR article, “Why Ethical People Make Unethical Choices,” showed that a manager’s reaction to employees who raise concerns determines whether they will ever speak up again (Carucci, 2016). Leaders need to make it okay to speak. Still, they are not the only ones to blame.

Whether through fear or silence, all members of the organization become complicit in the moral collapse of the whole firm when they don’t speak out against the unethical few. Author C.E. Johnson notes that some “don’t want to believe the organization is in trouble” and so choose to ignore what they see (2015, pg. 325). Self-imposed ignorance and inaction represents immoral behavior just as detrimental to the firm as the immoral behavior they are ignoring.

The push to win at all costs is a dangerous and slippery slope for companies. Don’t let a drive for results and success undermine the very fabric of your organization. Don’t let economic incentives erode the moral fiber of your company. Build an organization with a worthy purpose and set standards of behavior and money and success will naturally follow. Shortcuts ultimately leave you stranded, or worse, in jail. Better to take the high road.

 

 

References

Campbell, J., & Goritz, A.S. (2014) Culture corrupts! A qualitative study of organizational culture in corrupt organizations. Journal of Business Ethics. 120, 291-311. Retrieved October 8, 2015 from the EBSCOhost database.

Carruci, R. (2016, December 16). Why ethical people make unethical choices. Harvard Business Review. Retrieved from https://hbr.org/2016/12/why-ethical-people-make-unethical-choices.

Johnson, C.E. (2015). Meeting the Ethical Challenges of Leadership: Casting Light or Shadow (5th ed.). Los Angeles, California: SAGE Publications Ltd.

 

Achieving True Competitive Advantage

Achieving True Competitive Advantage

Competitive advantage is an essential business concept, but not one that many companies do well. A winning competitive advantage is one that fits the company’s internal situation and its external environment, is sustainable, and results in good, consistent performance (Gamble, Peteraf, & Thompson, 2013, pg. 9). These criteria are all unique but interdependent. The company’s resources and capabilities play a big role in determining both the initial viability and the sustainability of a competitive advantage. Selecting a competitive advantage that is best suited to the firm allows the company to operate at optimum levels while creating a consistent and valuable experience for customers. This combination is what generates a sustainable competitive advantage.

Putting a firm’s resources to their highest and best use creates a natural efficiency that yields value and profit for the firm and customer. However many companies fail because they try to emulate the strategy of another firm without realizing that no two firms will have the exact same mix of internal and external environments, and so they cannot guarantee that the same strategy will yield the same results. If the strategy doesn’t fit the reality of their business—its capabilities, customer, competitors, market, etc.-they will not be able to compete, at least not for long.

Achieving True Competitive Advantage in Your Firm

Identify Your Core Competency

A core competence is rare, hard to imitate, not easily substituted, and “central to a company’s strategy and competitiveness” (Gamble, Peteraf, & Thompson, 2013, pg. 72). Companies get in trouble when they lose sight of their core competencies and try too hard to imitate rivals and big firms in their industry. I’ve seen it happen many times. Each firm has something that they and they alone are really good at. Identifying that item helps to establish the firm’s Unique Value Proposition and helps to truly set them apart from their competitors. A company can’t be everything to everyone and survive. Focusing on your firm’s core competency will keep you from overextending your resources and from making critical strategic errors. This is especially true for firms utilizing a true differentiation strategy. As authors Zook and Allen note in their article for the Harvard Business Review, “The growth generated by successful differentiation begets complexity, and a complex company tends to forget what it’s good at” (2011). As you grow, stay focused on your strengths, and don’t try to dive into areas where you have no competency or advantage, no matter how green the grass may appear.

Deliver Consistent Value To Build Brand Loyalty

As mentioned earlier, a sustainable competitive advantage is one that delivers consistent value for customers, which in turn builds brand loyalty. Consistent delivery requires a great deal of investment of time, training, and resources to do well, especially for companies with multiple locations. Ensuring that a customer enjoys the same experience at a location in Montana as they do in Florida takes solid processes, systems, training, management, and care in the design of products and services. Though it takes more work, the fact that the customer experience is not only more enjoyable, but consistent across locations means that the customer can remain a customer whether they move or travel. Even single location companies can compete with consistent delivery of a valuable experience to the customer and excel against their competitors. Customers will return time and time again when they know and trust that they will get a good value. This is often the reason why more expensive brands still attract large followings over low cost providers. Which brings me to my next point.

Focus on Being Different, Not Cheaper

Cheap is not a strategy. As Seth Godin stated in his blog “Cheap is the last refuge for the [company] who can’t figure out how to be better” (2016). Starbucks continues to do well not because of the price of its coffee, but because of the consistency in its delivery paired with other key factors, such as social responsibility and convenience of locations, that appeal to the market. Companies like Starbucks compete on overall value and appeal, while low cost providers such as McDonald’s will always compete on price. Customers that go there because it’s cheaper will jump ship as soon as they find another provider who can do it for less. It’s hard to stay profitable and cheap at the same time. Zook and Allen said it best, “You earn money not just by performing a valuable task but by being different from your competitors in a manner that lets you serve your core customers better and more profitably” (2011).

Learn to Adapt

As markets and the competitive landscape evolve and change, companies need to look for ways to adapt without straying from their core competency. We have watched many companies die a slow and painful death because they weren’t able to translate their core competencies to the demands of a changing market. The news and publishing industries along with retail have been struggling to deliver in a digital world. Sears, who was once a go to for valuable home goods, tried to reposition the retail giant as a tech company and is now buckling under the consequences of a bad strategy. Stores are crumbling, morale is low, and the company is in a financial tailspin (Peterson, 2017). Sears strayed too far from its core competencies and its unlikely it will survive. Companies often confuse the product with its core competency. Often it’s the delivery that creates the true advantage. Be careful not to assume that market changes are fads or that in order to compete you have to emulate emerging leaders. Adapt, but don’t conform or lose sight of what your company does best.

 

References

Gamble, J.E., Peteraf, M.A., & Thompson, Jr., AA. (2013). Essentials of strategic management: The quest for competitive advantage. (4th ed.). New York, New York: McGraw-Hill Education.

Godin, S. (2016, August 25). In pursuit of cheap. Seth’s Blog. Retrieved from http://sethgodin.typepad.com/seths_blog/2016/08/in-pursuit-of-cheap.html.

Peterson, H. (2017, January 8). Inside Sears’ death spiral: How an iconic American brand has been driven to the edge of bankruptcy. Business Insider. Retrieved from http://www.businessinsider.com/sears-failing-stores-closing-edward-lampert-bankruptcy-chances-2017-1

Zook, C. & Allen, J. (2011, November). The great repeatable business model. Harvard Business Review. Retrieved from https://hbr.org/2011/11/the-great-repeatable-business-model.

Is Your Company’s Values Statement Total B.S.?

Is Your Company’s Values Statement Total B.S.?

Most companies these days have a values statement. Sometimes it’s that nice framed declaration in the reception area or it’s the opening page of the employee manual. Often the values statement came about as a required exercise from some consultant or because one of the managers read about it in some book. Its drafted, filed, sometimes framed, and then usually forgotten. Employees often don’t know it exists, and over time your business choices and daily operations fall so far out of line with the values you claim to stand for, that your company’s values statement has become just another worthless piece of paper.

Which is a huge mistake.

Your values statement is the Ten Commandments for your business. It’s the guiding principles through which you will judge every staff member’s conduct, every business decision, and every corporate initiative. If everyone in your company can’t state what you stand for and if your business decisions and operations don’t reflect your values statement, then I’m sorry to say that your company’s values statement is total B.S. Its time to fix it.

Values Statement Best Practices

Focus on the Top 3-5 Values that Matter Most to You

Its easy to get caught up in thinking that if it doesn’t end up on the list, it will appear that you don’t value it, so you cram everything on there. People and organizations have many values, but there are always 3-5 values that are the most important, that exist without compromise or exception, and which fuel the passion and energy of the business. Those are your core values. It may be difficult narrowing it down to just 3-5, but the clarity and focus it will bring to your strategy, culture, and activity is invaluable.

Define and Share Your Values

After you nail down your top 3-5, write out in a single, brief paragraph what they mean to you. A value to one person can mean something different to another. Define what it looks like in action, in words, and then place your statement where everyone who interacts with your business can see it. This includes on your website, employee break rooms, employee training materials, strategic planning documents, and yes the proverbial framed statement over the reception desk.

Use it as Your Litmus Test

Your values statement is the test you apply to every decision you make and how you, your employees, your customers, and vendors conduct themselves. When onboarding any client or reviewing a business decision ask yourself, “is this in line with our value statement? Does this customer uphold our values or will they ask us to compromise what matters most to us in order to deliver their product? Does this vendor hold themselves to the same standards we do?” If the answer is no, then don’t do it.

Your values statement isn’t just a feel good exercise. It’s a daily practice in focus and purpose. It helps you make the decisions to achieve what you want to achieve and be the kind of company you want to be. Don’t let it gather dust.