When culture goes wrong

by 27 Jun 2012

 

In the last month two CEOs of high profile companies have lost their jobs. They were in different businesses, with different geographic footprints, union relationships, debt levels, shareholder profiles and levels of business performance; but they did have something in common, and it’s something we should learn from.

Mark Selway at Boral and Bill Wild at Hastie both lost their jobs due to issues of culture. It’s a risk that I’m exposed to, and so are you; but culture is one of those things that most of us only really think about when it’s wrong.

First to Mr Wild, who was the victim of the same cultural malaise as the board and management team of NAB a decade ago in their $360m forex scandal; the failure of bad news to rise quickly. Mr Wild told our friends at Fairfax: “In the end it wasn't one individual that was at fault. It was a culture of 'no bad news' within this company that was at fault. An individual made a terrible mistake because of that culture, and is very sorry about what they have done.''

As you may know, we do a lot of work with boards. So when we put together our Alignment and Engagement Survey an employee survey, we approached one of Australia's best known directors to find out what boards want to know about your staff survey. He told us that there was one question above all others that was important to directors, which he called the “smoke under the door” question. It was a bit hard to ask about smoke under the door, so we changed the question to “we have a culture of no surprises where bad news is promptly shared with management”.

This question goes in all our staff surveys, but where does it fit? Is it part of employee engagement, or leadership, or accountability culture? Our statisticians analysed the issue and found that it doesn’t belong in any of our high performance factors. Forcing it in would have reduced the world class psychometric validity of the instrument.

So, whether or not you’ve got a culture of no surprises:

 

  • has nothing to do with all the other things we know are related to sustainable high performance, and
  • could be the a life and death matter for your company

 

This leaves me with three questions:

 

  1. Did Hastie’s board know that there was a culture of “no bad news” in their company? Did they take reasonable steps to find out whether this was the case?
  2. Did Mr Wild know about this culture? If not, why not? And if so, what had he done about it?
  3. What’s the story in your company?

 

The issue of whether bad news rises quickly or not is ill-suited to the normal types of data analysis in our profession. CEOs and directors couldn’t care less about some statistic describing the “average” speed of ascent of bad news. Nor do they get overly excited about departments where bad news rises especially swiftly. Nor should they; as our analysis shows, performance on this matter isn’t strongly related to pretty much anything else.

For this reason, the board report arising from our Alignment and Engagement Survey is different to all the other reports we generate. Instead of showing areas of high performance, it highlights areas where substantial numbers of employees disagree with the survey item. These are the places where deadly risk lies for CEOs and boards. It’s also bad news. In a culture where bad news doesn’t rise quickly, it’s also one of the last things you’ll hear about.

Mr Selway’s defenestration was altogether more dramatic. Here are a few of the salient points:

 

  • The building and construction products industry is doing it tough at the moment. Boral’s competitors CSR and Fletcher Building are also down.
  • Investors and analysts believed that Mr Selway was doing a good job
  • Mr Selway had done a similar turnaround job in his last role in the UK
  • Boral has had great stability for more than 50 years. The average CEO tenure has been over a decade.
  • Mr Selway’s style was well known prior to his appointment. He is understood to be focused, driven, results oriented and demanding

 

There have been a number of changes to the board that appointed Mr Selway; and the current board obviously formed the view that the clash between his style and corporate culture wasn’t tenable. This must have been a pretty serious clash, because they have made it clear that Selway’s strategy will be pursued by his replacement.

We think that culture is a whole lot more “situational” than absolute. Therefore, Selway’s preferred culture was neither right nor wrong, just the right one for the strategy he was pursuing. The board like the strategy, but not the culture. By demanding the same strategy with a different culture, are they dooming Selway’s replacement to failure?

There are some good questions in the Selway story for HR, OD and line managers everywhere. Do we each understand our preferred personal style? Even if we have a degree of self awareness, how many of us contemplate “what we’ll need to be like” to survive and thrive in our organisation? Finally, how many of us are conscious of our own style as it fits the tasks we’ve been assigned; let alone whether we can be what the job needs us to be, rather than what we’d like to be?

Boral’s travails provide a good reminder of the importance of the tacit psychological agreement in everyone’s job performance. Selway’s job description would have been long on the “what” and short on the “how”, just like everyone else’s. How he was to go about things would have been expressed in the values of the company, which for the record, are Excellence, Integrity, Collaboration and Endurance. I doubt his departure had much to do with these values.

Instead, Selway’s exit is more likely a result of a new chair and directors changing the expectation of how he should achieve his mandate. This shows that everyone has trouble articulating the soft stuff; and that everyone has trouble changing their style to fit the situation. Our consulting work with hundreds of different organisations has revealed three issues:

 

  1. Lack of priority: if the end justifies the means, then how you get there simply doesn’t matter. A notable few organisations and industries are still prone to this type of thinking. You know who they are, because they’re the industries you wouldn’t think of going into.
  2. Lack of vocabulary: for the majority of organisations, willingness to talk honestly about culture isn’t matched by the ability to do so. The reason is that most organisations lack the vocabulary to talk about culture in anything other than a superficial way. Models that espouse “good” and “bad” culture don’t always help either, because they inevitably result in an adversarial conversation. Far better to use the work of Hofsteede, Trompenaars and Hampden-Turner to open a non-threatening dialogue.
  3. Lack of appetite for hard conversations. Is it that we are Australian, or does everybody prefer to skirt around difficult issues? Culture is perpetually important but not urgent, which means there’s always something else to talk about.

 

By all accounts, Mr Wild and Mr Selway are both honourable people. Both of them got so much right; but were undone by one critical oversight. It reminds us that there are no silver bullets in the search for sustainable high performance, organisational development, just a long list of necessary conditions. So spend some time reflecting on what you haven’t done. It just might save your skin.

About the author

James Garriock is executive director of Insync Surveys. For further information visit www.insyncsurveys.com.au

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