Corporate Culture and “Benign” Indifference

All you need in this life is ignorance and confidence, and then success is sure. Mark Twain

People are good at convincing themselves that everything is okay, despite troubling indications.  Sometimes it is easier to ignore warning signs than to face the harsh reality.  It is really a part of the human condition – we fail to intervene or take action unless required to do so.  And that is especially true in the business world.

It is always easier to fail to act than to ack knowledge a problem, face the problem and make difficult choices.  When it comes to corporate culture, companies frequently ignore warning signs and always choose the path of less resistance.

A Chief Compliance Officer has to be very careful in this situation – corporate culture is a critical control, but it is easy to ignore indications of problems or weaknesses.  Because it is an amorphous concept, a board, a CEO or the CCO can easily rely on simple statements of affirmation – “we always do the right thing,” or “our corporate culture is linked to our values of honesty, integrity and compassion.” 

What I really mean to say, is that CCOs and corporate leaders rarely want to do the hard work that is required to embed, monitor and promote a company’s corporate culture.  Instead, I often hear from corporate executives that “our culture is fine,” “We do not need to focus on that issue,” or “our corporate culture is doing great.”  These statements of shallow affirmation ae usually based on belief rather than knowledge or hope rather than reality.  How do I know that?

Companies that are committed to their corporate culture understand that much more is required beyond positive words, reinforcement of misconceptions and other ways we all use to ignore the truth.

When I hear an executive state “our culture is strong,” I wait to hear the follow up explanation for how the executive knows this is true.  Words can be empty and often are.  If a perception is not based on measurements or facts, then I know it is just that – a perception, a hope, and perhaps at best, a belief.

On the flip side, or a more positive note, I have heard executives explain to me how they know their corporate culture is strong – for example, when they explain they regularly survey their employees, and rely on specific indicators of corporate culture (e.g. regular and specific, targeted surveys, reporting rates, employee engagement), or recognize the importance of monitoring its culture, I know the executive and the company understand corporate culture and how to promote its culture.  In other words, the company is unlikely to have a weak corporate culture. 

As more executives and compliance professionals devote time to implementing and promoting a company’s culture, the important idea becomes embedded in a company – a corporate culture is a company’s most important intangible asset and comprises a significant portion (at least 50 percent) of a company’s value.  Similarly, a company’s corporate culture – if effective – is a company’s most important “control,” meaning it is the most effective tool to ensure and promote compliance. 

Perhaps the most important indicator of the importance of corporate culture is the dramatic difference in misconduct rates between companies that are “unethical” and companies that are “ethical.” Research has shown that companies with ethical cultures will experience a dramatic decrease in employee misconduct rates – as much as three-fold decreases.  That is a significant benefit, and one of many that ethical companies can earn. 

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