Is Your Organization ’Healthy’ ?
We all tend to track and consider important those things we can easily measure. Year over year sales, quarterly profit, employee turnover rate – all such metrics are easy. If you believe that organizational culture affects the bottom line, the question is: how do you measure organizational health? At Thinkenomics, one of our fundamental principles is:
Organizational health is measured by how well a company connects it Values to its Actions. If you think that is something too difficult to measure, read on.
A remarkably sharp example of measuring organizational health, or lack thereof, is in the news again - Wells Fargo Bank. If you’ve been reading the news at all, you know the trouble that began last year when it came to light that Wells Fargo employees were opening deposit accounts and transferring funds without customers’ consent. Let’s look at how their values matched their actions. First, the values. Here is what is published on the Wells Fargo web site:
Our values should guide every conversation, decision, and interaction. Our values should anchor every product and service we provide and every channel we operate. If we can’t link what we do to one of our values, we should ask ourselves why we’re doing it. It’s that simple.
We have five primary values that are based on our vision and provide the foundation for everything we do:
· People as a competitive advantage
· What’s right for customers
· Diversity and inclusion
And the page goes on to expand in great detail on each value – I’ve included part of the first expanse here. Go to their website to read an excellent example of corporate Core Values.
People as a competitive advantage
We value and support our team members as a competitive advantage.
We strive to attract, develop, retain, and motivate the most talented, caring team members who work together as partners across businesses and functions. We provide the tools and training that team members need to succeed in their work, and we want them to be responsible and accountable for their businesses and functions.
These are undoubtedly admirable values. Who would not like to work for, or do business with, a company that lives up to these values? Now perform a web search for Wells Fargo Scandal and you will find a long list of articles describing employee behavior (ACTIONS) that were ethical failures. Here are a few examples:
MSN Money has a great article collecting many of the facts in the case, noting that employees opened as many as 2.1 million, yes that’s million, accounts in the name of existing customers without the customer’s permission or knowledge.
Branch Managers were warned 24 hours in advance of inspections. As reported by the Wall Street Journal, branch managers got the advance notice and employees were sometimes ordered to shred documents or forge signatures so the fraudulent customer accounts would not be found and the branch would pass inspection.
Employees who called the company’s ethics hotline were sometimes fired or punished.
The problem was not just a few disgruntled employees. Forbes published an article called “Wells Fargo and the true cost of culture gone wrong.” In it they report that over the last several years Wells Fargo has terminated more than 5,300 employees associated with the scandal. The Forbes article goes beyond reporting the cost (more on that below) but attempts to answer WHY? Their answer is summarized as:
Every company has a CULTURE.
Culture drives BEHAVIOR.
Every company has TANGIBLE MECHANISMS that reveal to employees’ the behaviors they either reward or punish.
COMPENSATION PLANS are one of these mechanisms.
Which brings us to another Thinkenomics principle; People will always do what they perceive is in their best interest. In his Forbes article, Chris Cancialosi describes it like this:
Unfortunately, as variable compensation plans afford high-performers an opportunity to maximize their income, they can also come with many unintended consequences. From lawyers who paid their client billables, to the product sales reps who work in cahoots with buyers to shift the timing of purchases to help each hit their bonuses, these compensation models can be a driving force for behavior if not designed with extreme care.
When push comes to shove, employees will learn to stack the deck in their favor in order to maximize their personal gain. If processes are broken, they find workarounds to help them accomplish their sales goals despite the existing rules and constraints. But there are a couple of huge differences between learning how to navigate the system and what seems to have happened at Wells Fargo.
Employees don’t behave like this because their bad people. They do it because their normal people behaving in a predictable way in a specific culture. Wells Fargo did not hire 5,300 “Bad People.” But it appears they created a culture in which specific actions, contrary to their values, were rewarded. So the easy lesson learned from this is to be careful with your compensation plans. For the critical thinker, the lesson learned is: You have to take an active part in shaping the culture of your organization.
What is the cost of an “unhealthy” corporate culture? Well, in 2011 Wells Fargo paid $85 million in fines for selling higher interest rate mortgages to customers who should have qualified for lower rates, and falsifying loan applications in the process. In 2016 the bank agreed to pay $185 million in fines for opening deposit accounts without customer consent. As mentioned above they terminated 5,300 employees. What is the recruitment cost and training cost of hiring 5,300 NEW employees? And what is the $$ cost of reputation damage?
An “unhealthy” organization carries a significant – measurable - financial cost.
A “healthy” corporate culture is a competitive advantage.
Post your Core Values where employees see them regularly.
Seek feedback, formally or anonymously, from your employees on if they believe the organization rewards them for following the company Core Values.
“Every company has a CULTURE.” What’s yours?
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