Marc Snyderman (marc@snydermanlawgroup.com) is Founder & President of Snyderman Law Group, PC and Antonella Colella (antonella@snydermanlawgroup.com) is a senior attorney at Snyderman Law Group, PC in Cherry Hill, New Jersey, USA.
How much have we all read in the past decade about the importance of culture? What have we done to address it? Maybe you changed your office structure to an open plan? Maybe you adopted business casual attire? Maybe you started Free Breakfast Fridays? Is this enough?
We all know these things affect employee engagement, retention, productivity, etc. and boost or reduce profitability. Simon Sinek in his discussion on the “golden circle of why” (why, how, what)[1] tells us that Millennials are the first workforce to expect to go to work every day to a place they love and to have the flexibility to work when they want, how they want, and where they want.
In a blog post we published on our website on 22 July 2018, we espoused that there’s something missing from all the talk about company culture, like a house of cards built without enough foundational cards. The foundational piece that’s missing is the ethical fiber of the company. The SLG Culture Core depicted in Figure 1 identifies the intersection of compliance and ethics as concentric circles within a pentagon of connected influencers on the why: the ethical fiber and the culture of an organization.
Printed with permission from Snyderman Law Group.
It is not possible to have a company culture that drives an organization forward unless the company’s ethical fiber is part of its core. We hear about ethics all the time, but never in the same sentence as culture. They are treated as different animals that coexist in separate contexts. They call it business ethics and have college and MBA courses on it. It’s touted as a company’s social responsibility and moral compass.
It’s time to stop talking about ethics and culture separately – it’s one discussion.
We know that unethical corporate behavior comes from fear, greed, pressure, or convenience. So it follows then that corporate cultures must address all of these in order to curb unethical behavior. Employees must know “how we do things around here” so they enjoy their work and don’t feel the need to act unethically.
Alex Edmans, a finance professor at London Business School, found a direct correlation between a corporation’s ethics and its profits.[2] Edmans used 26 years of data to show that ethical treatment of workers is associated with 2%–3% higher stock returns per year. So if both culture and ethics can lead to higher profits, the conversation needs to revolve around the two together to really propel an organization forward.
Let’s look at Wells Fargo, your favorite banker’s favorite bank. Wells Fargo bankers opened millions of fraudulent checking and savings accounts without their clients’ consent.[3] This is obviously unethical, but how did this happen? We’re not talking about one rogue employee. This misconduct was pervasive throughout the company. What has been discovered is that Wells Fargo had a cutthroat sales culture that incentivized employees to cross-sell financial products to their customers. Greed, pressure, fear, and convenience were all present here. It was this company culture that led to the unethical behavior. Together, they contributed to the scandal—you can’t have one without the other.
In order to address the Millennials’ expectation to love where they work, organizations need to deliver on this to stay competitive and, frankly, in order to survive in today’s market. Enter the aptly titled Work Sucks and How to Fix It, by Cali Ressler and Jody Thompson,[4] who ascribe to a ”no rules” approach to work: organizations should not be telling their employees where or how to work. Yes, there are work assignments, but there is no work schedule. Written a decade ago, it foreshadowed the fundamentals of today’s gig economy. Leaving early to pick up your kids at daycare or starting your workday at 10:00 a.m., because that’s the amount of time that you can devote to work that day, are slowly becoming accepted and expected.
In Daniel Pink’s Drive,[5] he told us that rewarding employees in the traditional way, with more money and promotions, is a paradigm that cannot survive the change to the gig economy. He talks about motivation 3.0, claiming that autonomy, mastery, and purpose are what motivates employees, and therefore can shift a company’s culture. Telling a Millennial that she has control over her work day (autonomy), has the chance to lead a team and grow a division (mastery), all while working for a better good (purpose), is the sweet spot in terms of building a healthy corporate culture, according to Pink. Look at companies like Tom’s of Maine for evidence of how a real purpose-driven culture can promote great success.
But how exactly does an organization do this? The above approaches are management theories and although enlightening, we all need practical examples to work with. So here is the secret: The only way to change an organization’s culture and get to a Shangri-La state where employees are happy and productivity increases, is to have an ethical workplace from the board of directors all the way down. Productive employees who are happy are essential to building healthy cultures, but much more is needed. An organization will not be able to offer an employee flexibility, autonomy, mastery, or purpose if its management does not believe that these tenets are important. The board, the CEO, the vice presidents, and everyone else must have the same ethical belief system.
Your organization’s ethics are its foundation, as shown in our graphic above. Your moral compass as an organization determines your culture and the way you choose to do business. Every other piece of the organization stems from this ethical core.
For example, a vice president at XYZ Corp. passes judgment on an employee who leaves at 3 p.m. to pick up his kids at daycare. This feeling gets passed down throughout the company. So although XYZ Corp. may provide a “flexible” work environment on paper, the employee’s direct supervisor may disapprove of the employee’s early dismissal, because she knows of the vice president’s true feelings about it. This disapproval will mount week after week until it may affect the employee in a negative way. Here, XYZ Corp. looks like it has a culture that promotes flexibility, but in reality, the organization has some rotten apples that don’t possess the values or beliefs that the flexible policy was intended to promote. This company’s culture is missing its foundation, and without a corresponding ethical belief system, it will fail.
But how do you change the ethics of an organization? An organization’s ethics stem from its workforce’s beliefs. Training and education are good first steps to ensuring that an organization is communicating its ethical message. The entire workforce should receive training, and an organization should keep records of who takes each training so that it will be prepared in the event of alleged unethical conduct. Training, however, will not change an individual who has an unethical belief system. An organization that acts unethically, or does not have the appropriate ethical values to match its culture, needs a clean slate. This can mean finding those rotten apples and replacing them with people who embody the moral beliefs that your organization promotes. This may seem extreme, but it’s the only way to ensure your organization does not get investigated or charged with unethical criminal conduct.
Drive, Work Sucks, and other numerous management theory books are seen as catering to Millennials and their “arrogant” beliefs about how the new workplace should look. But what if we’ve had it wrong all these years, and Millennials are here to show us the way it should be? Over the last ten years, we’ve mastered the art of discussing organizational culture and what we think it should be. It’s now time to elevate our discussion on corporate culture by highlighting ethics as the groundwork that needs to be laid in order to perfect our story on what the new workplace should be.