How Long Before Culture Cracks Show up in the Numbers?

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What It’s About?: I’m curious, observing organizations where I know culture cracks are beginning to show, AND yet financial results don’t follow the same signals. In fact, it’s possible for an organization to have its BEST financial results ever, while the foundation is slowly crumbling. How is this possible? Many organizations (banks as an example), have a business model where there is a long tail before customers get fed up and change. As a consumer, you have to be quite frustrated to change banks (all the paperwork and time… yuk). Commercial banking is a little more prone to change. However, changing a banking relationship in a business is a BIG deal. As a CEO, I changed a long standing banking relationship, and it was a distraction. On the other hand, culture cracks in other types of organizations, like a restaurant, can result in a very quick, negative consumer response. You and I decide on whether to return based on our last experience. I we have a few bad experiences over a short period, we’re off to the next five star rated food joint. The relationship between culture deterioration and a drop in profit is much tighter.

So What?: Let’s look at what happens in the longer “bank type” scenario. Typically, the following indicators or evidence starts to accumulate. It’s often hard to see the full picture, and board members are rarely aware because they are too far removed from daily activity. They see the positive PowerPoint spin at the quarterly board meetings.

Let’s look at some of the “culture cracks” all leaders should look for:

Top talent (beyond normal market conditions) starts to avoid the organization. This happens anecdotally and in real numbers. Use of outside recruiters significantly increases.
Impact leaders at every level slowly start to leave and/or grumble about things being screwed up and not being in sync. Voluntary turn over gets the following defensive explanation, “we will be better without them. It’s an opportunity to upgrade our talent.”
Metrics start to deteriorate. HR starts to spin the drop in engagement or other measures related to people and culture. Often they change the measurement platforms to avoid true comparison: “We’re not going backwards, we just have different ways of measuring.”
HR becomes a transaction mouthpiece for the CEO, versus courageous people/culture leaders that put uncomfortable truths/facts on the table.
The top team looks robotic, rarely challenges each other in a constructive way, and execs hunker down in their own areas of control. They do NOT look like they’re having fun together, and it’s obvious to the organization.
Concerns about culture issues are met with resistance and are diminished: “We’re having our best financial results ever… If you want to work at a country club… Go elsewhere... This is what a performance driven company is like.”
Technological innovations and other breakthroughs dramatically fall off, and the organization starts copying and chasing competitors.
Social media reviews and/or scores have a negative trend but are discounted as unimportant and/or biased.
Rumors of the company buying people off to stay increase: “When I told them I was leaving they finally made me a director.”
Cynicism starts to creep in at the front line. Phrases like “all THEY care about is making money,” become explanations. People are not inspired and pride slides.
Overall trust and morale at every level begins to demonstrably deteriorate.

Now What?: Top leadership and board members have a duty of care, and responsibility for the long term sustainability and ability of the organization to adapt and thrive. Great financial numbers are not sufficient. In fact, the most dangerous phrase that should scare the bejeezus out of leadership is, “but our numbers are sooo good.” The sad thing is that one day it will very quickly all go downhill, and the financial performance will be seriously impaired due to systemic infrastructure collapse. Usually by then, the previous regime has made their big bonuses, and left the organization holding the bag. The board will explain it as a timing, market and/or some outside events beyond their control. But we’ll know.

Think Big, Start Small, Act Now,

- Lorne

One Millennial View: What’s the highest level of culture cracks that you’ve tolerated? Why? I suppose it’s because many of us don’t know how to deal with it, and maybe everybody’s organization just sucks, right? Well. I think the point of this is we’re discovering that it doesn’t have to, and we can do something about it.

- Garrett

Edited and published by Garrett Rubis.

How Long Before Culture Cracks Show up in the Numbers?

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