Why great organisations don’t hire ‘brilliant jerks’
Cara McCrory explains the importance of good corporate culture and its impact on business performance.
First there was the Francis report into Mid Staffs, then came the Keogh review of abnormal mortality rates in 14 hospitals. Together, they did more than highlight failures in health care provision within sections of the NHS; they pointed to how ‘culture’ influenced behaviours, even where those behaviours were merely delivering process outcomes to the detriment of patients.
Culture became a 2013 buzzword, with the NHS the main target despite protestations from the chief inspector of hospitals, Professor Sir Mike Richards, who continued to praise the “huge amount of very good care” and argue that “compassion in the NHS is alive and well.”
But ‘cultural failings’ transcend the public sector. LIBOR rigging, the PPI scandal, and the sale of interest rate hedging products to SMEs were ‘cultural failures’ in the financial services’ sector. The Pollard review pointed to a deep rooted and unhealthy ‘competitive culture’ in the BBC, while ‘cultural misunderstandings’ contributed to the Deepwater Horizon disaster.
It’s actually difficult to spot a sector where there hasn’t been a scandal, crisis or widespread failing that hasn’t been linked to culture and cultural failure. Hardly surprising then that an overwhelming 87 per cent of respondents to PwC’s Tone from the Top survey said that it is the culture of a business that determines the potential for fraud and corruption as well as for ethical behaviour.
Pointing to organisational underperformance or failure and attributing it to a flawed culture is relatively easy. Identifying great cultural attributes is tricky, but defining corporate culture and how it influences individual behaviours is the really hard trick.
Quality
Recognising the manifestations of ‘good’ cultures is also relatively straightforward. Organisations are transparent high performers, investing in their people, their customers and their communities, while their people demonstrate exactly the same characteristics, which is hardly surprising as the organisation is the sum of its people and they take their tone from the top. However, distilling the elements that create and sustain a good corporate culture are more challenging.
Regulators, company boards, ministers of the Crown and empowerment gurus regularly talk about corporate culture; it’s become an all-purpose explanation of why organisations permit – or encourage – people to behave the way they do, but actually defining corporate culture is tricky and is often in the eye of the beholder. Is it the brand that identifies the company’s products or services? Or is it the mission statement and employee manuals that determine codes of conduct? Or even the informal ‘canteen culture’ of the company?
The reality is that corporate culture is the manifestation, the DNA of an organisation – the sum of the values management and employees hold and which define how they conduct themselves in their daily lives, whether at home or at work. And often it is the small things that send big messages to reinforce culture. PwC’s experience of reviewing company and organisational performance is that the culture of the business is defined by the owner, the board or the top management.
In companies where culture is well-defined, it is reflected in every hiring decision and it’s interesting that a single powerpoint presentation called ‘culture.doc’ began by throwing out conventional HR policies. Described by Facebook COO Sheryl Sandberg as maybe the most important document ever to come out of the [Silicon] Valley,” culture.doc – formally called Freedom & Responsibility Culture – started out as an attempt to define the DNA and culture of Netflix and ended up in the Harvard Business Review.
Former Netflix HR Chief Patty McCord and CEO Reed Hastings decided that the Netflix culture was defined by its management and delivered by everyone in the organisation, so they resolved to hire only the best and discovered that they created a new culture that combined high performance with unprecedented levels of responsibility. For example, Netflix has a “no vacation policy” for its employees. Staff can take off as many days as they want, as long as they do so responsibly.
Three things in particular in the presentation caused a stir:
• “Outstanding” employees only. Netflix doesn’t accept anyone who does an “adequate” job.
• “Freedom and responsibility” vs. command-and-control: Employees get to make decisions; managers just give them the right context to do so.
• No “brilliant jerks”. It doesn’t matter how good you are at the job. If you’re a jerk, you won’t stick around Netflix for long.
Despite the controversial content, the presentation has been viewed over 3 million times on Slideshare and many of Netflick’s controversial ideas have been implemented by other companies and organisations in the US and Europe, with equally spectacular results.
Our Tone from the Top survey supports that contention, with nearly 100 per cent of respondents agreeing that CEOs were the custodians of culture. However, fewer than half said that the senior leadership in their organisation constantly acted as a role model in living the culture and a mere 22 per cent said that there was nothing in place in their organisation to help them understand how well the culture was being delivered.
Organisations, regardless of sector, are now beginning to realise that wrong or inappropriate behaviours have significant and often disproportionate effects for the business at large. Regulators now talk openly about changing the ‘culture’ of organisations – reinforcing the view that companies need to focus on cultures and behaviours alongside policies, procedures and mission statements. In a world where there are no closed doors and everything finds its way into the public domain for all to see, it is clear that the days of “never explain, never apologise” are gone. Social media has transformed the ethics of business as consumers, customers and employees take to twitter and summarise their experience, opinions and advice.
Little wonder then that as an organisation’s culture is defined by its behaviours, a growing number of organisations are retaining advisors to audit their culture and to determine if there is a mismatch between the intended, espoused and actual behaviours. PwC now has a specialist team that is at the forefront of developing cultural assessment and measurement approaches to help organisations understand – and where appropriate – to modify their behaviours.
Our findings tell us that people don’t act on the spur of the moment, their behaviours are conditioned by the culture of the organisations they work in – so where senior and specialist management are leaving, where suppliers or customers are looking elsewhere and where the regulator or internal auditors are showing concerns, it may well be time for a hard look at the culture.
Cara McCrory is an Associate Partner with PwC.
Email: cara.l.mccrory@uk.pwc.com
Tel: 028 9041 5577
