Organisation : Corporate Culture: The Distorted View From The Top

Hagberg Consulting GroupRichard Hagberg

hagberg logo.gif (2535 bytes)Hagberg Consulting Group specializes in the assessment and development of executive leadership and organizational effectiveness.

Founded in 1984, the firm is a leader in using sophisticated proprietary assessment tools and long-term, personalized coaching to develop successful leaders and organizations.

Dr. Hagberg, President of Hagberg Consulting Group, has practiced as a consulting psychologist in the Bay Area for 16 years. Dr. Heifetz, Senior Consultant, has worked for over 15 years as a cultural anthropologist on issues of culture, integration and change.


Corporate Culture: The Distorted View From The Top

Have you ever been told about a decision made by senior management and asked yourself, “Is the CEO taking stupid pills with his orange juice?” Have you ever wondered, “How could senior management be so out of touch? They don’t have a clue about how things really work around here.”  Well, you’re not alone. After conducting research on 59 companies of diverse sizes and industries from all over the world, Hagberg Consulting Group (HCG) has found that management generally makes decisions with a highly distorted view of what’s really going on in the organization, particularly when it comes to understanding organizational culture.

To its credit, management is often highly attuned to developments in the external world: the market, competitive landscape and customer issues. Where management often appears to be clueless is in reading the corporation’s internal landscape – its culture, climate and employees’ feelings. Not surprisingly, misconceptions about the organization impact the quality of management decisions that all too often negatively impact the bottom line.

HCG’s recent study of organizational culture sheds light on this problem. Over a period of three years, HCG surveyed employees using its proprietary Cultural Assessment Tool (CAT), which asks 120 questions about employee views of their organizations’ corporate cultures. The survey was anonymous, but respondents were asked to indicate their level within their organization—e.g. senior management, middle management, etc. The study then compared the responses of senior management to those of all other employees. This comparison of item-level responses revealed dramatic differences.

HCG’s study identified distortions in the following areas:

Decision-Making

Many of the most significant differences of viewpoint between senior management and all other employees centered on how decisions in the organization are made. These differences suggest major distortions that have the potential to severely degrade the quality of management’s decisions.

Decision Participation

Executives believe that they actively solicit employee input in decision-making, and that they highly value employee opinions.  According to the data, they see themselves as highly participative in their management style, believe they actively seek out feedback, and consider themselves open to alternative views.  Employees, on the other hand, don’t confirm this perspective.  They remain skeptical of management’s openness to feedback and feel their views do not receive fair consideration in decision-making.

Employee attitudes have certainly changed over the past twenty years.

Today’s employees expect a greater degree of involvement in decision making.  Most executives don’t consider themselves autocratic, and this self-perception can lead to a certain denial regarding their openness to input.  Executives may simply fail to recognize the intimidating effect of their position of power. Although they may solicit employee input, employees may not feel comfortable providing candid feedback, particularly if it involves disagreeing with management’s decisions.  The data suggest that middle management may be the most hesitant to disagree with top management.   When soliciting employee support for initiatives or decisions, executives may unconsciously attempt to sell their own view rather than listening to employee ideas and concerns.

Risk Taking, Openness and Trust

Executives also assume that they have created an environment where risk taking is encouraged, where employees feel free to disagree and build off of each other’s ideas, where conflict is openly addressed and where nonconformity is accepted.  In short, they see openness and a minimum of threat.  In addition, management sees itself as being trusted by employees. 

Employees, on the other hand, are far less certain that management will always do what it says it will do and wonder whether management really wants to hear the bad news.  Employees are therefore reluctant to be the messengers of bad news and are more skeptical about whether management can actually be trusted.   Employees don’t feel that risk taking supported and believe that conformity is expected.   They also see management as allowing conflicts and disagreements to fester.  Other HCG research suggests that despite their strong assertive personalities, many senior executives are actually conflict phobic.  As a result, they behave like ostriches and hope organizational conflicts will go away. 

What becomes clear is that management and employees don’t feel the same level of trust, openness and freedom of expression.  Executives see issues as being dealt with openly and employees see them as being swept under the rug.

Employee Interests vs. Shareholder Value

According to the data, executives feel that they care about employees, consider their welfare in decision-making and try to balance the interests of employees with that of shareholders.  Employees don’t quite believe this and wonder if management isn’t exclusively worshiping at the altar of shareholder value, with employee interests being only an afterthought. Employees have also become quite cynical after decades of layoffs, mergers, stories about management greed and ethical lapses.  Clearly the pressure on management to deliver short-term results is intense.  The need to increase shareholder value has become a common justification for a variety of management actions that put employee interests at the bottom of the priority list.

Solutions

Senior management must actively and continuously solicit input, listen to feedback and supplement what they think they are hearing with anonymous, objective feedback tools that allow them to keep a finger on the pulse of employee attitudes and opinions.  Understanding employee needs, feelings and attitudes doesn’t mean you need to always act on them but at least it enables you to factor them into your decisions

Trust and teamwork don’t happen spontaneously just because people are working in groups--they must be cultivated.  Senior management needs to create an atmosphere where it is safe for employees to candidly express their views, exchange ideas and disagree with management.  Working through disagreements doesn’t mean unproductive conflict.  The manager who refuses to address conflict is setting the stage for political behavior.

Communication

Senior executives believe they have clearly communicated both direction and standards of behavior.  According to employees, this isn’t the case:

Bottom Line Focus

Executives believe that they run the business to achieve a number of objectives beyond just financial measures of success.  Although they acknowledge that they are quite attuned to financial metrics, they see this as only one of many factors influencing their decision-making.  Employees, on the other hand, see management as being almost exclusively focused on financial performance and the bottom line.  Perhaps this difference in perspective comes in part from the fact that management is also intimately aware of the organization’s strategy and can readily see the broader meaning and strategic rationale for various business activities and decisions. Employees don’t always see this connection and may miss the broader context. 

The comparison data also suggest that executives have a much more sophisticated understanding of how to interpret financial information and how to make broader significance out of these numbers.  Employees generally have a less sophisticated understanding of the financial information and appear far less aware of either the organization’s financial goals or its recent revenues and profits.  Executives also believe that they have communicated the broader significance of the organization’s mission and assume that employees see the link between financial data and strategic decisions.  The lesson here is that management must go out of its way to communicate non-financial goals, articulate the broader meaning of the organization’s activities, and help employees understand the financial results.  The mission and strategy may be clear to senior management, but it is frequently unclear to those at lower levels in the organization.  This is why employees feel that financial performance is all that matters to management.

Clear Performance Goals

Executives also believe that individual employee performance goals have been clearly linked to the company’s larger business objectives.  Senior management assumes that employees see how their day-to-day activities and priorities are connected with the organization’s strategy and business model.  Again, without communication of the broader business context for decisions, as discussed above, employees won’t see this link. In fact, they may not even be clear about what their individual performance goals are.

Standards

Quality

Paradoxically, although management has a strong belief that excellence and quality are highly valued, it appears to acknowledge that the organization often tends to have a short-term, crisis mentality.  Employees feel the pressure to produce quick results but question whether quality is really valued by senior management.  They see a more expedient, “Just ship it!” mentality. The pressure for short-term results can lead to expedient decisions and the compromise of standards.  Executives must realize that they live in a goldfish bowl where employees are watching their every move.  The slightest compromise of standards is quickly observed and widely communicated.  Years of effort to improve quality can be washed away by a few convenient compromises.

Meritocracy

Executives tend to see the organization as a meritocracy where those who get ahead have earned it.  They believe that getting results, demonstrating competence and achieving excellence are recognized and rewarded by the organization. This attitude is somewhat self-serving since they are the ones who have made it to the top.  Employees often wonder if promotions are based on political connections or favoritism. They are not as certain that a true meritocracy exists.  This suggests the need to establish an objective performance appraisal system, transparent career advancement criteria and the elimination of all factors other than performance in promotion and reward.

Work/Life Balance

Management believes that employees can have work/life balance and still succeed. Perhaps this is because they have more control over their own work schedules or because their expectations are more modest when it comes to actually “having a life.” Alternatively, employees feel intense pressure to perform and believe that in order to get ahead they must put work ahead of everything else in their lives. There is a good deal of discussion of work/life balance these days, and this is translating into pressure on management to accommodate for flextime, telecommuting, job sharing, part-time employment and family leave. The survey data suggest that senior management, given their different perspective, may not see these concerns as very important.

Ethical Practices

In an era of Enron, WorldCom and Tyco, questions about corporate ethics are quite sensitive. The survey results show that management believes unethical business practices are extremely rare. Employees are much less sure of the ethical purity of their organization, seeing ethical compromises as more common. Maybe employees’ standards are different.  Maybe management is unaware of compromises that are taking place deep in the organization. Or, maybe management doesn’t evaluate its own behavior as critically as it should.

Solutions

Senior management must massively over-communicate the organization’s mission and strategy. Management cannot assume that employees “get it.”  If employees understand the strategic context, it is much easier to explain the rationale for management decisions. Formal processes need to be established for keeping employees informed about priorities, changes in direction and important events. Employees must also understand the broader strategic meaning of their day-to-day activities and individual goals.

The pressure for short-term results is part of today’s business reality. Remember, when you are in a leadership role, compromises in ethics and quality will be visible to your followers and will have consequences. What may seem like a convenient compromise in the short run can damage your credibility in the long run. Avoid the expedient “quick fix” that compromises your values. Decide what you stand for, and remain true to it.

One of the best ways to reduce political behavior and retain the best performers is to create a true meritocracy. Establish systems that increase the likelihood that those who get results are recognized and promoted. Make an effort to reduce the importance of cronyism and favoritism. Make promotion criteria fair, objective, and when possible, transparent.

Management often believes that the cultural values they have consciously created are in fact represented in the actual culture of the organization. Don’t fool yourself into believing that the list of values you created at the off-site in the mountains are really the culture values that are endorsed by and practiced by the organization. Understand the real values that are operating in your organization’s culture.

Isolation and Insulation

Senior executives are unaware of their unique and privileged status.

Hierarchy

Executives don’t see significant status differences between employees at various levels. Perhaps they fail to recognize the privileged world they live in and the status and perks afforded to them. Conversely, employees see the organization as hierarchical. They see a more clearly defined class-structure where title, office size and special privileges differentiate levels of power and status. They also see who associates with whom and who is given access to certain information. 

Employee Loyalty

No matter what the current economic climate may be, organizations must be sensitive to the importance of retaining their top performers. It is disturbing to find that executives may be deluding themselves about the level of loyalty that exists in their organization. Members of senior management feel a strong sense of loyalty and commitment to the organization--this may actually be one factor in their career success. They tend to assume that others share this same feeling, but their employees are much less connected and committed. Employee loyalty is significantly lower than that of senior management. Not knowing this, senior management becomes far less attuned to the causes of unwanted turnover.

Another recent research study conducted by HCG shows that employee loyalty is positively impacted by teamwork, trust, confronting conflict, candor, meritocracy and decision participation.  Loyalty also improves when employees feel they are contributing to something meaningful beyond financial objectives. In all of these areas, executives exhibit a distorted and overly idealized view of the organization’s culture. They appear to be out of touch with those factors that might be undermining employee loyalty.

Compensation

Given the generally high level of executive compensation, it is not surprising that management is happy with its compensation package. Executives also believe that their job performance directly affects the compensation they receive. They believe that they get paid more because their value to the organization and their contribution merit a higher level of compensation. Employees are far less satisfied with their own compensation and are not sure that their efforts and results will actually influence their compensation.


Solutions

Management must realize that it is easy to become isolated and insulated.  Executives live in a privileged world with a great deal of influence, status and access to information. They often assume that they understand how employees are feeling. This may not be the case. Top management needs to take the time to practice “management by walking around” and seek every opportunity to make both formal and informal contact with employees.

If the level of employee turnover is unacceptable or if you are simply losing too many top performers, consider conducting exit interviews and anonymous employee surveys to pinpoint causes of dissatisfaction.

Never flaunt your power, status, special perks or financial privileges. Any behavior that creates the impression that employees are “second class citizens” should be avoided.

Conclusions

After decades of cost cutting, downsizing, mergers and scandals, employees have become cynical and distrusting toward management. Executives must keep in mind that employees are scrutinizing their every move. Unconscious and conscious behaviors are constantly being interpreted and may easily be misinterpreted. Senior management must keep in mind the following: 

  • Executives live in a bubble and have special privileges and power due to their role and status. Most fail to recognize the consequences of their position power
  • Because of this insulation, their perception of themselves and the corporate environment can become distorted.
    This distorted view can lead to a lack of objectivity that undermines the quality of their decisions
  • Executives are often out of touch with how their behavior impacts employees and how it is interpreted. They fail to see that their random acts are being interpreted and don’t realize the extent to which they unconsciously shape the organization’s culture.

There are concrete actions that executives can take to minimize the potential for developing a distorted view:

  • Go out of your way to create an atmosphere where employees feel free to tell management what is on their minds. Don’t assume you are hearing everyone’s real opinions.  You must make it safe for people to surface problems and concerns and to critique management’s decisions. If you want to test management’s ability to create an atmosphere where employees feel safe to share ideas, consider measuring the number of suggestions per employee in each department. 
  • Find ways to increase employee involvement in decisions. If you want their support in solving the organization’s problems, give employees an opportunity to participate in their solution. 
  • Utilize surveys and other sources of anonymous feedback on an annual basis. This will help you spot any changes in employee attitudes and morale. You may feel that you have established an “open door,” but remember, some employees will never tell you the bad news directly. 
  • When your initiatives meet resistance or your motives are misinterpreted, avoid the temptation to simply sell employees on your point of view.  Listen first to employees’ concerns. Only when you have demonstrated that you understand their resistance should you attempt to persuade them.

Avoid focusing too much of your attention and communications solely on financial performance. Consider developing a “balanced scorecard.”  Develop a set of performance measures that will tell you if your organization’s strategy is being achieved. In addition to financial performance, consider emphasizing such benchmarks as:

- Customer knowledge, satisfaction and loyalty
- The efficiency of internal business processes that ensure quality and speed to market
- The ability of the organization to change and improve by continuous learning and growth

You may think about your business strategy night and day. You may assume you have communicated its key elements to employees on numerous occasions. Just don’t assume they have really understood it.  You must dramatically over-communicate your plans and priorities.  Always keep in mind that the words and ideas that are the guts of your strategy mean something very specific to you; others may not have the same understanding or any understanding.

In summary, always remember that power comes with the potential for isolation and insulation. A leader must be grounded in an objective understanding about the reality of what is happening inside as well as outside the organization. Any leader who is not getting continuous, accurate information about the organization’s culture and the values, attitudes and morale of its employees, has the potential to suffer distortions in perspective, which can negatively impact the quality of their decisions. A distorted view from the top can ultimately prove fatal. 


Copyright © 2003 by Hagberg Consulting Group. All Rights Reserved.

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