“Despite the wake-up call delivered by the Hayne royal commission [into banking and financial services], it is alarming to see a clear disconnect still remains across Australian businesses between the CEOs’ impression of company culture and what is being felt at the frontline,” the Institute’s CEO, Lyn Goodear, said following the release of its 5 Hard Truths About Workplace Culture report.
These hard truths, it said, include culture problems being pervasive rather than isolated and immense in their scale, bigger organisations have bigger culture woes, and CEOs are struggling to recognise culture problems.
The report is based on a “culture change survey” completed by 967 business respondents, including a mixture of CEOs and executives as well as other employees, from organisations operating in a number of industries. Of these, 650 also provided additional comments in support of their beliefs.
It found that “the cultural problems so dramatically revealed by the royal commission are not unique to the financial services sector”, with healthcare, education and training, professional services and even government all facing steep culture barriers to overcome.
Indeed, one-third (34 per cent) believe that significant change is required to develop a positive and ethical culture within their organisation.
According to the report, such a finding “is likely to shock many Australians”, but aligns with the anecdotal feedback from HR professionals.
Among the problems respondents spoke of were “a culture of never failing”, “lack of clarity about what an ethical culture looks like” and even “some leaders acting in their own interests and setting the wrong examples”.
One respondent even spoke of a practice of fudging the books to look good for shareholders, with the report quoting them as stating: “We often presell products, pre-invoice... and write them off on the books. This could be months before the customer purchases it. It’s very driven by share price.”
Another was quoted in the report saying that “bad behaviour is rewarded and only punished when reputational damage happens”.
Factors preventing leaders from instilling a good culture
The AHRI’s report listed a number of factors that are likely to be preventing leaders from instilling an ethical culture, and conversely ways in which such a culture can be achieved.
Barriers identified are:
- poor leadership, including unethical behaviour and self-interest
- a short-term focus
- a lack of accountability and consequences for poor behaviour
- limited performance and behavioural measures
- a lack of communication
- poor clarity and education around vision and culture
- resource and time constraints
- external compliance, stakeholder and political pressures
Developing a good business culture
Meanwhile, factors that were deemed to promote an ethical culture within a business include:
- leading by example with ethical leadership from the top down
- a clear vision and mission/purpose
- clear and transparent communication
- training and tools to embed ethics
- a strong focus on customer needs
- clearly defined values and behavioural expectations
- clear codes of conduct and policies
- calling out and consequence management of poor behaviour
Presence of the leadership team was another key contributor, which respondents felt was increasingly lacking among larger organisations than smaller ones.
Two-way flow of information required
“CEOs see a perfect world; they’ve got rose-coloured glasses on,” one respondent was quoted as saying.
However, such a sentiment may not be all their own making. The report identified a problem of CEOs not being fully informed about problems or challenges, as managers felt dissuaded to offer this feedback without first knowing how to resolve or address it.
Such a finding helps to explain why CEOs and senior managers were much more upbeat about where the business is versus where it should be when compared with the rest of the workforce.
“For example, CEOs perceive that they regularly talk about ethics and doing the right thing, but employees further down the hierarchy don’t have that perception to anywhere near the same extent,” the report said.
“And even if employees do hear the words from leaders about ethics and the importance of doing the right thing, they often don’t see the decisions and actions of leaders being aligned with their words.
“This latter view and the perception of the self-interest of leaders was expressed by numerous survey respondents.”