Signs Your Company Suffers From a Toxic Culture

I once asked an executive to share the essence of his company’s culture with the members of a business school class I was teaching. His response was that in his company, his view was, “We don’t need a stinkin’ culture.” But that’s exactly what they had: a “stinking culture.”

What this executive didn’t realize is that every single company has a culture, but not all management teams are intentional about creating it. The best companies design their cultures to produce a sustainable competitive advantage. Cultures take a long time to build and a lot of work to maintain. They flow from management teams living a set of values that others seek to emulate, but almost never can – similar to attempting to get Roger Federer’s results on the tennis court simply by trying to mimic him.

As Jim Goodnight, CEO of SAS Institute, once said, “Ninety-five percent of my assets drive out the front gate every evening. It’s my job to bring them back.” But bringing them back is not just the CEO’s job. It’s a job that’s better done by a strong culture – one that will attract and keep the best people collaborating, innovating, learning and interacting around priorities that lead to world-class performance.

Companies with the best cultures tend to grow faster and have better profit margins. They have more job applications to choose from and lower turnover. Companies with powerful cultures have employees who are proud of where they work and can articulate clearly and compellingly why their company is better.

Here are a few cultural health measures you might use to rank your own organization. The worst cultures suffer from:

  1. Unhappy people. When disgruntled people are in management positions, culture quickly become toxic, resulting in high turnover or the wrong kind of turnover (where the stars leave and the “dead wood” stays).
  2. Unclear values. A management team that can’t articulate the priorities of the business or quantify them and set up ways to measure success won’t have value clarity – a culture killer.
  3. No common language or folklore. The best cultures tell great inside stories, remember their history and celebrate heroic culture carriers.
  4. Power-hoarding managers. Where leaders withhold information and use fear as the key motivator, the odds of developing a high-trust culture go to zero.
  5. Second-class citizens. Bad cultures have a caste system. If the output of only one kind of producer is recognized and valued, it’s impossible to build a great culture.
  6. Superficial diversity. Where managers only use race, gender or politics to create a superficial diversity, instead of ensuring that people with different life experiences are represented in the workplace, they can create cynicism.

The best cultures, on the other hand, are rooted in the inverse of these qualities, but there’s much more to them as well, including the following:

  1. Priorities are turned into projects. If priorities are set, but nothing happens, cynicism sets in. Sometimes committees are necessary to turning a priority into action. If so, make sure that your committees are set up with accountability and they sunset regularly so as not to become a permanent fixture or vestige of the past.
  2. Success is shared and celebrated. And failure is borne by senior management.
  3. There’s a shared language. This can be through dashboards, nicknames, indices or performance symbols. But there should be reminders everywhere.
  4. Employee satisfaction is prioritized. It should be important enough that it’s measured through means such as reviewing retention, recruiting and engagement surveys.
  5. Profits and growth are priorities. In business, it’s hard to have a great culture in a shrinking or flat revenue environment or where no profits are realized. Either of these can bring a team together, generate a laser-like focus and an urgency on a temporary basis; but if they persist for too long, it will erode the culture.
  6. People are growing. Employees have a career path and are learning, innovating, collaborating. They have a window into the future plans of the enterprise.
  7. People like and respect each other. This goes from the reception desk to the board room.

If your company doesn’t value its culture, it will be randomly hijacked by those with the loudest voices, and usually sink to lowest-common-denominator levels. If so, you will have to hope that your company has an unfair advantage such as killer IP, regulatory protections or political clout. Or that it can hope for what Harvard economist and Nobel Prize winner Wassily Leontief wrote:

“The role of humans as the most important factor of production is bound to diminish in the same way that the role of horses in agricultural production was first diminished and then eliminated by the introduction of tractors.”

But if your organization depends on complex, non-repetitive jobs, then developing a great culture will significantly increase the odds of surviving and thriving. You will have a culture in your company (or even in your family). So take time to be intentional about it and determine your own measures of what will make your culture a thriving one.

Joel Peterson

Chairman, JetBlue Airways. Stanford Business School


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