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Organisational Culture
Amy C. Edmondson • Jan 23, 2020
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When Employees Are Open With Each Other, But Not Management by Amy C. Edmondson
It’s human nature to grumble a little about the boss, the boring meeting, or some seemingly clueless directive from several layers above. Strictly speaking, such grumbling doesn’t cause real harm; everyone needs to vent now and then.
But an organization is in serious trouble when most discussions on crucial issues take place in side conversations, rather than in formal meetings, where concerns can be addressed thoughtfully with people in a position to instigate a change of course.
Recent news reports on Boeing reveal what appears to be an epidemic of side conversations about the 737 Max jetliner. In private emails and instant messages, employees expressed rampant concerns about the Max during its development — and outright disdain for some of the decisions being made, technologies being put forward, and even for the company’s customers. The 117 pages of internal communications turned over to the U.S. Congress last week paint a damning portrait of Boeing’s culture — captured in persistent side conversations. Its employees derided airline customers as incompetent and “idiots,” and had similarly harsh words about regulators and Boeing senior executives.
As Captain “Sully” Sullenberger noted in the New York Times, “We’ve all seen this movie before, in places like Enron.”
Side conversations occur because people believe it’s not acceptable to tell the truth publicly. They happen because employees have learned that meetings are places where you go along with the boss or the majority, even if you disagree with what’s being decided or planned. Because we all want to express ourselves and feel heard, we can’t stay silent forever. So we seek out our peers — the ones with whom we believe we can talk straight — and then say what we really think.
Here’s how to tell whether your organization might be plagued by an unhealthy degree of side conversations.
During a development process, an overwhelming emphasis on speed or profit drives out conversations about a new offering’s quality and safety and/or a new product or service is discussed in only positive terms in formal progress meetings. It’s a given that new offerings bring risks, uncertainties, and problems. Not hearing about them should always raise a red flag.
Subject matter experts say little or nothing at meetings. Although it’s always possible they simply have nothing to say, given their expertise and the novelty of the project, it’s more likely they feel unable to say something negative.
People automatically agree with leaders at meetings on crucial issues. Their lack of data, substantive comments or enthusiasm is a warning sign.
The way to heal a “sick” culture (as Boeing’s was called by Sara Nelson, president of the Flight Attendants Union) is to help all employees recognize that side conversations about substantive issues are a source of organizational pathology. It starts with senior executives building a culture of psychological safety where employees believe that candor is expected and welcome. As I have detailed in a recent book, this culture can be carefully built through three kinds of ongoing leadership action:
Set the stage. Be explicit about the tensions and challenges that plague all new endeavors, and constantly remind people that you understand the risks, uncertainties, and complexities. Make sure everyone knows that you recognize the tension between the profits the company desires and the absolute premium placed on quality and safety. Point out that kicking the problem down the road costs more in the long run.
Insist on input. Do not accept silence by subject matter experts in meetings. Issue explicit invitations for input. Put people on the spot by asking questions to elicit their thoughts. Force yourself to be curious and ready to hear what they are seeing and thinking.
Appreciate messengers. Respond productively to bad news and concerns. You never know how much courage it might have taken someone to speak. Focus on solutions. Invite ideas and look for volunteers to team up to help solve the problems raised.
Because of escalating uncertainty and risk in many industries, building a healthy culture for candid, challenging conversations has never been more important. It’s time to drive side conversations back onto the center stage.
Company size doesn’t matter when it comes to successful corporate governance. ICAEW’s leading thinker and media speaker on corporate governance issues, Jo Iwasaki, shares her thoughts on the importance of good corporate governance in companies of any size. Medium sized company case study A member recently told me of one of his experiences with a non-executive director (NED) on the board of a medium size, hi-tec company where he was the finance director (FD). The background The member had to manage the finances as the organisation went through a difficult time – it was in the immediate aftermath of the financial crisis, and the company was facing a severe shortage of funds as previously committed tranches of finance failed to materialise. The business environment was moving fast, and he needed to get the board and shareholders to agree on a series of measured decisions in rapid sequence. The challenge The main challenge he faced was the managing director: an overbearing visionary who had his own idea on how the company should ride out the storm. The member found it indispensable to have a NED, who was unafraid to provide an independent viewpoint, and so balance an otherwise one-dimensional decision-making process. He was also there to lend his ears to the FD to listen to ideas and suggestions that the FD wanted to present to the board, supporting him in presenting a different point of view. The company The company was not listed so was not required to have NEDs – under the current corporate governance regime in the UK, the Corporate Governance Code only applies to listed companies. Some of its specific provisions do not apply to companies below FTSE 350. However, there were a disparate group of shareholders (none with overall control) and the appointment of a NED to the board was stipulated by the shareholder agreement. The FD’s experience demonstrates that appointing a NED to the board should not be seen as an undesirable burden but as an opportunity to improve the governance and decision-making of a company. The principles of corporate government The principle ideas behind the Corporate Governance Code are fairly straight forward – principles have to be intuitive, relevant and easy to remember. After all, corporate governance is a means to an end, and the end is to help a board determine how to steer a company to achieve its business purpose. As much as that end is applicable to any company, so should the principles of corporate governance. One of the papers published by ICAEW is What are the overarching principles of corporate governance? Here we identify five principles of corporate governance: leadership – to steer the company to achieve its business purpose capability – having a capable board to discharge their duties accountability – to communicate to its stakeholders how the company is achieving its business purpose and other responsibilities sustainability – to create value and allocate it fairly and sustainably integrity ¬– to withstand scrutiny by internal and external stakeholders. These might look aspirational, but to develop a robust culture in business aspiration is no bad thing. Principles are not really a matter of regulation but they enable companies to be better run. And as ICAEW Chartered Accountants we should be familiar with applying high level principles to practical realities. In conclusion – size doesn’t matter Corporate governance, in particular at a principle level, is as relevant for SMEs as for listed companies. Keeping these principles in mind can help issues that typically face SMEs: for example balancing CEO, and succession planning. Companies may organically develop, but there is a point where it makes sense to have a more formal structure. Once we understand what drives these formalities, corporate governance can be a truly useful tool for companies of any size in responding to challenges of a rapidly changing business world while maintaining stakeholder confidence.
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Company size doesn’t matter when it comes to successful corporate governance. ICAEW’s leading thinker and media speaker on corporate governance issues, Jo Iwasaki, shares her thoughts on the importance of good corporate governance in companies of any size. Medium sized company case study A member recently told me of one of his experiences with a non-executive director (NED) on the board of a medium size, hi-tec company where he was the finance director (FD). The background The member had to manage the finances as the organisation went through a difficult time – it was in the immediate aftermath of the financial crisis, and the company was facing a severe shortage of funds as previously committed tranches of finance failed to materialise. The business environment was moving fast, and he needed to get the board and shareholders to agree on a series of measured decisions in rapid sequence. The challenge The main challenge he faced was the managing director: an overbearing visionary who had his own idea on how the company should ride out the storm. The member found it indispensable to have a NED, who was unafraid to provide an independent viewpoint, and so balance an otherwise one-dimensional decision-making process. He was also there to lend his ears to the FD to listen to ideas and suggestions that the FD wanted to present to the board, supporting him in presenting a different point of view. The company The company was not listed so was not required to have NEDs – under the current corporate governance regime in the UK, the Corporate Governance Code only applies to listed companies. Some of its specific provisions do not apply to companies below FTSE 350. However, there were a disparate group of shareholders (none with overall control) and the appointment of a NED to the board was stipulated by the shareholder agreement. The FD’s experience demonstrates that appointing a NED to the board should not be seen as an undesirable burden but as an opportunity to improve the governance and decision-making of a company. The principles of corporate government The principle ideas behind the Corporate Governance Code are fairly straight forward – principles have to be intuitive, relevant and easy to remember. After all, corporate governance is a means to an end, and the end is to help a board determine how to steer a company to achieve its business purpose. As much as that end is applicable to any company, so should the principles of corporate governance. One of the papers published by ICAEW is What are the overarching principles of corporate governance? Here we identify five principles of corporate governance: leadership – to steer the company to achieve its business purpose capability – having a capable board to discharge their duties accountability – to communicate to its stakeholders how the company is achieving its business purpose and other responsibilities sustainability – to create value and allocate it fairly and sustainably integrity ¬– to withstand scrutiny by internal and external stakeholders. These might look aspirational, but to develop a robust culture in business aspiration is no bad thing. Principles are not really a matter of regulation but they enable companies to be better run. And as ICAEW Chartered Accountants we should be familiar with applying high level principles to practical realities. In conclusion – size doesn’t matter Corporate governance, in particular at a principle level, is as relevant for SMEs as for listed companies. Keeping these principles in mind can help issues that typically face SMEs: for example balancing CEO, and succession planning. Companies may organically develop, but there is a point where it makes sense to have a more formal structure. Once we understand what drives these formalities, corporate governance can be a truly useful tool for companies of any size in responding to challenges of a rapidly changing business world while maintaining stakeholder confidence.