Cultural and reputational risks are becoming more and more common for enterprises today. As companies across business sectors find themselves suffering reputational damage over some form of toxic behavior or unethical business decision, a growing number of executives are starting to see culture as a direct contributor to the bottom line. While the increasing awareness around these issues is encouraging from a social standpoint, many executives are still unsure how to tangibly improve their company culture. According to Deloitte’s Human Capital Trends Report, 82% of executives say that culture is a potential competitive advantage, yet only 12% believe they’re driving the “right culture.”
How is it possible that only 12% believe they’re driving the right culture? In part, it’s because the processes that executives and board members have in place aren’t giving them the signals they need. Despite the fact that information is essential to understanding and managing culture risk, especially in a digitized and media-driven business environment, 65% of CEOs and 62% of board members today say they lack a process for identifying signals of potential culture risk. This leaves companies prone to a range of negative consequences ranging from consumer backlash to a spike in turnover.
How can there be such a lack of process for identifying signals of potential culture risk? At its core, the reason we’re not sure whether or not we are driving the ‘right’ culture is because many of the processes that we use to obtain relevant information rely on good intentions. Specifically, many of us rely on self-reporting and the moral character of leadership to improve organizational culture and reduce corporate risk. But as the research around organizational psychology and leadership suggests, neither of these approaches are enough to help businesses get the information they need.