Most chief executives think that they can understand their organisation by what is going right. They look at performance indicators to see what is green, what is delivering the best results and what offers the most profits. For an individual, this makes sense. A manager or a worker must work to their strengths and minimize their weaknesses. Good managers recognise this and create teams that complement their strengths and mitigate their weaknesses. However, the same can never be true for a CEO who is managing an organisation. The organisation cannot mitigate its weaknesses or avoid the bad news in the same way. It cannot look to the next tier of management to solve their problem. These issues are doubly important for understanding corporate culture, which determines an organisation’s business health. To understand the health of the organisation, the challenge is to get more bad news reported the higher you go in the organisation.
What I mean is that the CEO should be less concerned with hearing about good news or how wonderful things are and more interested in hearing what is going wrong. I do not mean that they need to be negative or search out negative topics to criticise. Instead, I mean they need exception reporting on cultural issues. They need to search this out because reporting, especially on cultural issues, is always inverted in an organisation. Aside from the general concern with bad news, junior staff will have less incentive to report the bad news upwards. To counteract this natural bias to good news, the Chief Executive needs to look for topics that create an exception for the organisation and have those reported to them as standard items. As a standard item, they avoid the appearance of bad news. The topic becomes something that appears to be routine performance information.
Here are three exceptions that can reveal the health of their organisation’s culture. There are others and I focus on these because these are not simply issues of “bad news”, but they are areas where the organisation can see the consequences of its culture and internal procedures. The three areas are
- Grievances or disciplinary issues
- Compromise agreements,
- Exit interviews.
Grievances. Most chief executives do not bother themselves with this level of detail. Yet, grievances are an insight into how their teams are being managed and how the organisation resolves internal disputes. If a service or a department has a higher number of grievances than another, it is time to look at how they manage their staff. What is the culture within that team, department, or the service? What is the nature of the grievance and are there systems in place to learn from them? If the staff leave after grievances, is there something within the way they are managed. Does that unit or department have a “my way or the highway” management approach? If the organisation is not learning to avoid grievances, which are the breakdown of trust and communication between staff and between employees and managers, then where is it learning?
Although these are directly related to grievances and are often lumped together, they need to be considered differently. Grievances may be a disagreement; a disciplinary is a formal process with a legally binding outcome. Here the organisation has to enforce its formal rules and culture. The issue is one where the rules have been broken and order must be restored. However, it is important to know why the problem emerged. What could have prevented it? Was it a problem of ignorance? Does it indicate a larger problem with culture or the way the system constrains the employee? What we may find is that the more the staff have to be disciplined, the less the system allows them to operate effectively or independently. Alternatively, the more staff are disciplined; it may suggest that management has failed because steps to prevent this informally or even formally have not worked. For each disciplinary, is the relevant manager being asked to explain what they did and could have done to prevent it. If an organisation is only efficient at completing these and not looking at preventing them, it may have to reconsider its culture.
Depending on your organisation, the chief executive may not approve these. If that is the case, then it will immediately be an area for concern. At a minimum a Chief Executive needs to know how many, why and where they are occurring even if they do not personally approve them. If a department is using these more than it is using others, the Chief Executive needs to understand what that means. Are they using these to silence whistle-blowers? Is the unit a “soft touch”? Alternatively, is it creating problems so severe that the only way to avoid legal or regulatory proceedings is to “pay off” staff. These questions need to be considered to understand the corporate culture.
Exit interviews are often the least exploited asset an organisation has. Many companies do not use these. Some that do may only use them to make sure someone is not going to take the company to an employment tribunal. They use them as part of a dispute resolution or prevention system rather than trying to learn from them. Even where they are used and they are used for the positive reasons, they are not exploited for what they reveal about the company’s culture. The Chief Executive is not going to need to see each one. Instead, they need to make sure a system exists to collect them and department managers and unit managers review them to learn from them. In the same way that induction programmes are needed to introduce an employee to the organisation, the exit interview needs to complete that loop. The reason why people leave is as important as why someone wants to work for a company. If the two are not linked, then the corporate culture will not be revealed, and the organisation is unlikely to be learning.
These are all HR issues, why does the CEO need to know them.
HR covers all of these topics and the CEO needs to know them. If they are not performance indicators within the company, then how the CEO understand the corporate culture? Even if the CEO is too busy for this level of detail, they need to have them reported on some basis even if only in an abstract or aggregated level. They may not add to the bottom line, but they have a direct impact on your bottom line. An alert CEO will realize that if these issues are out of control or not being tracked then the organisation is wasting a lot of energy to deal with problems created within the organisation and not harnessing positive energy to deliver a better service for customers and clients.