A new report from Marsh & McLennan Companies (MMC), tapping the insights by WomenCorporateDirectors (WCD), reveals a growing shift in boardroom agendas: an escalated focus and urgency around dysfunctional corporate culture and its potentially devastating impact on the organization. With research estimating that 80% of women who report sexual harassment change jobs within two years and 30% of M&A deals fail to achieve financial targets due to culture-related matters, directors are taking greater oversight over this area traditionally left to the CEO and the senior team.
In research conducted for “Identifying and Responding to a Dysfunctional Corporate Culture,” MMC interviewed top corporate directors from around the world, as investors and other stakeholders press for changes around issues of #MeToo and pay inequality. Directors shared the 10 red flags signaling a toxic culture in organizations as well as actions that directors can take to spot the warning signs from the top of the house. “The workload for board members continues to grow, and insights from fellow directors are critical to helping them address the most challenging and sensitive issues that arise in organizations,” said Susan C. Keating, CEO, WCD. She continued, “Through these kinds of reports and events such as WCD’s upcoming Global Institute in Silicon Valley May 19-22 – which will feature a special session on the topic, “Culture Shock: Board Oversight in a #MeToo Era” – WCD is helping to frame important topics that are impacting corporate governance in real time.”
“This report provides directors a road map for approaching a discussion of culture from a thoughtful, 360-degree viewpoint – examining the company’s vision, sales goals, decision-making, communications, reporting, employee turnover, HR practices, and more,” says Kapila Anand, a participant in the report, Lead Director of WCD, and Director, Extended Stay America, Inc., ESH Hospitality, Omega Healthcare Investors, and Elanco Animal Health, Inc.
“The costs of dysfunction threaten the very foundation of an organization,” says Patricia Milligan, Global Leader of the Multinational Client Group at Mercer, a division of MMC. “Not taking a thorough look into how the culture is functioning – or not – places a company at serious risk.”
10 Warning Signs of a Dysfunctional Culture
- No clear organizational vision or set of values
- All information to the board runs through the CEO
- Fighting amongst leadership
- Debate and challenge are not encouraged
- Limited transparency into organizational decision-making
- Complacency and resistance to discuss culture
- Bad news is not shared and employees do not feel comfortable reporting incidents
- Strong focus on individual results or a “get it done at all costs” attitude
- High employee turnover rates by business unit, race, age, gender, function, etc.
- Limited transparency on factors for promotion or success
“These warning signs provide a starting point for discussion, and can provide context for looking at the culture as a whole,” says Anand. “Ultimately, what is built coming out of this can make the organization more resilient, more innovative, and more attractive to the talent you want to keep and recruit to strengthen your future.”