Paying attention to the little things builds better businesses

Margaret Heffernan is not surprised by corporate meltdowns. For her, examples such as the collapse of Lehman Brothers or the recent scandal at Volkswagen over emissions cheating comes down to failures in organisational culture.

“Whenever there is a major organisational failure – and we have seen them in all sectors from banks to manufacturing to energy, automotive and health – the problem is not that there was something unknowable,” says Heffernan, an entrepreneur, writer and management expert.

“The problem has always been that even though people can see something is wrong, they don’t talk about it or act on it because there are cultural forces keeping them silent or passive. These cultures actively suppress truth-telling, argument and debate, and this leads to serious problems.”

US-based Heffernan was in Ireland recently to speak at the Irish Management Institute (IMI). Educated at Cambridge, she is a former programme maker with the BBC who turned corporate in 1994 and became involved in the running, buying and selling of internet businesses in the US.

She is the author of several books including Beyond Measure: The Big Impact of Small Changes which focuses on how small, everyday thoughts and habits generate and sustain organisational cultures.

Particular values

So what exactly is organisational culture? “It’s an accumulation of all the ways in which people do ‘stuff’ from how leaders lead to how individuals behave towards each other to how meetings and tea breaks happen,” Heffernan says.

“Some organisations have very strong cultures. Some organisations have none. What’s becoming very clear is that a culture that strongly supports particular values and behaviours is much more productive and resilient than a culture that does not.”

Asked to explain the connection between something as seemingly inconsequential as a tea break and organisational culture, Heffernan says: “Let me give you an example. I know of a bank that served teas and coffees to people at their desks. On the surface this looked like a nice idea. The downside was that nobody was getting a break and nobody was spending time together. Time together is one of the ways you foster and build social capital.

“This is a classic example of a ritual that looks fine but it’s not, as it’s keeping everyone separate. In fact, there have been experiments where introducing a coffee break actually makes an organisation more profitable. Why? Because coming together fosters the sharing of ideas and problem solving.”

Social bonds

Heffernan takes particular issue with organisational cultures that pit employees against each other.

“For a long time there was a view that if we make people compete, they will be more productive and will strive and work harder,” she says. “In fact, if people are forced to compete, evidence shows they won’t help each other, they won’t share information and they won’t share ideas that accelerate innovation.

“So after 50 years of thinking competition is how we get the best out of people, we’ve had to roll back as it has backfired spectacularly.

“Highly creative, highly resilient organisations are characterised by helpfulness, by very tight social bonds and by the norms of social capital by which I mean generosity, reciprocity and trust.

“This creates an environment where it is safe to ask tough questions, safe to propose crazy ideas, safe to share insights and information. This is the sort of gold standard toward which today’s most innovative and resilient organisations are headed.”

Heffernan says that culture is also expressed in the people an organisation attracts and retains or doesn’t.

“If you have a lot of people who hoard information or won’t contribute to ideas, you will have a very sclerotic organisation. If you have very few of them, you will have ideas whizzing around at great speed,” she says.

“Every person you hire changes your culture a little bit and brings with them the culture of their previous workplace. This is what makes culture something very dynamic and is why you have to pay a lot of attention to it and how it is working for or against you.”

Forced ranking

Asked to flag the signs of poor organisational culture, Heffernan identifies overly detailed job descriptions, over-intensive performance management systems and the forced ranking of employees by performance.

“Detailed job descriptions box people in and performance management/ rankings impede creative, dynamic thinking,” she says. “Hierarchy and bureaucracy also specifically impede truth telling and militate against the sharing of information and insights. How steep is an organisation’s hierarchy and how complex its bureaucracy also matter so we need to ask how much of both can go?”

For anyone interested in a corporate cultural health check, Heffernan suggests reflecting on the following:

– How safe is it to ask hard questions here?

– How much freedom is there to challenge?

– How many people in the organisation do I know?

– How far do I trust my co-workers?

– Do I have ideas, issues or concerns about the company that I don’t voice?

“I have yet to meet an organisation where more than 50 per cent said no to that last question,” Heffernan says. “If people aren’t being open, you’re wasting a huge amount of the intellectual capacity you’ve hired. In really creative, resilient organisations people will want to do or say something if there’s a problem because they care.

“It’s not a question of job description; it’s a question of ethical responsibility.”