Attention leaders: you, and not just your board, can be held liable for brand-sabotaging behaviors at your organization. Recently in the United States a court ruling has set the precedent that C-suite leaders can be held personally accountable for allowing a toxic corporate culture that fosters bad behaviors such as sexual harassment, discrimination or other misconduct.
It’s yet one more reminder that cutting investment in company culture is not a good idea. Research shows that a positive employee experience helps achieve the organizational resiliency you need not only to weather economic downturns, but also to capitalize on market opportunities when the economy recovers. And experience shows us that an inclusive and equitable culture is one of the surest ways to protect your organization—and you—from potentially costly reputation risk.
Avoiding bad action by diagnosing (and addressing) broken systems
Corporate officers become liable, the landmark ruling makes clear, when they fail to heed reports of misconduct or fail to have established lines of communication by which those reports can reach them. But this behavior is indicative of a deeper danger: leaders’ inclination to curry external stakeholders’ favor at the expense of internal stakeholders’ wellbeing.
Just how dangerous is demonstrated by the compounding damage—financial, reputational, operational—that Tesla and its C-suite are incurring for overlooking years of bad behavior in its factories. After being ordered to pay a contractor $137 million (later reduced to $15 million) for racial discrimination in 2021, the electric car maker was hit with a wave of law suits in 2022 alleging racial discrimination and sexual harassment.
The litigation prompted one shareholder to sue the CEO and officers for “causing financial harm and irreparable damage to the company’s reputation” by fostering a “toxic workplace culture.” Tesla’s shares plummeted 8.5 percent on the news, and the suit subsequently uncovered findings of a 2018 employee survey wherein workers depicted an intimidating work environment and expressed concerns about the CEO’s leadership.
Though the company and CEO liability may prove singularly large, the culture that gave rise to it is, in our experience, all too common. That’s because healthy cultures—places where inclusive values govern every policy, practice, interaction, and communication—don’t just happen. Their construction and maintenance require the commitment of top leadership, a data-informed strategy and targeted, ongoing investment.
Committing to systemic, not symptomatic, investment
What might that look like? With a decade of supporting clients as they shape and protect culture, we recommend the following:
- A gap analysis of the variance between values and systems, processes, policies and practices. Ask and assess: Are your values evident in every transaction and interaction? Are your ways of working aligned to the outcomes you desire? Are your processes delivering equitable employee experiences? A thorough audit of your operation can reveal not just your cultural climate but precisely the policies and practices that give rise to it.
- A strategy that tackles root causes of inequity and the capabilities—including behavior modification—to execute on it. Too many cultural initiatives have a flavor-of-the-month quality that breeds skepticism among employees. Effective strategies seek to modify, through experiential learning, leader behaviors, as these are what dictate cultural norms.
- Crisis preparedness. While healthy cultures are less likely to be the target of hostile criticism, no brand is immune. That’s why preparing for a public relations crisis must be part of any culture investment strategy. It’s the best way to ensure sparks don’t find the air they need to set the brand ablaze. Implementing a fire drill that simulates a PR crisis on social media in real-time is one way to approach this. You’ll learn what you’re prepared for as an organization, where there are gaps in roles and responsibilities and the ways reputation risk can imperil financial security.
To be sure, this adds up to not a trifling investment. But the rewards for making it are a fraction of the millions of dollars you will spend on damage control, including possible litigation.
Recent research from United Minds, Weber Shandwick and KRC Research of C-suite executives across industries shows that workforce development and retention is seen as the top buffer against a recession and the top goal cited by over three out of four (76%). In fact, three of the top four areas leaders identify as areas of focus in 2023 center on employees: attracting and retaining talent; managing the adoption of new technology to advance business growth; employee engagement and activism. Finally, preparing for crises is now the C-suite’s remit. CEOs are far more likely than VPs (66% vs. 25%) to focus on crisis anticipation and mitigation.
A similar study of employee and consumer perspectives by our organizations demonstrates why these efforts are important. Regardless of the current market environment, our research shows that people want to feel supported by their employer and that their contributions are meaningful. Of 79 workplace factors we asked 2,800 workers across seven countries to rank by importance to employee experience, a positive work environment came up as number one, followed by feelings of appreciation for their contributions (number two) and motivation to do their best work (number three). What’s more, 73% of employees who report working in a positive environment are likely to stay vs. 10% who don’t, and 70% of employees who report feeling motivated are satisfied with their jobs vs. 6% who are not.
Using missteps to help you find your brand footing
In the UK, CEOs have been replaced and some taken intentional actions to improve because of toxic cultures — including the Confederation of Business Industry, Bon Appetit and Brewdog. And it extends beyond corporations into sport and law enforcement – essentially, all organizations benefit from adapting and maintaining an inclusive culture.
Shoring up your culture is just as valuable after a crisis as before one – because what stakeholders most want to see is that their activism catalyzed the internal growth necessary to prevent further harm. Indeed, a sincere mea culpa—coupled with actions underscoring its sincerity—can propel the brand forward. Whereas failure to acknowledge responsibility, let alone take action to detoxify culture, inflames and sustains public enmity.
Our work with Papa John’s, the international pizza franchise, illustrates just how much organizations can reap when they acknowledge systemic change is needed and undertake the arduous business of overhauling their culture from the inside out.
Papa John’s cultural risks were very publicly exposed in July 2018 when its founder uttered a racist slur on a conference call—behavior in keeping with his criticism of NFL kneeling protests in 2017 and the Affordable Care Act in 2012. We were engaged by the company to help make clear to all stakeholders—employees as well as customers and investors—that the founder did not represent the perspectives of the company’s 120,000 far more diverse employees. Through the “Voices” campaign, which featured employees and franchisees as spokespeople for the first time in company history, proved a turning point for the brand, driving negative social media down by 29% and boosting neutral/positive conversation by 73%.
But to the credit of Papa John’s new leadership, crisis mitigation was their first step in culture remediation. We continued to work together, bringing a team of crisis and issues, DEI and change management experts to foster a positive employee experience by enlisting them in innovation, encouraging their dialogue via two-way communication channels, and promoting and rewarding inclusive leader behaviors. By holding leaders accountable for progress on these initiatives, our engagement strategy closed the gap between stated values and accepted practices, employee attitudes and public perceptions.
An ounce of prevention
Greater market resiliency. Less risk, both in terms of talent attrition and reputation damage.
For both reasons, culture should continue to be prioritized as an investment. A recession is no reason to cut back, but rather an opportunity to double down on systemic change.
Because a rebounding market is the absolute worst time to be held accountable for long-festering cultural failures. No matter how deep your pockets—as a brand, as an organization or as an individual—you can’t afford it.
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Eric Blankenbaker is Executive Vice President of Global Crisis for United Minds, part of The Weber Shandwick Collective, with a focus on culture and litigation communications. Executive Vice President of Culture, Equity and Inclusion Nadine Redd Blackburn spearheads the culture and strategy offerings at United Minds with a focus on behavior and systemic change.
