Enron: Enron was an energy trading company
that collapsed after a massive accounting fraud scheme was revealed. Its 2001 bankruptcy filing was the largest in American history at the time and estimated losses totalled $74 billion. Arthur Andersen, Enron’s auditor, ceased doing business after the scandal. Shareholders lost $11 billion and the scandal damaged the US stock market’s reputation for transparency and compliance.
WHAT COMMON MISTAKES DO LEADERS MAKE WHEN MEASURING CULTURE? Hani says leaders often leave organisational culture up to chance rather than taking active steps to think about what type of culture would enhance success and where dangerous gaps might lie. “They look at mostly lagging indicators,” he says.
“Has the performance been great? Are people engaged? Are employees happy to be here? These are all lagging indicators. Once they happen, you can’t change that because it is the narrative.” The value of cultural analytics lies in its ability to
connect intangible cultural elements with measurable outcomes, he says. By doing so, it allows organisations to identify behaviours that lead to positive performance outcomes or, conversely, those that hinder growth or are fostering behaviours that could undermine their reputation or their financial security. “Often, we talk about culture in fuzzy terms, but it
is rarely connected to hard outcomes,” he says. “So, we can make the case for anything – make the case for change, make the case for risk management, make the case for performance and so on – but it is not going to get us there and it hasn’t got us there so far.” He says problems with measuring and defining
culture in organisations happen because of: • Poor measurement metrics: Often leaders define cultural values based on personal hunches or copying generic industry trends, measuring
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culture inappropriately through engagement sentiment surveys or qualitative investigations with no clarity on the link between their unique organisational culture and critical business outcomes. “Leaders get caught out by the wrong behaviours
and values becoming dominant in their organisations, wasting enormous resources on measures or interventions that have no tangible impact or even a negative impact on desired behaviours and business outcomes,” he says.
• Defining culture in narrow terms based on the experiences of the senior management team: Mission statements are written by a few members of the leadership elite who go on an away day together and come up with a slogan that they display in reception, Hani says. “The truth is this is not written from the ground up. We don’t know whether people actually behave according to these values or just treat them as fashionable words.”
• Not understanding the impact of behaviours that are embedded in the workplace: A misunderstanding of an organisation’s real culture, rather than the varnished one that senior leaders may imagine exists, might lead to shortcuts or even unethical behaviours. Also, rewarding certain behaviours without considering what unintended outcome they might have could result in a lack of accountability or reduced motivation. “Striking a balance by aligning workplace behaviours with desired outcomes enables organisations to navigate challenges and adapt to evolving circumstances,” he says.
• Trying to import existing cultures onto yours: Just as a neighbour’s key won’t fit your front door, their organisational strategies won’t necessarily unlock success in your company. “Emulating external models without adapting them to your unique culture is a misstep,” he says. “Beware of off-the-shelf consultants. While external guidance can provide valuable insights, it is crucial to ensure consultants are tailoring strategies to your organisation rather than deploying a generic playbook.” • Not setting the standards for your organisation:
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