How to build a thriving and ethical organizational culture
Every piece of research undertaken into the subject of what makes an organization successful consistently returns one answer: ‘its culture’.
Culture is not simply a task for the HR department to fulfill, but a fundamental responsibility that shapes the organization’s trajectory and defines its legacy.
A vibrant culture – where people understand what needs to be done, have autonomy over the way that they do it and feel safe to speak up – is not a ‘nice-to-have’, but a strategic imperative for success in today’s ever-changing business landscape.
Conversely, a toxic culture poses a severe threat to an organization’s very existence and can lead to devastating consequences for those that work within it.
The dangers of a toxic culture
Toxic cultures arise when leaders allow negative behaviors and poor performance to fester. These cultures can manifest in various forms, ranging from subtle microaggressions and a lack of appreciation to blatant bullying, harassment and ethical breaches.
The impact of such toxicity is far-reaching, jeopardizing an organization’s financial health, reputation and the wellbeing of its employees.
Financially, disengaged employees are less productive, leading to missed targets and reduced profitability. High attrition rates, particularly among top performers, further escalate costs.
Financially, disengaged employees are less productive, leading to missed targets and reduced profitability.
Reputations built over years can be irreparably damaged as news of a toxic culture spreads rapidly in our interconnected world, leading to negative media coverage, consumer boycotts and diminished investor confidence.
Legally, organizations with toxic cultures often face lawsuits, fines and investigations, particularly when issues of harassment, discrimination or financial misconduct come to light.
Perhaps the most devastating impact of a toxic culture is on the individuals within the organization. In extreme cases, toxic cultures have even been linked to employee suicide. This underscores the profound ethical responsibility of CEOs to safeguard the wellbeing of their workforce.
Put simply, culture is not something that can be left to chance and is therefore not something CEOs can ignore.
The CEO as culture role model
Due to their position of authority, CEOs have a unique and crucial role in shaping the culture of their organizations. While every employee contributes to the overall culture, and HR is the custodian of the investment into it, the CEO and their team sets the tone and establishes the behavioral standards that permeate throughout the company.
Indeed, research conducted by Burson-Marsteller in the United States found that a CEO’s reputation (internally and externally) accounts for 50 percent of the organization’s reputation. In Germany, it’s 63 percent.
A CEO’s actions, communication style and responses to situations send powerful signals that influence the behavior of others. CEOs who prioritize ethical conduct, respectful communication and a genuine concern for employee wellbeing lay the foundation for a positive and thriving culture.
CEOs who prioritize ethical conduct, respectful communication and a genuine concern for employee wellbeing lay the foundation for a positive and thriving culture.
However, a CEO’s inaction or tolerance of negative behavior can be equally detrimental. Failing to address toxic behavior, or worse, exhibiting such behavior themselves, creates a breeding ground for toxicity to spread.
High-profile toxic culture case studies such as Uber, WeWork and, recently in Australia, Nine News, all highlight CEOs whose actions have contributed to the toxicity in the culture of their organizations and led to the downfall of their own careers.
These cautionary tales highlight the importance of CEOs understanding the profound impact of their behavior and decisions on the overall culture.
Building a culture for the future
CEOs must not only mitigate the risks of a toxic culture but also actively invest in the building of a vibrant culture that is fit for purpose in our modern, dynamic world. This requires embracing technological and societal change, adopting a human-centric approach and leading with purpose.
The business landscape is constantly evolving, and CEOs need to foster a culture that is agile, adaptable and embraces continuous learning.
A human-centric approach prioritizes emotional intelligence, the wellbeing of employees and recognizes that a healthy and supported workforce is essential for sustained success.
This involves promoting work–life balance, fostering open communication, providing opportunities for professional growth and creating a psychologically safe environment where employees feel valued and respected.
This kind of environment can often be seen as too ‘nice’ or not ‘challenging enough’ when in reality, when done correctly, will see the organization overachieve. Employees treat their culture – and the targets that drive it – with pride.
They want everyone within it to succeed and will reject the behaviors of others that undermine what they have collectively built.
This provides CEOs – and having worked with many I’m speaking from experience – with the confidence that not only have they created the conditions for success, but the staff want it just as much as they do.
A legacy of vibrancy
Ultimately, a CEO’s legacy is defined not just by financial performance, but by the impact they have on the lives of the people within their organization.
A vibrant and thriving culture is testament to a CEO’s commitment to their employees and their vision for a better future. It is a legacy worth striving toward and the one thing they’ll be forever known for.