Managing Corporate Culture Now Means Managing Great Expectations

March 29, 2023 – How work is organized within companies and how employees view their jobs and their relationships to companies is changing. COVID-19 combined with trends that were already taking shape have had a significant impact on employment, recruitment, and retention.

“Employees expect their organizations to share their personal values and sense of social responsibility for the community and environment, and the institution should still delight its customers and make a profit,” said Daniel P. Forrester, founder and chairman of THRUUE. “Employees, especially younger generations, believe that every type of organization can right social wrongs and drive systemic change, whether by creating a fairer and more equitable workplace, by ensuring a safer community for all races and religions, or by confronting climate change through multiyear commitments to reducing the firm’s carbon footprint. The collapse of faith in government as the key agent of social change, well documented by Edleman’s annual trust barometer, has created a significant void—86 percent of employees expect their CEO to speak out publicly on societal issues. CEOs now need to be transformational leaders and social activists.”

The Debate is Over
Other social upheavals have shaped new workplace expectations, such as Black Lives Matter, the nationwide protests in response to the death of George Floyd, the ongoing #MeToo movement, and public discussions about sexual harassment. A commitment to environmental, social and governance standards, with requisite transparency and accountability measures, has also become increasingly important to the investment community. For example, according to one consulting firm, companies that have publicly committed themselves to achieving net-zero carbon emissions more than tripled assets under management from the last quarter of 2020 to the first quarter of 2021, from $9 trillion to $32 trillion. It appears that CEOs are now expected to ensure their organizations capture these metrics and know how best to deliver these results.

“The debate over remote work, which so many firms had previously struggled to address, is over,” said Mitchell B. Reiss, an international consultant specializing in geopolitical risk, institutional turnarounds, and non-profit leadership. “Habits and norms established over half a century, including commuting, business travel, onboarding, all-hands meetings, coaching, mentoring and routine management, were reimagined, rewritten, or erased in weeks. Now CEOs will have to manage the tension between coming into the office and addressing employees’ myriad health and safety concerns as well as acknowledging a preference by many for remote work.”

“Additionally, voices calling for prioritizing employee safety — including mental health—over profits, have gotten louder and forced firms to respond by offering workplace benefits that promote flexibility and personal days that do not count against vacation time,” Mr. Forrester said. “Companies have met greater demands for diversity, equity, and inclusion by institutionalizing new positions in human resources and in the C-suite. Firms that have only paid lip service to respecting employees’ work–life balance risk devastating reviews on Glassdoor, Facebook, and LinkedIn; costly employee churn; damaged brands; and greater obstacles to hiring new talent.”

“Prospective employees are increasingly selecting firms on what the organization stands for,” said Mr. Reiss. For many people, finding an employer who matches their values is a higher priority than financial reward. “Employees have taken to heart the Business Roundtable statement that the purpose of the corporation was not simply to deliver shareholder value but to deliver value to all its stakeholders, including the surrounding community,” he said.

Managing Culture Now Means Managing Expectations
Meeting or exceeding this evolving list of growing employee and stakeholder expectations has recast the CEO as the chief expectations officer. But what levers can the CEO pull to manage so many disparate trends and views, and how will the CEO measure progress?

“CEOs who give sustained management attention and allocate resources to building value-based constructive cultures can better manage these growing expectations,” Mr. Forrester said. “Nurturing a constructive corporate culture has always mattered, with studies showing that such firms are more innovative and profitable than their peers. Still, some CEOs do not make this a priority; the reasons vary, but metrics and incentives have much to do with it.”

“One reason culture takes a back seat for some CEOs is the perception that it can’t be measured,” said Mr. Reiss. “At a time when companies pride themselves on the ability to measure everything, capturing a workplace’s culture has seemed too amorphous, and it has evaded capture by a standard key performance indicator.”

“We also know that workplace culture is difficult to change and takes an immense amount of personal time by senior leadership, a reality that is more complicated when the workforce operates remotely,” Mr. Reiss said. “With the average CEO tenure now at an all-time low (18 to 36 months), many CEOs may figure that meeting with frontline employees, whose feedback may strike them at times are parochial, is not the best investment of their limited time. Yet, such feedback shouldn’t surprise CEOs because employees can be just as self-interested as any C-suite executive. And a final factor should not be underestimated: CEOs need to have a thick skin, take criticism, and sometimes manage expectations face-to-face and one employee at a time.”

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