Karma is an ancient spiritual and religious concept that refers to the principle of cause and effect, where intent and actions (cause) influence the future (effect). Good intent and good deeds contribute to good future outcomes, while bad intent and bad deeds contribute to bad karma and negative future consequences. In the Christian bible it is expressed as: “As you sow, so shall you reap.” And from the Australian bushman: “A boomerang returns back to the person who throws it.”
Karma is a universal principle, and it applies equally to corporate culture. Let me explain.
Today, right this moment, many CEOs and management teams are discussing how to save their company and survive during this global COVID-19 pandemic and the resulting global economic meltdown. Most retail organizations have closed their stores, as have restaurants and other businesses dependent upon walk in customers. No sales equals no income – period. Income may be close to zero, but many costs are still at pre-pandemic levels, including salaries, rents, insurance premiums, taxes, etc. Something has to be done to save the company from insolvency and collapse.
And here’s where the karma of corporate culture comes in. Damage your culture today and it will negatively impact your business in the future!
Shadow of the Leader
Organizations are shadows of their leaders; that’s the good news and the bad news!
Basically, there are two types of senior leaders, those who wholeheartedly believe and understand that their employees are the lifeblood of the company, and those who don’t! And these two different types of leaders will respond very differently to this crisis.
At one extreme there are those very well paid CEOs (some may argue grossly overpaid) who will lay off everyone and file for either bankruptcy or lobby for government bailout money. Their commitment is to their shareholders (and in many cases their own bank account) and not to their employees. It’s just business they say!
The other extreme are those who, from the outset, have truly understood that well trained and respected employees are the business, period. Here is part of a letter to all Virgin employees from Sir Richard Branson:
At Virgin Atlantic, we consulted with and listened to our incredible employees, who virtually unanimously decided they would collectively volunteer to take unpaid leave for eight weeks out of the next six and a half months, in order to limit financial hardship for everyone, secure the airline’s future survival and try to protect everybody’s jobs. Our employees are united as one behind this plan, and our shareholders and partners have respected their vision, so we can hopefully emerge and thrive with as many jobs as possible intact once the situation stabilises.
Alfred F. Kelly Jr., chairman and CEO of Visa, recently let his 20,000 workforce know that there would be no layoffs in 2020. Kelly said, “There is enough sadness in the world and already too many families impacted by job losses. I have no interest in contributing to that.”
One of the core principles of corporate culture, as described in Culture Rules: The 10 Core Principles of Corporate Culture, is “Shadow of leader”. Basically, organisational culture is heavily influenced and reinforced by the attitudes, behaviour and actions of the CEO and senior leadership team. It is estimated that the combination of leadership and culture accounts for around 65% of company performance, the remainder being influenced by the type of industry and global external events.
Culture as Karma
For those business leaders who cut and run, they will never again regain the trust of employees and customers, either former or new. The cultural ethos and trust ecosystem has been wounded, possibly beyond repair. While the business may survive through a bailout or other investment, the damaged culture will be a huge liability to future employee engagement and business performance. Like the proverbial millstone around one’s neck, the culture will hold back, slow down and in some cases even block the future performance of the organization.
Consider the situation of the Royal Bank of Scotland. Even 12 years after CEO Fred Goodwin resigned (was forced out), RBS still has a toxic culture that negatively impacts both internal employees, customers and its overall performance.
Building Good Culture Karma
How should senior leaders act when facing such a dire financial and global economic situation? There is no magic one-size-fits-all formula, but there are some basic principles to help senior leaders and executive teams chart a course of action that does not mortgage the future for the present.
- Principle: Employees are the business, period.
Taking care of employees through this crisis should be priority one. Employees have an incredible amount of knowledge about your business, much more than in the senior team. It was be corporate suicide to lose or alienate those with the real knowledge of how your business works. People who know how things work and how to get things done are critical to your future.
As for ideas on what to do, ask your employees. Virgin consulted its employees for ideas that would work for both the business and its people.
- Principle: Let your decisions be guided by realistic optimism and not fear.
A crisis is a great time to build for the future. Innovation, not bunker thinking should be the rule. Your organization is full of talent and ideas if you tap into it. Think of Lockheed’s famed, Skunk Works, which takes talented employees and focuses them on thorny problems and future products.
Dyson Corporation, the vacuum cleaner people, designed and built a prototype medical ventilator in 10 days for use in hospitals with COVID-19 patients. The UK government has ordered 10,000 ventilators from Dyson, which could start producing them within weeks. “The race is now on to get it into production,” Dyson told staff in an emailed rallying cry.
Okay, so this company has no medical expertise. But it does have incredibly talented engineers and staff, and some relevant experience, given that both ventilators and vacuum cleaners involve pumping air efficiently. Other areas of crossover include digital motors, battery packs, airflow analysis and high-efficiency particulate air (HEPA) filters.
- Principle: Use your corporate values as a guide for your decisions.
Now is the time to show that your corporate values are real and not just words on paper or a PR or HR tick-the-box practice. If you have defined your company values in enough detail, then they should help as a guide to decision making about the business.
Ikea is an excellent example. Here are their corporate value statement and values:
“We believe that every individual has something valuable to offer and we strive to have the same values in the way we work.”
- Leadership By Example – Our managers try to set a good example, and expect the same of IKEA co-workers.
- Daring To Be Different – We question old solutions and, if we have a better idea, we are willing to change.
- Togetherness And Enthusiasm – Together, we have the power to solve seemingly unsolvable problems. We do it all the time.
- Accept And Delegate Responsibility – We promote co-workers with potential and stimulate them to surpass their expectations. Sure, people make mistakes. But they learn from them!
And their response to the pandemic? They have closed their stores to retail traffic and pick-ups, and are refocusing staff and customers towards on-line business. In addition “store workers who are fit & healthy are being asked to come in to into work when stores are shut to the public and we’ll work together to define how we best support our customers and communities. Those self-isolating in line with government guidelines are being paid.”
- Principle: Liquidity is critical.
Even in the best of times, liquidity is important, but in a crisis of this magnitude, cash is critical. Instead of just cutting staff costs, there are other liquidity strategies, if leadership has the courage. For example, during the 2008 global economic meltdown, Allan Mulally, the new CEO of Ford, mortgaged the Ford Blue Oval logo to raise cash, with the expectation that the company would survive and pay off the mortgage rather than lose their brand symbol. He also reduced the number of different car models to those most popular and most profitable. He also cut all funded projects that did not directly contribute to the strategic goals laid out in their recovery plan.
During the turnaround of Continental Airlines in the mid-1990s, new CEO Gordon Bethune gave staff more decision making authority, reduced management layers and renegotiated a prior commitment with Boeing for the purchase of new planes.
High paid executives are best able to survive a 6-8 month cash crisis. To improve liquidity, reduce executive salaries to maintenance levels and don’t pay bonuses. Pay them in shares instead, shares are depressed now but should bounce back – good for their future and current liquidity of company.
Don’t pay Board members. They will survive and if all they are interested in is the Board fee, then you don’t want them anyway.
- Principle: Build cooperative partnerships.
Work together with other companies, even competitors, to discover new ways of doing more with less. Dyson teamed up with the Technology Partnership, a Cambridge-based melting pot of scientists and innovators, some of whom have significant medical experience, in its race to design and build medical ventilators.
- Principle: Communicate with your customers.
Over communicate with your customers. Let them know the positive steps you are taking to survive this crisis. Customers who see you doing the right things for people and the business will remain loyal, and tell their friends this is a good company to do business with.
- Principle: Break the internal silos.
One of the most damaging aspects of modern corporate organizations is the relative independence of internal functions and departments. We call them silos, since there is little sharing of information, ideas or people between them. They often act like separate kingdoms, focusing more on their own budgets than the overall health of the company. In many companies, a large percentage of bonus income for department heads is based on “making their budget numbers”. A department can meet all its budget expectations and the company still have a poor year! It’s a classic case of sub-optimization. And a company with strong internal silos is rife with costly inefficiencies and redundancies.
Now is a great time to bust the silos. When Allan Mulally took over at Ford, one of his first acts, to help the company survive and focus everyone on building for the future, was to put all members of the senior leadership team the same compensation scheme. No longer were they to be rewarded on the performance of their region, or division or function. Everyone would be paid based on Ford Corporate delivering on its recovery strategy.
Corporate Culture and The Future
The decisions we make today as business leaders, and as government officials, today will have far reaching consequences in the future. What do you want your legacy to be? Whatever your choose to do, your corporate culture will be impacted for a long time to come.
A healthy culture pays dividends long into the future.