Corporate Culture Must Be Cultivated, Not Left to Chance

A garden needs tending; otherwise, it becomes overgrown, infested with weeds, and even breeding vermin.  What was once an enhancement becomes an eyesore.  Company culture works the same way.  It is an intangible asset that needs maintenance.  Left unattended, it becomes a liability, and the consequences reach considerably further than revenue alone.

Culture is an Asset Worth Protecting

Company culture, properly implemented and maintained, produces higher job satisfaction, greater productivity, and a nurturing environment for innovation.  It inspires staff and management alike to perform better and builds a genuine culture of excellence.  A positive culture becomes part of the brand itself, quantifiable, in effect, as goodwill on the balance sheet.

Southwest Airlines, under co-founder Herbert David Kelleher, built its entire business around this principle.  Kelleher famously hired for attitude and trained for skill, reportedly turning down technically stronger candidates in favour of ones who fit the airline’s culture of warmth and humour.  Southwest posted 47 consecutive years of profitability, an achievement almost unheard of in an industry defined by volatility, and analysts have repeatedly credited that culture, not fuel hedging or route strategy alone, as the durable advantage underneath it.

How Toxic Culture Takes Root

A toxic culture develops over time when management sets a bad example or neglects to weed out bad habits creeping in.  Cliques form.  Favouritism replaces merit.  Talent begins to leave.  Of greater concern are instances of sexual harassment, discrimination, and insular attitudes, which cost market competitiveness and expose the company to negative goodwill and legal action.

Uber’s own culture under founder Travis Cordell Kalanick offers the clearest cautionary tale of the last decade.  Engineer Susan J. Fowler published a blog post in February 2017 detailing sustained sexual harassment and a Human Resources department that repeatedly protected a high-performing manager over addressing her complaints.  The post triggered an internal investigation, the departure of over twenty employees, and ultimately Kalanick’s own resignation as CEO in June 2017.  Uber had built its internal culture around a value literally called “Toe-Stepping,” celebrating aggressive, boundary-pushing behaviour as a virtue.  The company later paid an estimated US$4.4 million settlement connected to the harassment claims, alongside considerable reputational damage that outlasted the executive team responsible for it.

Neglecting Your People is the First Real Risk

Inadequate investment in employees is the first structural risk.  Investment means ensuring people feel part of the company’s success, and genuinely gain from it, through promotion, career development, and recognition, not compensation alone.  When employees feel short-changed, they disengage.  They stop innovating.  Cynicism spreads, engagement drops, and passive-aggressive behaviour becomes the norm.

Wells Fargo’s fake accounts scandal, exposed in 2016, shows where unchecked pressure on employees leads.  Branch staff, facing unrealistic cross-selling quotas, opened roughly 3.5 million unauthorised accounts and credit cards in customers’ names over several years just to hit management’s targets.  Employees who raised concerns were reportedly ignored or dismissed.  Chief Executive Officer John Stumpf resigned in 2016, and the bank ultimately paid over US$3 billion in fines and settlements.  The employees were not the root cause.  The incentive structure management built around them was.

Accountability Cannot Bend for Seniority

At board level, values must cascade downward, with everyone held responsible for their own behaviour.  No favouritism in hiring.  No leniency for seniority or connections.  No free pass for bullying or discrimination, regardless of position.

Volkswagen’s “Dieselgate” scandal, exposed in September 2015, remains the starkest illustration of what happens when accountability disappears from an organisation under pressure to perform.  Engineers installed defeat devices in roughly 11 million diesel vehicles worldwide, software designed specifically to detect emissions testing and cheat the results.  Chief Executive Officer Martin Winterkorn resigned days after the scandal broke.  Volkswagen’s total costs, fines, settlements, and vehicle buybacks eventually exceeded US$30 billion.  The fraud did not emerge from a single rogue engineer.  It emerged from a culture where aggressive targets were set from the top, and nobody in the chain felt safe enough, or accountable enough, to say the targets were unachievable honestly.

Groupthink is a Business Risk, Not Just an HR Concern

Lack of diversity carries dangers on multiple levels.  Groupthink develops when everyone shares similar perspectives, creating a disconnect between the company and segments of the market it is trying to serve.  A sense of “the other” breeds prejudice, isolation, and microaggression, opening the company to negative goodwill and legal exposure.

Amazon discovered this the hard way with an internal AI recruiting tool it began building in 2014.  The system, trained predominantly on resumes submitted over the previous decade, a period dominated by male applicants in technical roles, taught itself to penalise resumes containing the word “women’s,” as in “women’s chess club captain,” and downgraded graduates of two all-women’s colleges.  Amazon’s own engineers discovered the bias in 2015 and scrapped the project entirely in 2018, after determining the gender bias could not be reliably corrected.  A homogenous training dataset, built from a homogenous hiring history, simply reproduced and automated the bias a diverse hiring process would have caught far earlier.

The Gap Between Stated Values and Leadership Behaviour Destroys Everything

The final risk is a disconnect between a company’s stated values and the actual example set by its leadership.  Ethical lapses at the top – insider trading, fraud, bribery – do not arise in a vacuum.  They arise in an environment that rewards profit over principle, and the damage outlasts the offender’s own departure.

Enron remains the definitive case study.  Under Chief Executive Officer Jeffrey Skilling, the company ran a “rank and yank” performance system, ranking employees and firing the bottom 15% annually, an incentive structure that rewarded aggressive, and eventually fraudulent, accounting over honest reporting.  Vice President Sherron Watkins internally warned Chairman Kenneth Lay in August 2001 that the company’s accounting practices could cause it to “implode in a wave of accounting scandals.”  Her warning went largely unheeded.  Enron filed for bankruptcy in December 2001, wiping out roughly US$74 billion in shareholder value and thousands of employees’ retirement savings, most of it concentrated in company stock the culture had encouraged them to hold.  Watkins later testified before Congress, and her name became shorthand for what a whistleblower protected properly, rather than ignored, might have prevented.

Zappos, under Chief Executive Officer Tony Hsieh, took the opposite approach entirely.  New hires completing initial training were offered “The Offer,” a cash payment, eventually rising to US$2,000, to quit immediately if they felt the company’s culture was not right for them.  The logic was blunt: an employee who stays purely for the pay cheque, rather than cultural fit, becomes the disengaged, cynical presence that erodes everything a culture is trying to build.  Zappos built its reputation, and its eventual US$1.2 billion acquisition by Amazon in 2009, substantially on the strength of a customer service culture it had spent years designing, rather than hoping would emerge naturally.

What Must Be Done

Securing explicit, legally enforceable commitment from every employee, from board level downward, is the first step.  The board must be seen embracing and advancing these values, named and expounded upon, embedded formally within Compliance.

Corporate culture should never be left to develop over time by accident.  It must be planned, cultivated, and nurtured, beginning with documentation that defines it and programmes that reinforce it.  It cannot sit inside a single department.  It is a multi-departmental effort spanning Human Resources, Legal, Compliance, and Corporate Communications, headed by someone reporting directly to the board, engaging external stakeholders, unions, vendors, and contractors, who both shape and are shaped by it.

A reward and proscription programme must sit alongside this, with clearly defined ethical standards and explicit consequences for misconduct, all the way to termination and legal action, a known carrot and stick, built into the ongoing education of the workforce rather than left to chance.

Company culture should be the foundation of a company’s market position, strategic development, and planning process, evaluated as a KPI, not treated as a distinct concern separate from the core business.  Done right, it protects a company against negative goodwill and scandal, develops talent, and drives growth.  Uber, Wells Fargo, Volkswagen, and Enron all learned this lesson at a cost measured in billions of dollars and, in some cases, criminal convictions.  Southwest and Zappos built the opposite outcome.  Customers ultimately want to buy into a company’s story.  It remains management’s responsibility to build one worth subscribing to, before the market decides that story for them instead.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code