Can there be corporate democracy if employees can’t vote on the actions its companies take? Yes, and it’s needed now more than ever.
The pandemic has brought much employee discontent and activism. Last January, for example, with one-third of the staff at a Starbucks in Buffalo sick with COVID-19 or isolating at home, the remaining workers asked for KN95 masks, better testing protocols, and the right to turn away illegally unmasked customers. These requests were flatly refused—a surprising response from a company whose founder, Howard Schultz, took pride in its human-centric culture. Google, Kroger, Amazon, and many others have experienced similar conflicts.
A recent study finds that “toxic culture”—unethical leadership behavior and disregard for employees’ health, diversity, financial security, and self-respect—is a far more accurate predictor of attrition than the usual suspect—compensation. To those of us who have studied organizations up close for decades, none of this is surprising. But what can be done about it?
“Companies with healthy, high-commitment, high-performance cultures have had comparatively less attrition during the pandemic.”
Intra-industry comparisons reveal substantially different attrition rates among competitors. Companies with healthy, high-commitment, high-performance cultures—such as Southwest Airlines, Johnson & Johnson, and Enterprise Rent-A-Car—have had comparatively less attrition during the pandemic. What makes them less vulnerable to the “Great Resignation” and other challenges from a constantly changing competitive landscape?
First, these companies have CEOs—indeed, leaders at all levels—who care equally about profits and employee well-being and don’t see them as competing or incompatible. They make these goals clear and understandable and they are humble listeners.
Second, these CEOs have institutionalized a governance and learning system, which enables truth to speak to power at the corporate and unit levels through periodic, systematic, well-structured honest conversations about the extent to which the company’s actions are aligned with its strategic performance goals and its human and customer-centric values. Because managers at all levels are held accountable for implementing and maintaining this governance and learning system, it becomes embedded in the culture. That ensures continuous improvement of policies and practices, which, in turn, ensures sustained commitment and performance.
Southwest Airlines, for example, has had, ever since its founding, a high-level culture committee that periodically assesses company culture and reports its unvarnished findings to senior management. It is one reason Southwest employees are so positive about their employer and that Southwest has so long outperformed its industry, and, incidentally, has never had a strike by its union.
Johnson & Johnson’s founder created a credo—to “put the needs and well-being of our customers and the people we serve first”—and requires senior teams at every level to foster repeated honest conversations with lower levels about whether their unit is practicing that credo. According to recently retired CEO Alex Gorsky, this has allowed Johnson & Johnson to sustain its high-commitment, high-performance culture for decades. At the leadership level, promotion depends on adherence to the credo and acting on the findings of these honest conversations.
These companies, while they remain hierarchical, are democratic in that leadership’s legitimacy in the eyes of employees depends on its willingness to listen to them and act on what is learned.
“Allowing employees to safely speak truth to power enables senior management to learn about barriers to performance that employees see clearly—but that leaders often see dimly or not at all.”
But how, specifically, does a democracy based not on voting but on honest conversation prevent a toxic culture? Allowing employees to safely speak truth to power enables senior management to learn about barriers to performance that employees see clearly—but that leaders often see dimly or not at all. Research has found that such barriers are often a root cause of toxic culture and, in fact, hundreds of honest conversations that I and my colleagues have observed revealed their particular company’s toxic culture.
Such revelation wouldn’t be worth much if it didn’t lead to change. But it does, because a properly conducted honest conversation is very emotionally powerful. Leaders are often shocked to learn how far off-base things have become, but are also energized because they learn that if they are willing to act, most employees will give their all to make those efforts succeed. That discovery is very inspiring.
How are honest conversations conducted so as not to go off the rails? We find that a face-to-face conversation between senior management and a task force of eight or so people who have interviewed 100 employees throughout the organization reliably spurs action that surveys and one-on-one conversations do not inspire. Leaders who have proven that they will listen by going through this (sometimes very unnerving) process earn their people’s trust and commitment which, in turn, boosts company performance.
Key to the success and survival of this system is, first, making managers below the senior level accountable to senior management for employing the process regularly, and second, rewarding those who do with recognition and promotion. That is exactly what Southwest Airlines and Johnson & Johnson have done for decades. Of course, CEOs themselves can and have successfully employed the process I describe below at the very top with their own key people.
If you wish to introduce such a governance and learning system into your own organization, here are some guiding principles:
1. Zero in. Focus on the strategic and cultural issues that matter most to the organization’s success.
2. Iterate between advocacy and inquiry. The senior team advocates an organizational direction and then launches an inquiry into the organization’s strengths and its barriers to success.
3. Make sure the conversation is constructive. Keep the process by which lower levels share the truth with leadership disciplined and structured to prevent missteps and outbursts that will shut down the conversation.
4. Make a plan. Having heard the truth, diagnose root causes of problems and develop a systemic action plan to realign the organization.
5. Make the leadership team accountable to those who provided feedback. That is, let the whole organization know the whole truth—both the good as well as the embarrassingly bad and sometimes ugly. Talk about what you heard and what changes you are making.
6. Check in regularly. Repeat the process periodically for continuous improvement and change.
Are you prepared to lead more democratically? It can make all the difference between employees who feel they have to defend themselves from management and employees who feel that they and their leaders are on the same team.
Michael Beer is the Cahners-Rabb Professor of Business Administration, Emeritus, at Harvard Business School and is the author of the book Fit to Compete: Why Honest Conversations about Your Company’s Capabilities Are the Key to a Winning Strategy.
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Feedback or ideas to share? Email the Working Knowledge team at hbswk@hbs.edu.
Image: Unsplash/Dylan Gillis