Organizational Culture: An Overlooked Internal Risk

by Michael Griffin and Tracy Davis Bradley for Bloomberg Business Week, October 1st, 2010.

Companies that encourage and support open communications outperform their peers, according to research from the Corporate Executive Board.

Nearly half of executive teams lack the information they need to manage effectively because employees withhold vital input out of fear that doing otherwise will reflect poorly on them. This restricted information flow can cripple a company’s ability to identify and respond to internal and external threats. A recent survey by the Corporate Executive Board of more than 400,000 employees across various industries reveals that companies that break down two key barriers to honest feedback not only reduce fraud and misconduct, but also deliver peer-beating shareholder returns by a substantial margin.

Imagine that the chief executive of your company recently launched a strategy aimed at taking advantage of a megatrend affecting customers: environmentally friendly widgets. You’re a senior executive tasked with communicating to your largest shareholders how this strategy will drive better corporate performance. You believe in this strategy, and of course you want the meeting to go well. You go to Boston and New York to meet with your five largest shareholders. The first three meetings go great, but the last two portfolio managers you meet with are not convinced. They don’t come right out and say so, but you sense that they believe environmentally friendly widgets are a fad and thus they are skeptical of the long-term viability of your strategy. When you get back to the office, you bump into your CEO, who asks how the meetings went. What do you tell her? Do you mention the skepticism?

There is no right or wrong answer. Many individuals, however, will instinctively emphasize the positive (e.g., “The meetings went very well; there is some genuine excitement about the direction we are taking”).(continue reading… )

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