THE BLOG

Leadership Tips for Organizational Integrity

05/15/2013 06:41 pm ET | Updated Jul 15, 2013
  • Mike Berman Transformational Manager and Turnaround Specialist

There are never coincidences, but there certainly are synchronized events that validate an environment -- for the good and bad. Take the news about Bloomberg LP and the IRS. Although the IRS is a non-partisan government agency, large segments of the population have never really trusted it. Bloomberg, however, has been universally held in high esteem since its inception. However far apart these organizations might seem from one another, regardless of employee motivations for acts Bloomberg has now apologized for and the IRS has admitted to making mistakes for, they are closely related and not coincidental. Rather than merely commenting on or dismissing these as unrelated stories from two organizations that seem to have lost their way, leaders should internalize and apply common themes to their own operations.

An organization's culture reflects executive management's tone, with the organization's actions following executive management's instructions -- stated or implied. Companies wishing to steer clear of the headline-grabbing cultural and operational issues the IRS and Bloomberg LP are now dealing with are well served to:

1. Clearly articulate and continually reinforce a business objective;
2. Instill rigorous process and controls tied to achieving the stated objective;
3. Routinely inspect and audit the means, results without integrity will always fail;
4. Do not launch any initiative driven purely by compensation;
5. All members of executive management must speak with at least 2 customers every day.

I am often brought into businesses in crisis, where the most extreme behaviors damaged not only a company's credibility the acts put the enterprise at great risk. I have yet to encounter any situation where the employees purposefully set out to undermine the company's viability or bring harm to its customers, yet I have seen many where employee actions did just that. In some cases things spun out of control because the laws of unintended consequences took over, but lack of appropriate managerial oversight, misaligned communication and absence of meaningful controls is more often the root cause. Though it is unreasonable to expect executive management can always know what every employee is doing at all times, I find that without exception executive management gets the employee behaviors they deserve. If Bloomberg and the IRS have engaged in the activities being reported, they do not stand out as coincidental exceptions, but as the most recent examples of powerful entities doing things to further erode institutional trust.

As one notable example, a company I worked with designed a bonus plan to richly reward employees for growing a recently introduced product line. All employees in each office received bonus payments for hitting sales targets for the new product, and additional compensation would be earned by the three offices posting the greatest sales for each month. Regional managers and group vice presidents also received bonus based on top line sales figures.

On the surface this all made perfect sense, but in practice the plan was ruinous. Rather than cultivating a successful new product, employees focused on ways to earn bonus. Instead of using weekly management meetings to evaluate critical performance metrics, the sessions were strictly focused on tips for boosting top line sales figures to earn more bonus. The least harmful outcome was skyrocketing cost of sales. Too many formerly loyal and longstanding customers stopped doing business with this company altogether because they purchased product they didn't need or couldn't use in the quantities ordered and, worse, over a dozen employees were eventually terminated for falsifying sales records. Like the IRS, executive management ultimately admitted mistakes were made and like Bloomberg many apologies were issued, but this company has yet to fully recover from the internal and external credibility it lost.

As a result of their inaction, expect Bloomberg LP's apparent breach of customer privacy will dominate the business headlines for as long as the IRS allegedly targeting conservative organizations will dominate political news. Lesson learned? Only time will tell.