11/17/2011 03:09 pm ET Updated Jan 17, 2012

What Business Can Learn From Penn State

The Penn State scandal includes sickening detail of alleged child molestation and what appeared to be a systemic failure of leaders to intercede on behalf of victims. Having written on pedophilia in the Catholic Church as a former Catholic priest and ethicist, I am too familiar with how culture can negatively impact individuals and enable them to make very bad decisions which seemingly go against everything they believe. Meanwhile, as a leadership consultant to businesses, I often find my clients attempting to build the right culture for creating and sustaining success. Penn State tells us that focusing on culture is a good idea. And, it provides multiple examples of what organizations should avoid.

1) Beware of authority-based cultures with a concentration of power at the top. While any head football coach at a major university has power, Joe Paterno's legacy made him a kind of saintly figure within the Penn State community. This might explain the student reaction to his firing. Paterno's power was highly concentrated, only cascading to his most immediate staff that comprised his inner circle. Too often, authority-based cultures lead to decision-making which is disconnected from the larger community and its norms for behavior. In this situation, decisions are made in a detached fashion without insights and perspectives from those who may know more, provide new innovation, and/or offer differing points of view. Cultures which place emphasis on the power of the few are incurious and fall prey to hubris.

2) Do not allow sacred cows. Too often companies have individuals, programs, processes, services, or products which cannot be questioned. For whatever reason, they represent the "third rail" of the organization's politics leading people to quietly accept them or talk about them in hushed tones. We all can think of executives with cushy jobs who are not very good at what they do but are rarely questioned. This can lead us to wonder what secrets they know that leave them so untouchable. Sacred cows can be a serious downer for high performers and those with a penchant for change. At Penn State, there seemed to be a clear avoidance of exposing issues based on unwritten rules about individuals in close proximity to Joe Paterno. This silence created multiple opportunities for more children to be victimized.

3) Beware when your revenues depend upon few sources. Sadly, college football is a major financial resource for schools leaving the institutions overly dependent upon their football programs. If you dig deep enough, you always seem to find money involved in a scandal like this one. Companies should beware of too much dependency upon one channel of revenue. This can lead them to be at the mercy of a large client who can chip away at profit by using their size as leverage. Remember what Wal-Mart did to Vlasic? This same issue can sometimes build a tight concentration of power and dependence within an organization creating tensions between team players. It might also develop an obstinacy within leadership ranks with individuals focused more on sustaining their position than leading the company to less risky dependence upon a single client or revenue sources.

4) Encourage transparency. Organizations that have secrecy and semi-private rituals as part of their culture tend to shut down truth telling. The Catholic Church was largely engaged in cover up activities to sustain the mysterious life of its all-male celibate clergy. College football has its own cult-like features that include charismatic figures, protection of an inner circle, and a commitment to secret information known only by members of the team. Some of the most successful corporate cultures have become so committed to transparency that they have open offices at all levels of the organization or glass-walled offices and conference rooms. They invest in internal communications so that information is widely available throughout the company. Transparency builds a more engaged climate where the sharing of ideas occurs at multiple levels of the company. This can spur innovation and make people feel more connected to each other and the company at large.

5) Be vigilant about your values holding everyone to the highest ethical standards. While value statements are a dime a dozen, real and enduring values that are lived in a company are essential for building an organization of trust, feedback, and employee engagement. Leaders within companies should continually discuss organizational mission and the purpose of their own leadership. The way they behave as leaders should align with this purpose demonstrating exactly what they stand for and what they believe. By seeking feedback from all individuals around them in a 360 fashion, leaders can demonstrate their commitment to learning, developing, and living up to the values they set forth. Somehow, somewhere along the way, the Penn State football organization did not demonstrate a high standard of ethics. We might say the same of Enron or perhaps BP's handling of the oil spill crisis last year. Ethical companies get two benefits from committing to values. They attract and retain employees who feel proud to be connected to their brand and they make a positive impression in the marketplace leading to additional opportunity for growth.

Companies and non-profits need to start doing the right thing if they want to start having the right culture. They need to focus on enduring values, transparency, shared power, and engagement of employees. Meanwhile, they should proactively take on any gaps in behavior, performance, and/or revenue mix that can lead to the type of toxicity that leads to really bad stuff.