For directors, CEOs and those interested in good governance there has been an important shift in the focus of regulators towards organisational culture. The importance of a healthy culture in organisations initially focused on managing risk and workplace health and safety. Over the last ten years a number of inquiries and reports have broadened the responsibility for good governance to include many additional areas of workplace culture. These changes mean that the people skills of managers withi
rs within organisations are more important than ever.
Let’s look at a couple of examples. Principle 3 from the ASX Corporate Governance Council says directors need to “Instil a culture of acting lawfully, ethically and responsibly.”
The APRA report on the Commonwealth Bank recommended “cultural change that moves the dial from reactive and complacent to empowered.”
In fact, it could be argued that these responsibilities go beyond the skills of managers into the quality of the character of the managers in organisations. For example, the reputational damage done to cricket by the 2018 ball tampering incident, was found to be partly the responsibility of the leadership: “The leadership of CA should also accept responsibility for its inadvertent (but foreseeable) failure to create and support a culture in which the will-to-win was balanced by an equal commitment to moral courage and ethical restraint.”
Academic research over many years has established a strong connection between trust and managerial success which translates into benefits for the business.
One highly regarded analysis (by Dirks and Ferrin in 2002) looked back over 40 years of trust research and examined 106 studies to draw out the key relationships. Interestingly, this same model shows that the character of the manager affects trust. The character of a manager shapes the attitudes and reactions of employees.
In this environment, perhaps we need to go beyond skills and look at the character of the people in our organisation. For example, honesty is a key attribute that helps to build trust between the CEO and the Board, and between managers and those they are managing. However, honesty is not really considered a skill, but something deeper.
Then, if trust is an outcome of character, then a lack of trust within an organisation may be a sign that all is not well. It doesn’t stop there. Trust in an organisation’s leaders is strongly related to important organisational outcomes including productivity, job satisfaction and employee engagement.
Because organisational trust and the character of managers and leaders are strongly related, there are some clear indications that may indicate that a manager is undermining trust:
refusing to take ownership of any poor decisions, bad outcomes or errors, shifting the blame onto team members and leaving them deal with any consequencesbenefiting themselves above any other concern, creating a good image for their boss, while treating the team poorlybeing prepared to use deceit to manipulate employees, for example promising a reward that never arrives, or a promotion that was never availablerarely seeking feedback or input in making decisions, even when there were detrimental effects on team membersnot leading by example and not following through on commitments
Some of these items can be addressed through improved people skills, but some of them go to who a person really is, the habits that they have built up over time.
The good news is that these character attributes can also be improved, through seeing the importance of trust in organisations, changing the mindset and enacting changed behaviour towards people.
In an environment where organisational culture is becoming ever more important for regulators, as well as organisations, the best way to improve may actually be to focus on a deeper level than skills.
It may be that we can best help our organisations to be better, by helping managers to be better people.