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Avoiding Toxic Corporate Cultures: Are CEOs helping or hurting their organizations?

Chad Hartnell, Assistant Professor in the Department of Managerial Sciences at Georgia State University's Robinson College of Business

Chad Hartnell, Assistant Professor in the Department of Managerial Sciences at Georgia State University’s Robinson College of Business

By Chad Hartnell

Leaders often trumpet organizational culture as a source of competitive advantage, but it can also be the source of an organization’s demise.

Under the leadership of Chief Executive Officer (CEO) Martin Winterkorn, Volkswagen admitted to cheating U.S. emissions tests to grow its market share in vehicles with diesel engines, a scandal blamed partly on the culture of fear and deference to authority that suppressed communication about problems that might hinder achieving organizational goals.

More recently, Uber co-founder and CEO Travis Kalanick resigned in the wake of sexual harassment investigations attributed to the toxic culture within the company.

Culture within a business organization is a relatively stable set of norms, values and beliefs that employees learn as they collectively discover effective solutions to problems internal and external to the organization. These shared social cues have a significant impact on how employees treat each other and direct their efforts toward accomplishing organizational objectives.

Conventional wisdom suggests that CEOs are culture creators. They certainly are. But, as these examples illustrate, a tight alignment between CEO leadership behavior and an organization’s culture can create a myopic focus among employees that results in destructive behavior and, eventually, poorer organizational performance.

How then can leaders manage culture as a positive, productive resource that enhances employee well-being and organizational performance without culture becoming a source of organizational dysfunction?

Our research team at the J. Mack Robinson College of Business investigated this question among 114 CEOs and 324 top management team members in the technology industry. The research, published in the Journal of Applied Psychology, indicates CEO leadership behavior that is similar to the organization’s culture has a deleterious impact on subsequent firm performance (measured as return on assets).

On the other hand, CEO leadership behavior that is different from the organization’s culture enhances subsequent firm performance.

CEOs who solely reinforce the organization’s culture communicate a message to “keep doing what we’re doing.” A CEO’s core responsibility, however, is to do or get done whatever is not being handled adequately within the organization. This responsibility requires the fortitude to ask, “What do we need to continue doing, what do we need to start doing and what do we need to stop doing to sustain or enhance the organization’s future success?”

CEOs should be culture contributors. They should model and reinforce behaviors that are essential to organizational effectiveness, but are not prioritized in the organization’s culture.

Chad Hartnell is an assistant professor in the Department of Managerial Sciences at Georgia State University’s Robinson College of Business.

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