By: Tim Erblich, CEO, Ethisphere
Editor’s note: This column originally appeared on the Huffington Post.
A crisis always hides a lesson. In the case of Wells Fargo, we see that once again what gets measured gets done – and Wells Fargo measured the wrong things. Cross-selling was touted as a key driver of company performance. While employees were measured at times hourly, executives were handsomely rewarded on short-term financial results.
It was short-termism at its most dangerous. To keep their jobs, many employees did what was expected – even if it was unethical and harmed customers, the industry and, ultimately, the company.
Is Your Company Measuring the Right Things?
How can we learn from this? Many executives across industries have taken a closer look at what their companies measure and incent – and how that affects culture and the bottom line. Those two concepts are not in opposition to each other; as data and research have shown, ethical behavior is also good business.
We’ve found that firms that rank among the World’s Most Ethical Companies outperformed the S&P 500 last year by 3.3 percent. Companies that differentiate themselves by being good global citizens have more engaged and productive employees, an easier time recruiting high-quality employees, and more resources to devote to growing their businesses. That translates directly into better business outcomes and higher shareholder returns. As executives seek to build profitable and sustainable organizations, they are taking a fresh look at radical transparency. They recognize that an open, accountable culture that measures the right things can be good for business, people and the planet.
It’s been said before but it bears repeating: Culture eats strategy for breakfast. It’s essential to get culture and measurement right.
1. Understand your Culture
The first step is to establish an accurate baseline for a company’s culture. It can be difficult for a company to evaluate its culture independently. It’s like taking an objective look at your own family. You’re too close, you have too much invested and it’s easy to either be told what you want to hear or overlook what you don’t want to see.