Many companies profess to have strong values. However, authentically held values are not an advertising tag line. Rather, they are reflected in workplace norms, leadership styles, and employee behaviors. A company’s values are reflected in its day-to-day operations, how it accomplishes its business objectives and how it treats customers and employees. Scholars often refer to this as cultural capital, a term introduced in the 1970’s by French sociologist Pierre Bourdieu.
Kevin Stiroh, a bank supervisor and economist, published an interesting article in Harvard Business Review discussing how corporate culture influences misconduct in financial firms and why problematic cultures persist. His thesis is that “misconduct is not just the product of a few individuals or bad processes, but rather the result of wider organizational breakdowns, enabled by a firm’s culture.” In other words, a misuse of cultural capital.
He writes:
“In an organization with a high level of cultural capital, misconduct risk is low, and its organizational structures, processes, formal incentives, and desired business outcomes are consistent with the firm’s stated values. Unspoken patterns of behavior reinforce this alignment and drive corporate outcomes.”
By contrast, in an organization with low levels of cultural capital, formal policies and procedures do not reflect “the way things are really done” — that is, the stated values of the organization are not reflected in the behavior of senior leaders or the actions of the organization’s members. Misconduct then results from norms and pressures that drive individuals to make decisions that are not aligned with the values, business strategies, and risk appetite set by the board and senior leaders. Rules may be followed to the letter, but not in spirit. All of this increases misconduct risk and potentially damages the firm and the industry over time. See The Economics of Why Companies Don’t Fix Their Toxic Cultures.
Companies invest in maintaining their physical plant, R&D, IT and sales infrastructure to maintain a market advantage. Investing in maintaining a strong culture where respect is real is equally important.