Company Culture in times of Crisis

Transcript from Season 1 Episode 4 of the Hardly Working Podcast

Maulik

Today, when I look back over the years, it feels like a roller coaster ride. We’ve faced recessions, trade sanctions, terrorist attacks, volcanoes and pandemics. It’s brought global organizations to their knees. As things get worse, we’re looking at supply chain shortages and anti-trust lawsuits.

But if we think hard, and like is oft-said of the pandemic — there is a silver lining to every cloud — crises scenarios too have their pluses. Every crisis has shown the importance of company culture, and how a strong culture can help keep companies running through difficult situations.

On the first season of Hardly Working, we’re dealing with company culture, and on today’s episode, we’re looking at the importance of company culture in times of crisis.

Let’s start with the crises themselves. Why does it feel like there are more and more things affecting businesses today? Is globalization to blame in any way?

Nishanth
With the flattening of the world that globalization brings, it also means that issues in any one country can affect businesses globally. A worker strike or a hurricane in one country can effectively shut down the supply of many products.

Add into the mix the rapid changes that technology demands. As products are increasingly digital, customers expect frequent updates and new features and extended support. Companies can no longer spend years engineering a product and putting it out there, they need to keep building on it.

The news cycle doesn’t help either. There are plenty of leaks and there’s constant speculation about new products and product cycles and features. You just need to look at the hype surrounding the PlayStation 5 logo announcement. It wasn’t even the product announcement, let alone a product launch, but it was fodder for hundreds of media channels, tech focused or otherwise.

So, you’ve got a situation where companies are expected to be constantly innovating, constantly supplying better products at lower rates to every corner of the world. So any natural disaster or external factor anywhere can disrupt the supply chain. And the 24 hour news cycle means that even a stray tweet can snowball into a big issue.

Maulik
And it only seems to grow more. What’s perplexing is that we’ve always had natural disasters and pandemics. It’s not a new thing. Companies now so much more affected by this? I would have thought that every pandemic would have made a stronger company, a readier company to face challenges of growing magnitude. That is not the case.

Nishanth
There are just more companies and products out there in general. Quite a lot of then attempting to cater to a global audience. And there’s less focus on vertical integration than before. So you could have a vendor in Taiwan supplying parts to a company here in India, which then sells goods to a subsidiary in Europe for a product designed in California, by a company registered in the UK. So any issues in the supply chain can quickly affect things down the line.

But companies have always been susceptible to these kinds of external factors, or sudden changes or freak events. The black swans as they’re called. In some way, it’s also the way companies are structured that makes then more fragile or more likely to be affected. And today we’re also more likely to hear about it.

Maulik
But these are all external factors as you’ve said. Previously, we’ve also discussed how there seems to be some internal factors or internal crises — if that’s how we’d want to see it as — that companies seem to be facing.

We’ve spoken about how the founder is so important to the culture of a company, that the company struggles when they move on. Or how there are gaps in fulfilling expectations as a new generation moves into the workforce. Or some companies that aren’t able to innovate or build an R&D robust enough to bring our new products fast enough to keep up with the competition.

But many of these issues seem predictable. Like I said earlier, companies, if they try hard enough, can predict and plan for these kinds of crises.

Nishanth
Yeah, broadly speaking, you can divide these crises into ones that stem from changes in the industry, and ones that stem from external factors.

Maulik
So, if we see it from a macro-level, changes in the workforce, changes in technology etc. are industry wide changes, while obviously pandemics and other problems are the so called Black Swans.

Nishanth
Exactly. Industry wide changes can be planned for in advance. But they require developing a culture that’s forecasting and looking ahead and can tackle these crises before they become detrimental. They also require companies to develop a culture that’s innovative and is constantly researching and developing new products, or even just improving existing products and processes. This allows them to stay ahead of the curve.

Maulik
That is in line with the strategic planning which we spoke of earlier. Having a vision and sticking to it. But the external factors — they are unpredictable — almost impossible to plan for. Unless culture planning is the preventive solution rather than the curative one.

Nishanth
Yeah, having a strong culture can definitely reduce the impact. A strong culture allows companies to retain talent even during times of crisis, as employees are aligned with the vision and values of the company, and are working towards that larger goal. They’re loyal to the company, and aren’t just working for money, which means that pay-cuts sting less.

If layoffs have to take place, a strong culture will ensure that bridges aren’t burned, and any fallout doesn’t negatively impact the image of the company.

Also, a culture that’s sort of friction-less and empowers employees to make decisions can be more agile and allow the company to pivot during difficult times.

Even during a pivot, or a leadership change, or when a company is forced to make changes due to unforeseen circumstances, the culture of the company will transition over, and continue to affect the way things work for a long time.

Maulik
Hmm. And the current pandemic has brought only brought back culture to the forefront. What unfortunate though is that, as I read, many companies are only now realizing the value of having built or developed a strong culture. So many of them trying to make changes now only as a beginning; possibly as compensation for mistakes or apathy in the past.Actually, there is no choice. The crisis is forcing the focus on culture.

Nishanth
Crises like these tend to put a spotlight on culture. Especially when a company is forced to transition to a new way of working, they realize how many of their systems are outdated, or how many of their processes don’t actually contribute to productivity. When the company needs their teams to step up and shift into overdrive, they’re held back because of a weak culture.

Maulik
So the pandemic and other external events do play their part in distinguishing companies with strong cultures vs those that have weaker or no cultures. But many times we see crises stem from cultural issues. And these are innate.

Like Founder’s syndrome, where the founder or leadership is too hands on, a micro-manager so to say. Sometimes the leaders are output focused and not outcome focused and they don’t allow teams to work on outputs whereas as leaders they should be focusing on the outcome and not output. That comes with organizational trust. Take a look at the generational gaps we spoke of. It seems like the dissonant or dated kind of culture can also be dangerous to an organization.

Companies need to identify these kinds of problems as a preventive while also ensuring a strong culture. What’s your view?

Nishanth
The problem is there can’t be a workplace with “No-culture”. As much as many leaders would want. Culture develops organically, especially if leadership doesn’t choose to play a part in developing it. That organic culture can turn out to be a strong one, but it could also become weak, the “taker” culture we’ve spoken of, or even worse, a self-destructive culture.

A crisis might seem like a bad time to start rejigging the culture of the organization, but there’s no time like the present to start safe guarding against future crisis.

It’s always good to look back at the mission and vision statements, the values and see if they’re actually directing the company. Of they actually align with what the company is doing. It’s also good to setup feedback loops, to ensure that leadership is aware of what’s happening on the shop floor. And just asking employees and creating an environment where they’re free to voice their opinions, and empowered to make positive changes.

If these things are already in place, but they’re not working, then it might be time to look at how they’re implemented, and examine the reasons for their failure.

None of this has to be perfect. It’ll need to keep changing and evolving as the culture evolves, so there’s no point in waiting for an idealised system. It’s better to just start.

Maulik
I think it’s important to give examples and discuss how culture has helped companies through times of crisis.

The first, and most recent example that comes to mind is of course AirBnB. Even though they had to lay off staff, the way they conducted those layoffs spoke volumes about the culture they had fostered within the company. That in turn showed the values and intentions to investors and customers, and even though nobody likes layoffs, they came out looking human, and humane.

We’ve also seen many companies pivot quickly to respond to the crisis. Fashion brands switching to making masks. Alcohol brands making sanitizers. Obviously, they’re able to change-up their workflows fast enough to respond, and are still keeping their customers at the top of their mind. What’s important those who do is with a genuine intention stand out compared to the ‘me-toos’ and ‘also-rans’. Here authenticity of culture come through.

I’d like specifically put out a report about H&M and Adidas, both whose financial health is solid, announced their intention to stop paying rent for stores — 450+ in case of H&M — that had to close due to the pandemic. This announcement was part of a provision of the rescue plan proposed by the German government. This provision was intended to protect tenants against the risk of eviction. That appears indecent compared to the examples of other brands in the fashion space like LVMH or Gucci that decided not only to be responsive with providing masks but also being empathetic by not cutting pay-cuts. A fall out of culture and values, would you say? In fact, any other examples that you’d like to add?

Nishanth
Any company that’s been in business for a long period of time would’ve faced a crisis at some point. Internal, external, cultural or maybe all of them.

Johnson and the Tylenol scandal is a great example of leadership and culture helping the company through what could’ve been a disastrous crisis. By sticking to their values over profits, they were able to recover from the scandal, and come out stronger than before.

You’ve obviously got brands like Nintendo, which has gone from playing cards to video games consoles, and their huge list of IP’s, like Mario and Zelda. But through it all they’ve maintained their values and they know the audience that they’re catering to.

The culture of innovation that Google and Amazon foster, have led to lots of successes, like the Kindle, or Echo or Gmail.

Netflix is a more recent example. They’ve gone from mail order DVDs to becoming an Emmy nominated production house, and revolutionized streaming along the way. But they’re not just sitting on their laurels. Their culture is ensuring that they’re continuing to innovate in various areas. Content, pricing plans, even just how they’re delivering content, which you would think is their core differentiator.

Maulik
That’s been a neat discussion. To sum up, culture is no doubt of immense importance to an organization. It develops — in a good way or a bad way, whether leadership chooses to actively develop it or not. The times of crisis however can really shine a light on the health of the culture within the organization. A strong culture could mean the difference between surviving a crisis and having no option but to lock doors for good.

Let’s add that if there aren’t already measures in place to monitor the culture, then this is the time to start. And if a weak culture has taken root, this is the time to work towards taking corrective measures it, before the next crisis comes along.

Nishanth
We’re going to be putting out a new episode very week, so get subscribed. You can find the podcast on Apple Podcasts, Spotify, Google Podcasts, or anywhere else you get your podcasts.

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That’s it from us, and I think it’s time to get back to work.