March 30, 2017
Author: Lai-King Hum
Corporate culture is a critical part of success. Create a toxic culture and you will pay a price. This is one of the lessons for the recent human resource disasters at TD Bank and Uber. Each reflects the danger for companies, large and small, when they allow, even sometimes encourage, a dysfunctional workplace culture. Beyond compliance with human rights and health and safety laws, companies need to encourage the development of respect for ethics, diversity and civility. Doing so may increase profits and avoid the cost of repairing a human resource process gone rogue. Company culture works best when policies and procedures are thoughtfully created and consistently supported.
The day after CBC reported that three TD Bank employees claimed frontline staff faced “incredible pressure” to act unethically, investors punished TD, and the bank lost 5.5 percent overnight. That is over 7 Billion dollars in value! Analysts see the stock as heading on a downward trend as a result of this, despite having just reported an increase in net revenue of over 13%. Tellers admitted lying and fraudulently increasing credit limits because of the pressures to meet their sales quota.
For the bank and its competitors, this will involve their regulator looking at the allegations of fraud and to what extent they are liable. Clearly, it creates a nightmare scenario for the human resources department. There are thousands of front line employees who may seek dramatic improvement. Going forward, hiring may be more difficult. Now perceived as a poor employer, new hires may demand higher compensation. Any yet to be seen is what impact this will have on consumers. Doubtless some customers will avoid the TD Bank.
Lyft’s response to Uber is an important example of how a competitor might leverage the TD Bank’s problem and what might transpire. Lyft’s response to Uber’s raising rates during a taxi strike was to make a 1 million dollar donation to the ACLU, announced through a blog post entitled Defending our Values. The #DeleteUber campaign cost Uber 200,000 users and doubtless lifted Lyft’s fortunes greatly. Of course, Uber has become the poster company for poor culture motivated by greed, rather than acting on principled and core values.
Uber created a uniquely dysfunctional culture based on their 14 core values. What happens when this culture meets social media? Well the initial response to a former employee accusing the company of a misogynist workplace has been another backlash against Uber for a poison culture. Of course, contrition was supplied. But does anyone believe them? Their own investors are doubtful. Early Uber investors Mitch and Freada Kaptor wrote ““To us, this decision is yet another example of Uber’s continued unwillingness to be open, transparent, and direct”. As founders of the Kaptor Centre for Social Change, and important drivers of social change and diversity, their condemnation (here) is as devastating as it is selfless because as investors in Uber they will be affected by the negative press. For many Uber employees, the time for apologies (especially if they lack credibility) is too late as recruiters are now shunning Uber employees looking to leave. A video of CEO Travis Kalanick blasting an Uber driver only further condemns the company culture. Then, in the face of a social media backlash, we see another apology and a commitment to change by the CEO Travis Kalanick . So pervasive is the toxic culture some employers are resistant to hiring present and a former Uber worker because they worry the cost of a dysfunctional employee is too high.
Toxic workplaces can be transformed and potential liability limited. In the immediate term, a full workplace transformation project will need to be created, implemented and seen to be done by the employees, customers and investors. Marketing messaging will need to re-orient itself to counter the damage done the brand.
Abusive and high-pressure unethical workplace cultures damage a company’s reputation and brand, whether or not the line into discrimination or harassment has been crossed, leading to possible loss of shareholder value and lower profits. Even dishonest, if not illegal, practices such as the Uber Greyball tactic stemming from such workplaces obviously create lasting damage. As noted above companies, employees, business partners and investors will suffer. As reported by Time, Lyft experienced a 40% increase in application of their application and a 60% increase in activations.
The best solution is to identify any issues early, and build a respectful, productive culture that is both discrimination and harassment free, as well as ethical. Otherwise, companies will likely spend more to repair a damaged brand. There may also be potential lawsuits, from employees who feel vindicated in their discomfort pushing ethical boundaries. To paraphrase an old saying “an ounce of prevention is worth billions of pounds of cure”.