When good culture turns bad: ensuring a healthy and ethical work environment

Sparked by a series of recent scandals involving well-known organizations, corporate culture has resurfaced as a top priority in boardrooms. A noteworthy example is the revelation that employees at Deutsche Bank were for years pressuring small and medium-sized Spanish firms to acquire intricate foreign exchange derivatives, falsely presenting them as safe and cost-effective. While these activities yielded substantial profits for the bank, they also placed clients in jeopardy, resulting in severe financial setbacks.

This and other high-profile incidents serve as stark reminders for leaders to critically examine their organizations and proactively address cultural shortcomings. Among the most detrimental practices that can erode a company’s culture is the retention of individuals who blatantly disregard stated values or act badly, even if these are not violating explicit company values. For example, in the case above, the bankers were bringing in significant financial gains for Deutsche Bank – despite honesty, integrity, and high ethical standards being among its stated values.

Such employees may contribute to short-term financial gains. However, their actions send a demoralizing message to the workforce, suggesting that the organization’s values are merely window dressing or not present at all. This maycreate a toxic environment, which can severely impact the morale of employees who genuinely embrace and abide by these principles.

For example, research by Murray Barrick and colleagues shows that over time, a team’s behavior will orient itself to that of the worst player in the group, multiplying the insidious effects of one person. From work by psychologists Mark Leary and Roy Baumeister, we know that bad behavior always has more influence on the environment around the actor compared to good behavior. Negative emotions, like anger and feelings of injustice, often pervade a team’s atmosphere when a bad apple is allowed to exist in a group.

A prime example of this situation came to light in a workplace culture review at mining company Rio Tinto in 2021. The review exposed the prevalence of harmful behaviors, which were known as an “open secret” among employees. The lack of accountability, especially for senior leaders and high performers, was singled out as a major concern. The company has since taken steps to address this issue, including mandatory training programs, ongoing communication, and explicit procedures to flag behaviors that are contrary to the company’s values.

To foster a strong and healthy culture, organizations must hold all employees accountable for it, regardless of their financial contributions. As performance and results are so critical to organizations, this is not always so easy to do. On several occasions, I have witnessed leaders’ hesitancy to take action with these employees, as they worry about how it will impact their team’s performance, and how that might subsequently affect their standing in the organization.