NEW YORK, Sept. 23, 2011—CEOs in Corporate America are six times more likely than average workers to believe they work in a company where people are inspired, a new study from LRN finds. In fact, employees say they are primarily coerced (84%) or motivated (12%) by carrots and sticks on the job rather than inspired by values and a commitment to a mission and purpose (4%).
Yet, the study reveals that companies that do self-govern through values significantly outperform those who don’t. These companies experience higher levels of innovation, employee loyalty, and customer satisfaction, and lower levels of misconduct, employee fear of speaking up and retaliation, the study finds. Employees in self-governing companies also report stronger financial performance relative to the competition.
These, and other findings, come from “The HOW Report,” a first-of-its kind study of more than 5,000 full-time employees, commissioned by LRN and independently conducted by the Boston Research Group, in collaboration with Research Data Technology and The Center for Effective Organizations at the University of Southern California. The study compares the business returns of competing models of governance, culture and leadership and the observed behavior of management and employees.
“What you measure is a window into what you value. As institutions, we’ve gotten incredibly good at measuring ‘how much,’ as in ‘how much’ revenue, profit, market share, resource, debt, etc.,” said Dov Seidman, CEO of LRN. “As we continue to lurch frequently from one crisis to another, and generally contend with the dynamics of operating in a globally interdependent world, creating resiliency and forging a path of sustainable growth requires leaders to rethink the very nature of how their organizations operate and how their people conduct business. We have entered a new era where it is possible to measure how we operate, lead and govern our institutions. And this study demonstrates that it is, indeed, practical to be principled.”
Key Findings of the HOW Report:
1. Rare: Self-Governance is rare in corporate America. Only 3% of respondents report they work for organizations whose purpose and values inform decision-making and guide all employee and company behavior.
2. Less misconduct/more speaking up: Organizations that exhibit self-governing behavior experience significantly fewer risks associated with employee misconduct.
- Employees in self-governing organizations are three times more likely to report that there is no retaliation in their organizations than are employees in companies that rely on rules and policing, top-down, command-and-control leadership and coercion, and 1.5 times more likely than employees in companies that rely on hierarchy, structure, control processes, performance-based rewards and punishments to motivate people.
- 94% of respondents work for organizations that do not make them feel completely comfortable in speaking up (e.g. when they see misconduct), challenging the status quo, or voicing alternative opinions or views.
- In self governing organizations, 94% agree that employees report unethical behavior when they see it, compared to 62% in what the study characterizes as “informed acquiescence” companies and 26% in “blind obedience” companies.
3. Advantages: Organizations that exhibit self-governing behavior are significantly more likely to achieve higher levels of innovation, employee loyalty and greater customer satisfaction, particularly when compared to rules-based, coercive organizations.
- Employees who work at self-governing organizations are as much as five times more likely to observe that good ideas will get adopted.
- Values-based behaviors result in almost nine times the level of observed customer satisfaction.
- Employees at self-governing organizations are twice as likely to believe that their company has a good reputation among its customers.
- Employees at self-governing organizations are nearly three times more likely to refer a friend to their company.
4. High performance: When viewed systemically, the four primary outcomes of a self-governing organization — less employee misconduct, greater innovation, employee loyalty and customer satisfaction — come together to synergistically deliver superior financial performance.
- There is strong statistical evidence that an interdependent, synergistic relationship exists between and among these outcome behaviors; so much so that they act in a reinforcing and systemic manner to impact financial performance.
- Employees in self-governing companies perceive a 15 percentage point and 40 percentage point advantage, respectively, in financially outperforming the competition compared to hierarchical or top-down companies.
5. Measurable: Trust, inspiration and significance can be measured and create a distinct competitive advantage.
- Only 9% of employees believe they work for a high-trust organization where there is little or no fear or coercion.
- Only 12% of respondents maintain that they work for companies where decisions are made based on long-term considerations. Nearly 60% said that short-term mindsets prevail.
- Over 90% of respondents work for organizations that do not create an atmosphere offering sufficient levels of information sharing. Additionally, 90% work for organizations that don’t effectively foster coordination between departments and groups.
- Nearly 70% of respondents work for organizations fixated on traditional methods of success rather than on long-term significance.
“A super-system of culture, governance, and leadership as a conscious, deliberate, long-term strategy can be key to differentiation, success and significance for companies in the 21st century,” said Dov Seidman. “Companies and leaders who pioneer and forge ahead on a genuine journey of governance, culture and leadership are the ones who will be around in the 22nd century.”
About the HOW Report
The HOW Report is a study of more than 5,122 full-time employees from all levels and departments – and most from companies with 2,000 or more employees. The study was conducted jointly by the Boston Research Group and Research Data Technology in early 2011. The questions, statements and descriptions used in the survey instrument were carefully designed by a team of academics from The Center for Effective Organizations at the University of Southern California and industry experts in organizational behavior, workplace dynamics, behavioral economics and ethics and compliance. To learn more or obtain a copy of the full report, please visit http://www.lrn.com/how-report.html.
About LRN
Since 1994, LRN has helped 15 million people at 700 companies worldwide simultaneously navigate complex legal and regulatory environments and foster ethical cultures. LRN’s combination of practical tools, education and strategic advice helps companies translate their values into concrete corporate practices and leadership behaviors that create sustainable competitive advantage. In partnership with LRN, companies need not choose between living principles and maximizing profits, or between enhancing reputation and growing revenue: both are a product of principled performance. In 2008, LRN acquired green strategy firm GreenOrder. LRN works with organizations in more than 100 countries, and has offices in New York, Los Angeles, London and Mumbai. For more information, visit www.lrn.com or follow @LRNinc on Twitter.