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This chapter is from the book

Other Expressions of Damaging Unhappiness

When discovered, outright fraud is the most visible form of unhappy companies, but corporate fraud is rare. Unhappy corporate cultures in general are common, however, and they have many other costs. Some costs are direct. High absenteeism and high turnover are two obvious ones. Far more often, the costs are hidden. Deriving from the same fear-driven actions that can lead to fraud, these behaviors can damage the company nearly as badly. The following two unhappy companies serve to show how corrosive fear and mistrust can become.

Demonstrating the problem of personal divisiveness, the first example involves a mid-level information systems manager at a major bank. Needing to take down the computer system for urgent maintenance, the IS manager had received approval from the most senior executive in the division. She issued a memo to all department heads alerting them of the shutdown the next day and the need to schedule important bank transactions around it. Shortly before the scheduled maintenance time, one of the department heads came to her office door and complained that the shutdown was going to seriously affect his department’s work. He was a large, physical man, and he reached up to grab the top of the door frame, blocking entry to her office—as well as her escape. Growing ever angrier, he insisted that the younger manager reschedule around his needs. Through her office window, the IS manager was able to catch the eye of the more senior executive. This individual sauntered over as if he just happened to be passing by. His appearance caused the department head to back down. Having lost the fight he had picked, the department head promptly returned to his area and spent the afternoon screaming at his staff.

Demonstrating the problem of corporate divisiveness, the second example involves a Japanese manufacturing company and its American subsidiary. In the early 1990s, the company developed a reputation for not being able to meet product demand in the United States. The parts were manufactured in Japan and assembled in the United States, so that the machines were officially "made in the USA." To solve the problem of product shortages, the manufacturer brought in an outside consultant to improve its supply-chain management.

Before long, the consultant recognized that the problems were not technical but relational. The American subsidiary had the habit of placing a large number of orders, then canceling the orders months later—after the U.S. salespeople had received their bonuses for the sales. When the Japanese headquarters realized what was going on, the senior executives there arbitrarily cut ongoing U.S. orders by 50 percent.

In other words, rather than tackle head-on the subsidiary’s bogus bookings, headquarters guessed at what the actual orders were so as not to over-manufacture parts. A bizarre dynamic emerged: When the orders were fake, salespeople received undeserved bonuses. When the orders were real, the arbitrary cutbacks meant that salespeople were unable to deliver sufficient product, which cost them bonuses and future sales. The supply-chain management project was Japan’s way of solving the difficulty without creating a conflict. It took months before the consultant could bring the two sides together to confront the unsavory behavior of the American subsidiary as well as the enabling behavior of their Japanese counterparts.

Almost every office has at least one bully, and most people learn to work around such individuals; but corporations seldom consider how much corporate time and energy is absorbed in those accommodations. The bank bully would have gladly disrupted operations for several other departments to suit his needs and to hide the fact that he had not bothered to read a time-critical memo. Instead, he had to be satisfied with disrupting productivity in his own department for much of the day. A single tantrum could easily have cost the bank $10,000 in lost time. A similar bully at an R&D company left not one but two successive departments in such shambles that the entire staffs of both groups had to be reassigned and entirely new teams brought in. The loss set back the company more than a year in two key technology areas. Higher-level bullies can bring entire companies down. Subordinates have testified that Richard Scrushy, the former CEO of HealthSouth, and Bernie Ebbers, the former CEO of WorldCom, used intimidation and manipulation to get underlings to cook the books. One HealthSouth employee said that Scrushy exploded in a rage at him when confronted about accounting irregularities. (The employee who left the company was one of the few in the department not indicted. Scrushy avoided a criminal conviction but faced civil charges for his actions.)

The conflict between organizations at the Japanese manufacturer took the company into the red for that product line. In most cases, companies are unwilling to confront either personal or organizational conflict in a constructive manner. In fact, few companies will acknowledge that social conflict exists, seeking answers in numbers analysis, reorganizations designed to shake up the group’s performance, or misapplied technology such as the Japanese company’s supply-chain solution, which would have glossed over deep human issues rather than addressed them.

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