The managerial merry-go-round

As most successful companies will know, building effective corporate culture is very rewarding, but also challenging. It requires senior managers to create shared values and embed those values in their decisions and interactions with staff.

Some firms are able to do this successfully, while others struggle. Creating an effective culture is important for the functioning of the firm – when employees feel aligned with the company’s values, they are more likely to stay committed and perform at their best.

Previous research has shown that these values include integrity, respect, teamwork, quality and innovation. But things become problematic if a manager pays more attention to some values than others, creating a mismatch with the values of employees.

And our newsfeeds are full of stories that highlight the failures and successes of this balance.

Netflix for example has been celebrated for its “focus on values and performance over rules and controls”. On the other hand, Boeing has been reported as turning from “a company that was relentlessly focused on product to one more focused on profit”.

Our latest research shows leaders with a history of job hopping may promote cultural values that will help them get their next job, but not those perceived as important by their employees.

The study looked at senior managers at the S&P 500 indexed firms, that is 500 of the largest publicly traded US companies.

Each firm has multiple senior managers, eg, Chief Executive Officer (CEO) and Chief Financial Officer (CFO). We obtained 56,234 records of senior managers’ employment history for the period 2002 – 2017 and conducted analyses on 10,932 observations.

We first analysed how managers talk in earnings conference calls, these are quarterly meetings where financial performance and other non-financial matters are discussed. We established the share of managers’ conversations about a certain topic to capture the amount of managerial attention given to it.

Next, we calculated how many times the managers mentioned one of the five critical values for building corporate culture (integrity, respect, teamwork, quality and innovation).

The managers’ mentions of values were then compared to company reviews posted by current and former employees on a popular social media platform, which we used to identify which values were most important to employees.

This comparison allowed us to examine how closely the leader’s values aligned with what employees considered most important to corporate culture.

And lastly, we looked at the employment history of the managers and assessed whether those who ‘job-hopped’ had values that were misaligned with their employees’ values.

Because each firm has more than one manager, we looked at the history of the top five managers in a company. ‘Job-hopping’ was validated using the average tenure per job to infer a manager’s job-switching frequency, with managers without this frequency termed as ‘settled-in’ managers.

We found that a job-hopping manager was more likely to be focused on ‘innovation’ compared to the other four values (integrity, respect, teamwork, quality), most likely because it was deemed more visible to future employers.

We believe innovation is a value that is more observable because people outside the company can check how much companies spent on research and development (R&D) from financial statements and whether companies successfully produced innovation outputs, such as patents.

Job-hopping managers are more likely to focus on buzz words like ‘innovation’ to help pitch themselves to future employers.

Leaders with a history of job-hopping mentioned innovation more, even if their priorities did not resonate with employees. This seems to happen because job-hopping leaders care more about their desirability as a potential corporate leader in the executive labour market.

In contrast, this doesn’t appear to happen with ‘settled-in’ managers who are inclined to seek internal career advancement.

Our study focuses on the impact of job-hopping managers’ corporate culture values rather than on financial performance.

However, prior research provides evidence of the corporate values that are related to a firm’s performance. The findings suggest that the corporate values claimed by firms or managers are not associated with a firm’s performance, but the value of ‘integrity’ assessed by employees is associated with stronger performance of a firm.

When employees are focused on company values that are less observable to outsiders, sometimes referred to as ‘soft’ cultural values like respect or integrity, but their leader is focused on more visible values, there is a misalignment and the workplace culture will suffer.

Our study highlights the importance of value alignment between leaders and employees. The findings could be useful for firms that struggle with building effective culture.

While job-hopping leaders will bring a breadth of experience from diverse organisations, this study suggests that firms should exercise caution if they want a leader who will focus on developing corporate culture.

This article was written by Professor Margaret Abernethy, Associate Professor Chung-Yu Hung, and Associate Professor Like Jiang of  University of Melbourne. It was published by Pursuit.