CAN YOUR CAREER SURVIVE A CORPORATE SCANDAL?
When your company is caught up in a scandal, it can turn your entire life upside down – even if you were not involved. How do you as an employee recover from such a stressful event?
when a corporate scandal is exposed, the focus is on the company – its reaction to the scandal, public opinion of the company and whether it will survive the scandal. But very little is said about the immediate emotional impact of the scandal on the “innocents” within the company, or the future impact on their careers.
In recent times South Africa had its fair share of company scandals, with the latest being when audit firm KPMG admitted that some of the work it did for, amongst others, Sars, “fell considerably short of KPMG’s standards”.
As a consequence of its public announcement, several senior leaders of the firm have left, with the company being threatened with legal action.There are even rumours that it may be blacklisted, which means it will no longer get contracts from certain stakeholders in future.
The downward spiral
Conroy Fourie, independent coach, says once the “insidious impact of the unacceptable behaviour” reaches breaking point and all is exposed, people who felt secure suddenly find their world crashing down around them.
“The fallout from the public exposure of untrustworthy, perceived immoral behaviour triggers an ending.The mystical spell has been shattered. People experience shock, and may still briefly flirt with denial,” says Fourie. (See graphic below.)
Emotionally, people become numb at this stage. Then anger sets in.There is explicit or implied blame, and employees may feel that “others have done this to us”. They may start blaming themselves – even beating themselves up – for not seeing it coming, for not speaking up, or for not trying to leave when the first rumours started.
“Distrust may become pervasive [...] By now the stress responses have impacted the affected people to such an extent that their ability to remain creative in their jobs have been compromised. They may become immobilised by fear.”
Fourie, who calls himself a change and transition catalyst, says the employees then feel they have lost support from within the company, and if friends and family start asking difficult questions, the innocents may feel that they themselves are under attack.
Prof. Leon van Vuuren, executive business and professional ethics director at The Ethics Institute, says the real danger is when people become despondent and the despondency turns into apathy. It may even escalate to the point where affected employees sabotage the company. “When people reach that stage, they feel entitled to freebies, like stealing time and property such as stationary from the company.They feel the company owes them,” he says.
The neutral zone
People may even experience depression and anxiety about their future. Eventually, they reach the point that Fourie calls the “neutral zone”.
In the neutral zone, people realise they need support. “Make use of whatever support structures your organisation has in place, such as confidential employee wellness services,” he advises those who are caught up in such a situation. Fourie says any organisation of worth will make it an absolute priority to shore up employee support structures to an even higher level during this time of organisational trauma.
Employees in organisations such as KPMG are likely to be people who consider themselves to be resourceful and self-reliant. “Now is not the time to let ego trip you up, causing you not to engage with support structures.”
Van Vuuren says it is vital for those remaining in the company to get immediate, honest communication about how the fall-out will affect them.
They want to see transparent management consequences, such as the bad apples being named and shamed, and they want an immediate and sincere apology.
“If a company does not react swiftly to calm the waters, the good ones will leave immediately,” says Van Vuuren.
The new beginning
Fourie advises people not to make rash decisions. “Get yourself back on track in performing your job tasks as professionally as possible, even if you may have begun the process of divorcing yourself from the organisation to find another avenue for the expression of your professional abilities.”
Academics at the Harvard Business School recently did a comprehensive study on the effect on executives from scandal-riddled companies and how they are perceived in the job market.
The research indicated that executives from such companies pay a penalty in the job market, even if there was clearly no wrongdoing on their part.
“Overall, these executives are paid nearly 4% less than their peers. Given that initial compensation in a job strongly affects future compensation, the difference can become truly significant over a career,” the study found.
The team noted in their article – The Scandal Effect published by Harvard Business Review – that stigma, which may be fair or unfair, undermines a person’s credibility in the social role they are attempting to play.
The academics looked at “organisational stigma”, which occurs when a company’s actions are widely seen as fundamentally flawed or immoral. People who have worked for a tainted company will find it quite difficult to shake the stigma associated with their former employer.
The Harvard research team found that considerations such as the culture of the country where the scandal occurred, the role, seniority and gender as well as the level of education of the innocents and the industry culture all play a part in the people’s abilities to bounce back.
The Harvard study refers to three steps to bounce back from a corporate scandal:
Forthrightness: Truth is the best friend of the innocent; Reputation: Draw on your own reputation and legitimacy from people who believe in you; and
Rehab: Take a rehab job that you can do with one hand tied behind your back – the purpose is to create a persuasive story to compete with the scandal narrative.
Fourie says remaining leaders should be role models and an inspiration to others in the aftermath of a scandal. “If you assess the situation and believe the company can recover, and you want to remain, commit to being part of the solution. If you cannot, and want to engage in bad talk, it is time to move on.”
Van Vuuren warns that companies with fear-based cultures are “sitting ducks” for ethical violations. Writing policies that allow and encourage people to speak up and not to hide mistakes may take a month, but establishing a trust-based culture takes years.
“Now is not the time to let ego trip you
up, causing you not to engage with support structures.”
Leon van Vuuren Executive business and professional ethics director at The Ethics Institute
Conroy Fourie Independent coach