• Giorgia

At What Cost To Growth Do We Ignore Existing Bad Corporate Habits

Photo by Jp Valery on Unsplash

In this second blog on the subject of corporate habits, let’s talk about money.

A habit means we get into a pattern and keep doing the same actions, automatically, without thinking there may be an alternative. The habit can include anything from a certain way to run meetings, an acquisition spree or the size of a product. If nobody questions the action, then it keeps going and becomes a habit. This pattern is closely connected with how human beings behave in group and the effect of social norms. This is a huge subject in itself, but for the purpose of this article it can be summarised as ‘we tend to follow the behaviours of our colleagues and bosses”. Therefore, social norms have the effect of maximising habits.

Companies also start habits by following what other companies do. Looking around and checking out competitors is good, after all no company operates in a vacuum. However, blindly following others can easily lead to following their mistakes, and bad habits. This happens incredibly frequently, and I will talk more about it next time.

Back to the big question: what is the cost of ignoring bad corporate habits?”

Are bad habits a problem? They become one when they start destroying a company

Let’s see some examples:

  • Someone in the company changes their approach to accounting, over time this became a habit (reinforced by social norms and the culture of the organisation). This habit – which was not questioned for a long time – meant share price fall from $90.56 to under a dollar and forced Enron to file for bankruptcy.

  • Someone in a financial institution started reporting artificially low or high interest rates, this would make them appear in a stronger position. This habit spread to other financial institutions resulting in the LIBOR scandal. Following investigations, regulators in the United States and United Kingdom levied some $9 billion in fines on banks involved, as well as criminal charges.

  • Someone in your company forgets, is too busy or doesn’t understand the importance of following cyber security policies. Colleagues start following this habit, not intentionally, but for the same reasons above, and because of social norms. This bad habit can have serious consequences: the cost of cybercrime has been estimated at $600 billion a year.

These examples give an insight on the financial impact of bad habits.

If you are a leader within your company, would you have ignored those habits?

Lots more to come on the subject, in the meantime please start adding your questions and comments to contribute to the discussion.



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