Companies getting proactive on culture assessments
High turnover rates and worker burnout has “renewed focus on workplace culture” and a desire to nip burgeoning issues in the bud.
Faced with complaints of workplace misconduct, companies have increasingly opted in recent years to look not only into the claims themselves, but into their company culture at-large, too.
It’s a strategy many companies started adopting around the #MeToo movement, which launched conversations on how corporate culture—and not merely bad actors—can pave the way for sexual harassment in the workplace. According to attorneys tasked with these investigations, though, a growing number of companies are now taking an even more proactive approach: launching culture investigations even when there are no formal complaints in sight.
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“There’s been a growing understanding at the board level that part of exercising fiduciary duties is understanding what’s going on at the company quite broadly. And culture fits into that,” said Aviva Gilbert, a partner at Farella Braun + Martel who specializes in white-collar and corporate internal investigations.
“I wouldn’t say it’s happening every day. But boards, if they’re alerted of some concern that could even remotely be a cultural issue, I’ve seen instances in which they’ll take it upon themselves to set up a committee and do an investigation to evaluate the company’s culture,” Gilbert said.
Mergers and acquisitions, employee surveys that hint at dissatisfaction in certain departments, employers simply wanting to be proactive, or existing investigations into unrelated issues are increasingly becoming triggers for culture investigations, attorneys say.
Gilbert offered an example. “I did an investigation for a public company recently that had some Sarbanes-Oxley compliance issues that we needed to evaluate. That was the origin of the investigation,” she said. “In the course of doing so, we heard a lot of concerns about the tone at the top in a particular wing of the company, and the culture that a C-level executive was implementing in their part of the organization.
“The second half of our investigation discussed the cultural and leadership issues in an important part of the company and how we evaluated those, what people had to say, and then some steps we recommended the board considered to improve and address some of the cultural concerns,” she added.
This eagerness to look inward is a far cry from prevailing attitudes a decade ago, said Sharon Perley Masling, a director of workplace culture consulting at Morgan, Lewis & Bockius. “Ten years ago, if you asked an employment lawyer their advice about whether or not they should conduct [a culture] assessment, they would probably have said no because they saw it as opening up a can of worms and exposing the company to liability,” Masling said.
In addition to the #MeToo movement, Masling pointed to the 2020 calls for racial justice and recent worker unrest as inflection points. That year, demand for corporate culture assessments grew as many companies turned their attention to diversity, equity and inclusion initiatives, while recent high turnover rates and discourse on worker burnout has “renewed focus on workplace culture” and a desire to nip burgeoning issues in the bud before they develop into issues such as worker attrition, Masling said.
Since 2017, when Morgan Lewis convened 17 lawyers to conduct culture assessments in response to #MeToo, the team, which now has 35 lawyers, has seen a 620% increase in the number of hours they spend on this type of work. The team is currently handling more than 100 matters related to workplace culture counseling and training, according to a spokesperson for the firm.
Harry Jones, a shareholder at Polsinelli who represents employers, agreed that demand for culture investigations has seen a “more than 100% rise in the last 10 years.” In the three decades since he started practicing law, culture investigations only started being normal within the last decade, he said.
While certain inflection points accelerated demand for investigations, Masling said that there’s also “been slow and steady growth in the space.” In 2016, more than a year before sexual abuse allegations against film producer Harvey Weinstein kicked #MeToo into high gear, the U.S. Equal Employment Opportunity Commission released a report recommending employers assess their workplaces for “the risk factors associated with harassment.” Some of Masling’s more proactive clients had also been asking workers to fill out climate surveys.
“What’s different in the last five or six years is people have said, ‘While you’re at it, while you’re investigating what John said about Jack, can you look at it more deeply?” Jones said. “Can you address our larger issue, which is there appears to be a schism, or there appears to be a giant feud between the head of HR and the head of finance. … Is there a solution to this cultural divide? Is it politicized?”
While Masling has seen specific events trigger culture assessments, such as mergers or hints of unrest in worker surveys, she believes “there is no one right time to do an assessment.”
“I think it is always good for a company to invest in understanding its culture,” she said. But she does have one piece of advice for companies. “Only commit to doing an assessment if you are prepared to act on what you learn,” she said. “The worst thing an organization can do is to ask its employees to speak up and then ignore what they have to say.”
Investigations can sometimes lead to bigger changes than a company anticipated. Jones pointed to the Dallas Mavericks, which hired outside counsel in 2018 to investigate allegations of misconduct by former team president and CEO Terdema Ussery II. The findings of the seven-month investigation resulted in the organization mandating training for employees on respect, the hiring of more women in leadership positions, and the expansion of its HR department.
“They wound up with a whole different set of recommendations than they had thought they would,” Jones said.
He said in-house counsel working with outside investigators should always try to define the scope of what they’re looking for; open-ended investigations might sound good, he said, “but it’s very expensive, it can lead down a lot of blind alleys, it can go on forever.” Making sure the findings are presented in a well-drafted report can also be important to shareholders and boards of directors.
Jones, Masling and Gilbert were all emphatic about one point: Hire outside counsel to perform investigations.
“Granted, this is a little bit self-serving,” Gilbert said. “But I think it’s really challenging for in-house counsel to do this type of investigation themselves. They’re often very close to the issues. They know all the parties. They have to have ongoing working relationships with them.”
Jones said, “Consultants are often used for these things, like a McKinsey type. However, when you get really deep into some of these problems, you do have the question of law.
“Sometimes you would open up an investigation, thinking you are investigating one thing, and you would find out a much bigger thing. … There’s a whistleblower here, involving SEC violations or something,” he said. “Now you’re suddenly in a totally different world of risk.”
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