Article originally published in the American City Business Journals on September 28, 2020.
Two of the most important influences on how employees view their company are the tone at the top and the organizational culture nurtured by the CEO and the senior leadership team. This is monitored by the Human Resources department, which keeps pulse on the attitudes of employees. Tone at the top reflects the ethical climate of the organization, while culture reflects how employees within the organization treat each other.
If employees are not comfortable talking to HR about their concerns, trust in the company’s leadership team is adversely impacted, which hurts the company’s ability to operate as a high-performance organization.
Due to numerous allegations of sexual harassment at McDonald’s, CEO Steve Easterbrook, who joined the company in March 2015, established a sexual harassment hotline for employees to report behavior inconsistent with McDonald’s code of conduct. However, Easterbrook’s own behavior violated that code.
On Nov. 3, 2019, Easterbrook was terminated for engaging in a consensual sexual relationship with a female employee. In his departing message, Easterbrook wrote, “’Given the values of the company, I agree with the board that it is … time to move on.”
Easterbrook was subsequently sued by the board to claw back $41.8 million in severance pay when it found he had sexual relationships with not one, but with several female employees, which he allegedly concealed from the board.
Shortly after arriving at McDonald’s, Easterbrook named David Fairhurst as global chief people officer to oversee McDonald’s corporate HR function. An Aug. 25 article published in The Wall Street Journal reported that Fairhurst made it more difficult for employees to provide feedback on the behavior of their bosses. This should have been a red flag.
Employees also accused Fairhurst of playing favoritism regarding promotions and acting improperly with female employees at after-hours social events, as well as promoting a “party culture.” Employees were concerned about reporting misconduct of executives to HR for fear of retaliation. Fairhurst departed McDonald’s a day after Easterbrook was terminated.
McDonald’s board has launched an independent investigation into the HR department and the culture of the company.
The role of the HR department is to ensure that human resource policies are applied consistently across the company in a fair and impartial manner. HR should serve as a safe place where employees can go to share their concerns about wrongdoing without fear that what they say can be used against them.
Employees lacked trust in the HR department at McDonald’s. In the recent past, this was also the case at both Uber and Wells Fargo.
In March 2018, I wrote an article headlined, “Do your employees see your HR department as friend or foe?” In that article I describe the HR cultures at Uber and at Wells Fargo, both of which destroyed, rather than built trust. Ultimately, Travis Kalanick, the CEO of Uber, was terminated by the company’s large investors and John Stumpf, the CEO of Wells Fargo, was terminated by the board, in part for the wrong tone and the wrong culture within their respective companies.
In February 2017, engineer Susan Fowler accused Uber of tolerating a culture in which sexual harassment was the norm. In a blog post, she wrote about the lack of support HR gave female employees when they complained about the toxic work environment. Many female employees chose to leave Uber, depriving the company of needed talent.
In September 2016, news broke that employees of the Retail Banking division of Wells Fargo created 3.5 million fraudulent accounts, driven by management’s strong desire to achieve bonus plan objectives.
Within weeks, CNN Money reported that a number of Wells Fargo employees were terminated for reporting these unethical practices to HR. Four months later, CNN Money reported that “Wells Fargo admitted that at least some of these whistleblower retaliation claims … may have merit.”
These are lessons for all boards, CEOs and senior leaders on the importance of living up to the values of their company and for ensuring employees can trust the HR Department. The damage caused to the organization and the personal and professional costs of not doing so is significant.
Stan Silverman is founder and CEO of Silverman Leadership and author of “Be Different! The Key to Business and Career Success.” He is also a speaker, advisor and widely read nationally syndicated columnist on leadership, entrepreneurship and corporate governance. He can be reached at Stan@SilvermanLeadership.com.