Students of corporate culture should turn their eyes to Washington. We are about to see whether a gigantic effort to re-engineer a deeply flawed culture can actually succeed.

I speak of the Veterans Administration, where discussion of poor culture could occupy us for days. On Friday the White House released a blistering diagnosis of what has gone wrong at the agency, and it cited a sclerotic, self-serving culture as the prime reason why so many veterans were forced to wait so long for medical care. That report was only the latest in a long line of other reports, investigations, hearings, and complaints this spring that the VA fell into a terrible state, with bureaucrats at the top gaming the system to hide poor care to those at the bottom.

Then came news over the weekend that President Obama has chosen Robert McDonald, former CEO of Procter & Gamble, to take over as secretary for veteran affairs. This is where it gets interesting, because if you want to fix a flawed corporate culture, grabbing a former CEO of Procter & Gamble is a great place to start.

Readers of this column will know that I've been a fan of P&G's approach to ethics and compliance for years. McDonald himself delivered a keynote address at the Compliance Week 2012 conference where he spoke about the importance of culture. Until earlier this  year, the company famously had no dedicated chief compliance officer—rather, executives rotated into the ethics & compliance department for a few years, did their tour of duty, and then rotated back out into the larger organization to keep preaching the gospel of strong ethics, compliance, and “the P&G way.”

Let's dispense with one criticism the cynics will launch promptly: that McDonald wasn't a great CEO, and was fired in 2013 after only four years on the job, for failing to cut costs and grow revenues to the market's satisfaction. So what? McDonald is one among many CEOs in the consumer and retail sectors fired for failing to deliver pre-financial crisis growth in our post-crisis world. Plus, the customer base of the Veterans Administration—former soldiers who need help—is fundamentally different than the consumer world. The problems at a government agency like the VA are fundamentally different than those at a public company. A successful VA should achieve less growth, as we provide better care more quickly and help veterans participate in society as fully as possible. 

To deliver that better standard of care, however, you need the whole VA focused on that mission. Many VA employees are, but too many are not. That's where you need a leader who knows how to foster a strong culture, and that's where McDonald's skills will be put to the test.

Go back to the White House report released last week. The specific complaints were:

lack of resources (both medical staff, and IT to manage staff);

lack of transparency, especially to the myriad bodies that now oversee VA spending and conduct;

the ill-conceived and now infamous rule from 2011 that all patients must receive an initial appointment within 14 days of contacting the VA;

a “corrosive culture” that punishes whistleblowers, ruins morale, and passes problems from one VA division to the next rather than solves them.

Corrosive culture is the root problem there, of course. It leads to the lack of transparency, the poor communication, the flawed work rules (like a 14-day appointment window set as an employee performance metric), the ignored whistleblowers, and the general not-my-problem attitude rife in VA management.

The question for McDonald will be whether he can bring the discipline of P&G's culture to an organization as sprawling, and reeling, as the VA. Several parts of “the P&G Way” stand out as good common sense: the company tries to hire and keep employees for the long term, sometimes 20 years or more; it prefers people with military experience (McDonald himself is a West Point graduate, served in the 82nd Airborne and ended as a captain); managers almost always serve in an overseas branch of P&G at some point, before returning to headquarters in Cincinnati; the company values data to drive decisions and uncover risks.

Those hallmarks of P&G's culture, plus its strong ethics & compliance function, work. P&G is an enormous enterprise, with $84 billion in revenue and 121,000 employees around the world—and for a company of that size and sweep, Procter & Gamble does not have the misconduct problems we see elsewhere. It has its troubles, but nothing like what we've seen at Walmart, General Motors, Glaxo, or other corporate titans. Employees like McDonald are part of the reason why.

Let's not sugarcoat the challenges McDonald faces. VA employees are federal workers, and as the White House report diplomatically put it, “There is a tendency to transfer problems rather than solve problems. This is in part due to the difficulty of hiring and firing in the federal government.” Lack of resources is another enormous problem for the VA, and the fault there lies in Congress—especially Republicans, who want to cut every spending dollar they can find no matter how short-sighted that may be. Even if McDonald had endless resources and employee support (which he won't), the sheer magnitude of organizational re-engineering he'll need to do is enormous. And he'll need to do it under a harsh public spotlight.

Still, the root of the VA's problems are in its culture. It now has a talented person ready to tackle the job. Let's hope he does well.

 

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