“Culture eats strategy for breakfast.” Peter Drucker
“Maintaining an effective culture is so important that it trumps even strategy.”
Howard H Stevenson – Harvard Business School’s ‘Lion of Entrepreneurship’.
Company Culture – Why It’s So Important And How You Can Improve Yours in 90 Days.
Organizational culture improvement has leapt to the joint No.1 spot on the agendas of CEOs of major businesses all around the globe. It has inherited this priority position from several previous waves of industrial transformation: the quality initiatives of the 1980s, the business process re-engineering of the 1990s and the subsequent ERP, CRM and related technology plays that came afterwards. This is because culture is now seen as one of the two most important factors in long-term corporate success. Culture has now equaled strategy as a prime lever used by CEOs in their perpetual striving to maintain organizational effectiveness (Peter Drucker: “Culture eats strategy for breakfast”).
This paper explains why company culture is so important to growth. It goes on to explain that culture, far from being hard to change or improve, is now firmly on the map of company attributes that leaders can significantly upgrade in a short space of time. It concludes with a look at the twin phenomena of talent-alignment and culture selection which together promise a rapid, low-cost and employee-centric route to improve a business’s culture.
Why is Culture Important?
“Our number one priority is company culture.” Tony Hsieh, CEO, Zappos
Culture is the single most important factor driving productivity, sales achievement, work quality, customer satisfaction and the willingness in every employee to ‘go the extra mile’ for their team or organization. Though late to the management table, culture has come to equal strategy in the perception of CEOs everywhere. For many, it even beats strategy. More importantly for the future, in the perception of millennials and Generation Z, culture has beaten salary and perks into second place when rating the attractiveness of potential employers. Top talent is now drawn to top culture, not top dollar.
But if culture is now top of the agenda, it didn’t get there the easy way. For decades it was widely accepted that to change and improve a company at the highest level, four enterprise capabilities must be engaged: strategy, people, process, and technology. Enormous energy and capital have been spent on these capabilities during change programs, re-orgs, mergers, strategy reviews and other enterprise-wide initiatives. Yet none of these movements have achieved their potential because culture in one way or another has sabotaged their efforts.
People have not embraced these changes when they are in conflict with their culture or more importantly when a culture is weak, non-existent, or when an enterprise has multiple conflicting cultures. That’s why CEOs and Boards believe more and more that if they don’t address culture head on, their change initiatives will fail or at a minimum fail to provide the proposed return on investment promised.
On the other hand companies that have clearly defined cultures and truly live their cultures enjoy uncommon success with their change initiatives. They have learnt the way to activate their cultures to support major change programs.
Deloitte quotes J. Kotter and James Heskett’s landmark study which found that over a 10-year period, companies that intentionally managed their cultures outperformed similar companies that did not. Their findings included revenue growth of 682 percent versus 166 percent (for those who did not); stock price increases of 901 percent versus 74 percent; net income growth of 756 percent versus 1 percent; and job growth of 282 percent versus 36 percent. Additionally, an analysis of companies listed on Fortune’s 100 Best Companies to Work For further demonstrate that those with well-managed cultures significantly outperform the S&P 500.
Deloitte’s view is backed up by others. Denison Consulting concludes that companies demonstrating higher levels of performance in key areas of corporate culture deliver better results when it comes to return on assets, sales growth and increased value to shareholders.
Culture and strategy are the two top levers at the disposal of managers in their appointed mission to lead their organizations higher up the value and profit trees. But which comes first? Should strategy be given pre-eminence and only followed by a stab at culture management once the company’s general direction is settled? Or is it necessary to get culture – the intangible element – right, before even considering how to progress?
The answer is straightforward. If you have a strategy, do culture next. If you are in the process of changing the strategy, use your strategy project to implement your culture. Culture change is a major enabler of new projects, not an inhibitor. It reduces project resistance because it gives people what they want. By the same token, any culture initiative that doesn’t have a strategy, people, process or technology initiative to drive home the new culture will not be successful. It is far easier to change a culture through the vehicle of a change project than it is to just drive it down through line management. Since most companies are undergoing one change project or another at any given time, this means that right now is invariably the right time to address culture.
The Hard Side of Culture
One reason that management may have prioritized strategy over culture in the past is that strategy appears manifestly easier to understand than culture. It’s also possible that strategy also sounds the more managerial of the two and fits with the self-image of many leaders. Grappling with strategy gives leaders a sense they are taking control of the company’s future and showing decisiveness. It’s a ‘hard’ subject worthy of respect for those who can think, not just operationally, but with breadth and vision. Culture, which, as many observers put it, ‘expresses goals through values and beliefs and guides activity through shared assumptions and group norms’ seems to be anything but ‘hard’.
But this simply isn’t true.
The hard side of culture is identifying individual behaviors, motivators and cognitive processing and formally linking these to agreed values, beliefs, norms and traditions in such a way that culture can be defined and refined within the organization in explicit and easily understood terms. This is anything but a soft activity. In fact it requires the attention of a team of intellectually diverse people, all of whom are willing to bring their sharply focused minds to the service of the project.
Culture change now delivers more benefit per hour and dollar spent than any other program available.
Timeframes are important too. Culture, with all its apparent intangibility and lack of obvious definition and means of control, sits uneasily on the desk of a CEO hired by an impatient board to double the share price by the end of the next quarter. It doesn’t appear to offer a quick return on investment. Not only that but culture change consultants, with their eyes on a lengthy contract no doubt, routinely warn that managing culture is a long-term process with rewards spread out over decades, not years or months. For the aforementioned under-pressure CEO, that’s not an appealing time frame in which to expect benefits.
Until recently, this perception may have been true. Culture was a difficult subject. But that was before the breakthrough came in our understanding of the deeper elements behind human drive and ambition and how their correct employment (or lack of) affects human behaviour. As these talent-alignment programs began to drive engagement and productivity in companies it was clear that they were also having far-reaching effects on culture right across those organizations too. Suddenly culture change rose up the agenda as a topic that any responsible leader could engage with in certainty of success.
It is the thesis of this paper that improving organizational culture, far from being difficult, is now, because of our improved understanding, a fundamentally achievable goal. Not only that but the potential rewards mean that culture change now delivers more benefit per hour and dollar spent than virtually any other change program on the market. Culture change is now the lowest hanging fruit on the tree. It is the easiest benefit to harvest requiring the least overall effort at the least cost.
Not only that but whilst the life span of every element of the company is diminishing, not just plant and equipment, but product and marketing strategy too, culture, if done correctly is still as durable and its benefits as constant as it ever was. Culture is the rock to which everything else is fastened.
Culture the Engine of Productivity
Culture reflects the collective will with which an organization can execute its strategic goals. When individuals align (both emotionally and physically) with a culture, motivation soars. Motivation drives productivity. Companies with great cultures take on a family type atmosphere that individuals and teams align with.
David Brooks at the New York Times talks about ‘thick’ versus ‘thin’ organizations. ‘Thin’ organizations look to take advantage of people’s strengths and treat people as resources to be marshalled. They are ‘thin’ because they are shallow and see-through, lacking substance. They are also unremarkable leaving barely a memory on either customers or former employees.
‘Thick’ organizations however make an impression that lasts. They are characterised by having collective rituals, sacred origin stories, common ideals, a distinct jargon, a sacred guidebook. Thick organizations think in terms of virtue and vice. They take advantage of people’s desire to do good and arouse their higher longings. “Thick institutions have a different moral ecology,” he writes. “People tend to like the version of themselves that is called forth by such places.”
This is the essence of a great culture and it’s why culture powers productivity. When people like ‘the version of themselves that is called forth’ by an organization, they will work hard for it. They will bond with the others who work there who also like ‘the version of themselves that is called forth’.
By contrast, to set about the execution of a strategy, even a perfect strategy, with a company whose culture is dysfunctional, is to invite disaster. It’s like expecting a ship with broken engines to power you to your destination, all because you put a new radar on the bridge. Don’t get me wrong. Radar (strategy) is good. But without engines (culture) the ship isn’t leaving port.
Example: In the UK there was once a high profile technology company called ICL. ICL made mainframe computers that rivalled those of IBM. In the 1970s and 1980s it sold a lot of machines. But the ICL company culture around teamworking was poor and this had a catastrophic effect on service delivery and execution. For instance, if a meeting involving a number of participants was arranged, there would often be only a couple of people present as the clock struck the hour. Meeting participants would arrive in their own time, the last one taking their seat often more than 30 minutes late. Enormous amounts of time were regularly wasted as each new arrival was updated with the discussions so far. Despite a new CEO being appointed and a strategic partnership arranged with a Japanese hardware maker (Fujitsu), the company went into decline. The culture of disrespect towards colleagues and teamworking was never fixed and gradually ate away at individual loyalty, innovation and discretionary hours worked. The company had hired many good business leaders over time but none of these had prioritized healing its corporate ‘soul’ and so its people continued to work against each other. ICL ceased making computers in the early 1990s and its name disappeared entirely from the marketplace in 2002.
Good strategy and leadership had not prevailed over poor culture.
None of this is intended to suggest that strategy is not important. Far from it. Good strategy, at all levels of the business, is absolutely vital for success. We should all be passionate about strategy. But what is clear from the evidence and the research is that culture must be got right even as strategy is got right. We can install a new radar. But we still have to fix the engines.
One of the most influential leadership books in recent years, Tribal Leadership, emphasizes just how important culture is over anything else. “Tribal Leaders focus their efforts on upgrading the tribal culture,” say the authors. “Divisions and companies run by Tribal Leaders set the standard of performance in their industries, from productivity and profitability to employee retention. People are so eager to work in these cultures that they will take a pay cut if necessary.”
Culture attracts talent. Without culture, talent will founder.
Culture is the soul of the organization according to many observers, including academic Henry Minzberg. “I think of the structure as the skeleton, and as the flesh and blood. But culture is the soul that holds the thing together and gives it life force.” Culture is invisible, yet it governs everything.
Traditionally, out of culture and strategy, strategy has been the easiest thing to measure and improve. ‘Leadership goes hand-in-hand with strategy formation, and most leaders understand the fundamentals,’ says Harvard Business Review. ‘Culture, however, is a more elusive lever, because much of it is anchored in unspoken behaviors, mindsets, and social patterns.’
Indeed, the intangible nature of culture is also the reason why executives so often fail to address it. It’s much easier to spend money on a sales awayday, or customer service training course, or strategy workshop. These are all visible. But these efforts often just address the symptoms of a weak culture, not the cause. It’s like taking painkillers for a broken limb. This gives an illusion of improvement but in the longer term the pain will return. It’s far better to fix the weak culture, even though this requires more thought. Then the symptoms of poor productivity and high turnover will go away forever and the organization’s health can rise to a new high level.
The Benefits of a Great Work Culture
There is no dearth of research on the positive effects of good culture.
According to Larry Elton writing at Forbes.com the three key results arising from a strong culture are Identity, Retention (of staff) and Image.
Luanne Kelchner at Chron.com says the four key benefits of a strong culture are Retention, Reputation, Productivity and Quality.
Great Places to Work says that “companies with an excellent work culture outperform their competitors on the stock market by nearly two times.”
And Peter Ashworth, CEO of Transformation Inc says that “Talented humans want to do business with the best organizations, because it aligns with their own values and expectations.”
Everyone seems to agree that culture is not just about having a nice working environment in the office. It has a powerful effect on people’s engagement, team-working, productivity and quality as well as a direct and measurable effect on a company’s fortunes. Culture seriously matters. No wonder CEOs are (belatedly) prioritizing it.
It seems that if you get the soft stuff right, it invariably trickles over into the hard stuff.
So if culture is really, really important, what does it look like?
What a Great Corporate Culture Looks Like
Teamweek reports how Google has grown its enviable work culture. Google has constantly invested in learning about how people work best. And the search giant has recognized the critical importance of teams in the modern workplace. It has invested a lot of time in understanding what makes teams work and what doesn’t. Yet even Google has not been able to create the die on which great teams can be successively minted. The formula still eludes them as this NYT article shows.
Still, even if Google hasn’t quite cracked the solution, they’ve tried. And their discovery of the importance of teams has clearly been a big step forward on the culture trail.
Forbes Magazine also picks up the Google theme. It says that Google does two things right:
- Communicates well.
- Offers development opportunities.
Of course, not all companies can offer development opportunities. They may be struggling just to achieve the same as they did last year. But the ‘communicates well’ endorsement is another feather in Google’s cap.
Facebook is also praised by Teamweek for its focus on:
- a) open communication,
- b) teamwork
- c) flexibility
Notice the similarity here with Google? Indeed the themes of communication, team-working and allowing the individual to shape their own space are recurrent themes across many successful cultures.
Zappos, now a subsidiary of Amazon, is one of the largest online retailers. They started selling shoes online back in 1999 and expanded to a $1 billion business by 2008. Zappos CEO, Tony Hsieh is probably the world’s No. 1 fan of developing a strong company culture. He believes, “Our number one priority is company culture. Our whole belief is that if you get the culture right, most of the other stuff like delivering great customer service or building a long-term enduring brand will just happen naturally on its own.”
Zappos also protects its company culture by hiring for the cultural fit. What’s more, the company re-states its culture all the way through its hiring process. Months can pass between the initial interview and an actual offer. During the trial period all new hires spend time taking customer calls. If those hires think they don’t fit in by the end of their trial period, they are offered $3000 to leave. Zappos would rather give away $3000 than hire someone who does not fit in. That’s how seriously they take culture.
Across the most renowned and effective organizations in the world, the same headings keep coming up. Culture. Communication. Teamwork. It’s a golden triangle. But which comes first? Does good teaming drive culture? Or does culture birth the other two? By the end of this paper we think you’ll know the answer.
Culture and the Next Generation of Workers
A decision to invest in culture improvement would be short-sighted if it didn’t take account of the future workforce.
Greg Besner, CEO of CultureIQ writes how previous generations saw job security as the most important element when considering a career. Baby boomers were prepared to bend themselves around their company.
By contrast, millennials expect the opposite. “Millennials grew up in a time of financial prosperity and rapid technological advancements” he writes. “A career means much more to them than a stable place to work for 40 years. They are looking at company values, meaning, community, and culture.” Millennials look for a strong ‘culture fit’ with their employer and then expect that employer to open doors for them. They expect the company to ‘know them’ and then use that knowledge to both respect and develop their talent. In practice this means an awful lot of communication and an awful lot of teamworking.
This desire to make the most of their talent both within and without the organization’s walls represents a huge opportunity for organizations that can grasp what is really going on. Millennials are being neither arrogant nor self-centered. If anything, they are more connected to their peers and their profession than any generation before them. They also want to make the kind of positive difference in the world that their forefathers could only dream about.
When you put together the growing importance of culture and the desire of younger employees to develop and engage their innate natural talent, the scene is set for the mother of all productivity leaps.
How to Improve Company Culture
Consultancies of all kinds have developed their own processes for improving culture. Spencer Stuart for instance recommend a 4-stage plan described as a) Articulate the aspiration, b) Select and develop leaders who align with the target culture, c) Use organizational conversations about culture to underscore the importance of change, d) Reinforce the desired change through organizational design.
Deloitte, PWC and others have their own formats.
But the common thread in all of these programs is that they are highly mechanistic. All of them see the workforce as an entity that must have ‘something done to it’. It must be pulled and pushed about, shown the error of its former ways and ushered into a new era of enlightenment. Or else shown the door. None of these consultancies or their elaborate mechanisms see that people already contain the solution within them.
By contrast OND’s Culture Solution recognizes that the seeds of a great culture are already within each one of us. Management must begin to grow these seeds, not by commanding, but by giving. It is only by first giving employees something precious and valuable that the organization can win the right to request that those same employees voluntarily sign up to a new, improved ‘collective will’. The gift that must be given is something that resonates with the deep sense of purpose in the heart of every human and meets their needs for community. It is when each employee’s deep-within core of natural strengths and talents – a much deeper layer than skills and experience – is recognized, mapped, shared and then aligned with each person’s job role and also with the natural strengths and talents of their team-mates. This is talent-alignment. When staff are talent-aligned, communication and teamwork throughout the organization is empowered and enabled beyond anything that can be achieved with team-building exercises, coffee rooms, beer and pizza get-togethers, off-sites or any other formal or informal activity.
OND’s Culture Solution
OND’s Culture Solution is a 2-step program that begins with organization wide talent-alignment and is followed up by a proven culture selection and adoption process.
The first stage, talent-alignment using the Method Teaming program, ensures that employees receive an intuitive, science-based understanding of both their own and their team’s talent. This is the eureka moment of self-discovery. When people discover their own natural-born behaviors, motivations, and cognitive processing approach AND at the same time can see those of everyone else in their team, their sense of place becomes as clear as if it was satnav’d and their self-confidence grows foundations six feet deep.
In down-to-earth terms, talent-alignment means they get something of huge value to their lives and careers. They learn more about themselves and how they can best serve their team and organization than they ever knew was possible.
Talent-alignment is proven to vastly improve engagement, productivity and purpose. Potentially it can increase productivity from the average US level of <50% up to almost 90%.
But it will also impact culture. Even without anything else following on, this first stage will give a positive boost to company culture by improving teamwork and communication. In fact it can impact on every one of these ‘10 Dead Simple Ways to Improve Your Company Culture’ proposed by an independent firm of employee recognition specialists:
- Embrace transparency by implementing modern communication and collaboration tools.
- Recognize and reward valuable contributions
- Cultivate strong co-worker relationships
- Embrace and inspire employee autonomy
- Practice flexibility
- Communicate purpose and passion
- Promote a team atmosphere
- Give and solicit regular feedback
- Stay true to your core values
- Give culture building the effort it deserves
Method Teaming will hit every one of these 10 points as described in detail in this article. The organization will become more focused and businesslike as a result than ever before. Retention numbers will rise, thereby reducing replacement and on-boarding costs and preserving company know-how longer. This has already happened at HPE, Cognizant and many others.
The second stage. By now workers are primed, eager and ready for the second stage, Culture – Value – Action, or CVA. In fact, there is already a palpable sense of culture change permeating the enterprise. Employees can sense it like mariners sense a change in the wind. They are grateful to the organization for what it has given rather than demanded and are aching for something more. The new vibe is exciting and fresh. But at this point it’s still unstructured. Employees want to be part of the ‘collective will’ and be fired by the excitement of working together towards a common, worthwhile goal. They demand structure. Just like the members of a choir they know the most fun comes when everyone’s singing the same song in harmony – no point in singing alone.
All management has to do is name the tune.
Here’s what everyone knows instinctively is wrong with the old culture and why they’re desperate for the new:
- A culture that does not guide behavior is of little value.
- A culture that does not guide decision making is of little value.
- A culture that is not lived by C Suite is of little value.
- A culture that is not measured is not lived.
- A culture that is not trained is not important.
- A culture with no stories is not a culture.
CVA is an intentional process (proven in Ernst & Young, Disney and other major corporations) that allows organizations to choose the cultural tracks and values that are appropriate to its industry and mission and begin to take them on board. No two company cultures are the same, nor should they be. There is no ‘one size fits all’ culture that can be purchased off the shelf and applied to any organization. CVA means organizations can evolve naturally to, not just a great culture, but the right culture for their industry and mission.
Applied correctly, CVA will build a powerful culture that employees will be so proud of they’ll tell everyone they know about it. Isn’t that a great place to work!
- Method Teaming ensures staff have received value and are primed for change.
- CVA confirms and accelerates the value and channels it correctly into a powerful made-to-measure culture that can endure for generations.
The entire program can be completed in 90 days.
Culture change is one of the two prime levers (along with strategy) of growth and productivity available to leaders. It is now easier to manage than ever before and affordable by every business and organization. Culture improvement is highly valued by high caliber employees.
- Culture equals strategy as an engine of growth
- Strong cultures accelerate away from others on a wide range of indices
- Culture change no longer requires a long time to effect
- Culture change is more affordable than most productivity programs
- Culture drives teamwork and communication
- Top employees gravitate to top cultures
Talent-alignment >> intentional culture change >> right culture.
Bullet summary of this paper.
Culture now widely recognised as the biggest engine of growth.
Culture one of the two top levers available to management, along with strategy.
Culture not a ‘soft’ subject.
Culture change now an achievable goal in any organization due to the breakthrough in our understanding of what drives human motivation and behavior.
Good strategy without good culture leads nowhere.
Many academics and business leaders place culture ahead of strategy.
A great work culture is good for organizations and people alike.
Millennials gravitate to companies known for a strong culture.
Big focus on culture change now from major consultancies.
OND’s Culture Solution is naturally better and more successful than any other solutions on the market because it addresses human purpose and people’s career needs as well as the organization’s growth needs.