Organizational culture is often seen as an elusive topic. Yet, without the right culture, organizations cannot succeed short term, nor can they endure. With the ever-changing dynamics of the workforce, the stewardship of organizational culture is just as important as strategy, talent, product development, or customer service. Organizations can and must define the culture they desire and intentionally execute a well-thought out road map to shape their future.
Jason Richmond is President & CEO of Ideal Outcomes, Inc. He helps companies build strong sustained revenue growth through by developing energizing office cultures. After reading his book Culture Spark, I reached out to talk about his work and his research.
Why is creating a performance-enhancing culture critically important?
Simply put, culture drives performance. Study after study makes this abundantly clear. One Harvard Business School study conducted by Drs. James Heskett and John Kotter found that organizations with strong corporate cultures realized over eleven years revenue growth of 682 percent, employment growth of 282 percent and stock price growth of 901 percent.
The stronger the culture, the higher the employee engagement. Teams with strong positive cultures can weather short-term blows to engagement, such as economic downturns, anxiety over mergers, or increased competition. In other words, culture is the fuel that drives and sustains positive engagement.
There is no doubt that strong culture translates into a powerful competitive advantage. In fact, there is a huge risk in undervaluing the advantage the right culture plays. Poor behavior and missteps in culture can be even more detrimental than missteps in fundamental business strategy. It you are still skeptical, think Enron, Lehman Brothers, or Volkswagen. Compare these disasters (or potential failures, as Volkswagen does still have a heartbeat and the chance to turn things around) with companies that have weathered rapid growth, change, and even mergers and acquisitions.
Zappos is one example. This is a company that has focused on its culture from day one. And because of its ongoing commitment to culture, Zappos continues to perform well, even weathering an acquisition by Amazon—without doubt an extraordinarily different corporate culture.
Trader Joe’s is another example. Compare their 10-year compound annual growth rate of 5.9 percent to Kroger’s 0.2 percent. Sure, shoppers love the convenience of shopping at Trader Joe’s, but the key driver is their offbeat, customer-centric culture.
The right culture lays the foundation for any organization’s success, regardless of the industry, company size, or the phase of business growth. The right culture attracts and retains better talent. Companies with a healthy culture gain a positive reputation, not only among employees, but also with customers and the market. Reputation drives your ability to attract new customers, retain those you have, and even to increase your prices. A positive culture will improve the quality of your employees’ work, which further supports your reputation and brand image. If you do not keep pace with—or better yet, exceed—your competition in terms of your work culture, you are going to plateau or fall behind.
6 Culture Myths
You share six myths about culture in your book. Would you briefly touch on them?
Myth #1. It’s HR’s Job: While HR certainly plays a significant role in the development and management of policies that can help or hurt culture, it’s the responsibility of everyone inside the organization to create and maintain a thriving culture. Culture is a business problem, not a people problem.
Myth #2. Perks Create Great Cultures: Perks are desirable. But culture is much more than a perk. Culture is about the emotional connection we have with our workplace—how we feel about working there. The right culture makes it easy for employees to create the connections needed to foster collaboration and unite teams as they work toward common goals. People rally behind their leaders when they feel their leaders believe in them, not because they’ve been manipulated with freebies and bonuses of one kind or another.
Myth #3. Hiring for Culture Doesn’t Matter: Hiring people that don’t believe in your values doesn’t make sense because they are harder to acclimate with the processes and people you already have in place. One thing you can’t do is import another company’s culture in the belief that you can make it your own. It’s tempting to think that because a company is known for its great culture you can simply hire one of its senior executives to bring that secret sauce with them. At some point, your culture has to organically manifest itself.
Myth #4. Great Culture Is Expensive: Creating a truly great culture isn’t dependent on lavish spending. Providing low-cost elements such as the opportunity to be entrepreneurial and involved in decision-making, along with a focus on giving back to the community, are as important to employees today as health benefits or a 401(k). In the end, a healthy organizational culture enables your company to make more money, not spend it.
Myth #5. Culture Is a Passing Fad: For many years, CEOs have shrugged off suggestions to work on their corporate culture. The realization that culture is not a buzzword, but a vital long-term corporate attribute is finally starting to stick. Boards see the negative impact of a culture crisis on the value of their companies. Lawsuits, investigations, and financial woes abound.
Myth #6. Culture is Created on its Own: You already have a culture, even if you haven’t consciously developed it. Culture is also what happens when no one pays attention, and then you pay the price. Left to its own devices, culture often bubbles up negatively, hurting the growth and success of the company. Culture is one of a company’s biggest assets—until it isn’t. Then it’s one of its biggest obstacles.
The bottom line is that you have to take responsibility to create the culture you want and not let your culture develop and evolve by chance. Your role is to ensure that your culture has been planned for and developed purposefully and intentionally. Leaving things to chance or hoping a newly introduced leader might solve all your problems is a quick path to failure or disappointment.
What qualities are always present in a healthy culture?
The challenge leaders face is that there is no one perfect culture. Culture needs to vary depending on your business strategy. The culture required to drive a strategy of innovation is different from the culture required to develop efficiency or operational excellence. There are many examples of healthy culture, and unfortunately, many more examples of unhealthy ones.
It all boils down to how you treat people. Authenticity matters a great deal. Customers and employees alike crave the real deal. They want to work for a company that serves as a role model for ethical and values-centered behavior. There is a significant gap at many organizations between what leaders say and how they behave, between their stated values and the way they treat people. When such gaps exist, trust is quickly eroded, and there cannot be a healthy culture without trust.
Another key driver of trust that also starts at the top is approachability. Corporate leaders that operate with an ivory tower mentality are likely to find their tower tumbling down. Senior executives should be accessible and responsive, as opposed to keeping the C-Suite drawbridge up. Approachability means not only having an open-door policy, but also demonstrating that it is more than lip service. Employees need to know that their voices will be heard, their opinions will be respected, and their efforts will be appreciated.
As companies tackle culture, and it has become a focus area in literature and conferences, what do they still often miss?
They miss that culture is a core component of their overall business strategy. It is not an afterthought or a nice-to-have plan that they delegate to human resources to develop. It must be defined up front with careful alignment to everything the organization does. It must be continuously nurtured, supported, and cultivated as business needs or the market changes, while still adhering to fundamental beliefs and values. Above all, leaders need to understand that culture is an emotional mindset. It is all about employees believing in what their organization does. It is about understanding whether they like being there and whether they respect how your organization makes decisions and how it treats employees, customers, and other stakeholders. These are not business operations questions; they are emotional questions that require answers that satisfy those emotions. Many leaders are uncomfortable with the emotional side of leadership, but without that connection, their organization will not thrive.
You developed a five-step system for culture change. Is there one step that most companies struggle with?
Each step presents its own challenges, but sustain is often the toughest. We know that change initiatives fail much more often than they succeed. Sustaining culture change is particularly challenging because we ask people to alter deeply ingrained and sometimes unconscious behaviors and habits.
As time passes, the trend is for companies to decrease their attention and awareness of their goals. To combat this, it is vital to keep culture at the forefront of meetings, conversations, and everyday life. Leaders must lead by example and continue to demonstrate company values. Values absolutely must remain the centerpiece of your culture. They must drive every decision, especially the toughest ones. Recognition and rewards need to be targeted at the changes you are trying to drive and implement. Furthermore, continued training is essential to keep employees engaged in the mission and help them understand the benefits that go with it. Especially important is ongoing training for managers, for without their leadership, sustainment is nearly impossible. Your culture is not a program; it is the way you do business.
What are the common mistakes leaders make when trying to reinvent the corporate culture?
There are three main reasons culture change initiatives fail. Partnering with employees at all levels to prevent these from happening will prevent a myriad of mistakes.
#1. Lack of Executive Commitment: If you’re not fully embracing a change in culture, why should anyone else? Culture change is a strategic and true competitive advantage, but many company leaders just don’t get it and don’t take it seriously enough. You have to identify what culture truly means and then make sure that it happens. It’s a byproduct of leadership that should cascade down throughout the organization.
#2. Lack of Middle Management Buy-In: Middle management has a very strong influence on culture because they have the most immediate connection to most of your employees—and often customers, as well. Middle managers are instrumental in creating a deep personal commitment to change. They truly influence the emotional a-ha moments, the vital light bulb moments that need to occur to create momentum.
#3. Insufficient Ongoing Communication and Reinforcement: Leaders face a lot of problems, but poor communication is one they create for themselves. You have to be open, transparent and consistent, today more than ever. Transparency may be an overused word in communications, but that doesn’t detract from its significance. Be open and honest. Walk the talk. And be accountable. In any organization, there’s always resistance to change. One of the key things we have to do is manage that change process, manage expectations about where we’re going and how we can get there.
Communication is a constant and ongoing process, not something you do at a quarterly meeting. With regular communication, you have an intimate pulse of your team and the issues at hand.
You can have the best intentions in the world. But for culture change to be successfully implemented, you need to be aware of the pitfalls that can spell failure. There has to be a genuine, visible commitment from the top corporate leaders. Culture needs to be recognized as a company-wide function and not the responsibility of Human Resources. Note that middle management has a particularly strong role to play. And don’t think you can launch an initiative and that’s the end of it. Ongoing communication is a vital means of reinforcing the culture change.
You touch on considerations in mergers. One of the most challenging aspects of a merger is unifying two different cultures. And it is too often overlooked in favor of strategic alignment. What are some of the considerations that are important for leaders to understand?
The number one reason for corporate marriage failure is culture clash: two different mindsets, two different ways of operating, two different aspirations. Or as Don Harrison, developer of the Accelerating Implementation Methodology (AIM), so neatly expresses it, “Same beds, different dreams.”
Many company leaders just don’t give enough consideration to the challenges posed by effecting a merger. They focus on exciting potential increases in revenue, bottom-line profit, or increase in market share. But the “culture thing” is ignored, taken for granted, or sorely underestimated.
What can you do to smoothly blend corporate cultures? Plan ahead, because the early days of a merger are the most precarious. This is the time when employees on both sides are most nervous about the relationship and how it is going to play out. You want to bring two cultures together to build a joint organization that’s stronger by uniting.
First, define the culture you want. Jointly establish your core values. If you don’t know what they are, you can’t expect employees to get it.
Second, research and identify any significant cultural differences. Interview relevant personnel; hold focus groups and conduct employee surveys. Talk to customers. They will be impacted, too.
Third, communicate with employees, new and old. Keep them informed about progress. Make them feel involved. Foster links between peers at the two companies. Be ready to respond quickly to the inevitable rumors and concerns.
Fourth, plug the brain drain. Often, key managers become disenchanted with the blending of two companies. Go out of your way to keep this influential group on board. Otherwise, an exodus of talent can spread throughout the ranks. Make sure people from both sides of the merger are involved in key projects.
Fifth, don’t forget that a company is only as good as its people. Companies often focus on integrating the operational elements (the policies and procedures, rules and regulations), but don’t give equal time to the human elements (the relationships and informal structures). Conduct talent reviews sooner rather than later and identify the “keepers.” An executive from Coca-Cola once told me, “Identify your top talent and get your arms around them. Show them the love, over and over.”
Sixth, size matters. The smaller your company, the greater the chances you think you can’t afford to devote resources to the issue of merging cultures. Don’t short-change culture. Smaller companies are more intimate environments, and because of that, the consequences of ignoring the issue of culture or thinking it will take care of itself can be extremely damaging.
If you don’t set out a strong harmonious vision early in the merger process, it just degenerates into individual fiefdoms. If you don’t have a vision that both sides believe in and can work towards, then you’re already a step behind.
For more information, see Culture Spark.
Photo Credit: Felix Mittermeir