1: Is A Values-Based Culture Worth The Effort?
In firms that are struggling or desperate to improve, the leaders consider corporate culture a low priority and a distraction from the day-to-day operations of a firm, the exigencies of the moment, and their short-term financial goals. In successful culture-rich firms, leaders have an entirely different attitude toward culture: it is a priority, because they recognize it is the reason for their success.
The author's experience has led her to the conclusion that "positive, people-centred corporate values leader to higher performance." Such a culture is overwhelmingly evident in "vanguard companies" that have achieved strong performance, in stark contrast to the culture of their rivals who are stagnant or failing. Aside of anecdote and observation, there is statistical correlation between culture and performance - a brief reference to studies by the AMA (2008) and University of Chicago (1999). "In the war for profit, culture does make a difference."
Does Your Company Need A Culture Change?
The most obvious sign that you company is in need of a change is high turnover of employees. The best employees do not have unconditional loyalty to your firm - their loyalty stems from a high level of job satisfaction, fair compensation, and an environment in which they are empowered to grow and achieve. They have skills and qualities that are very much in demand, and they know that if your firm doesn't offer them the pay and conditions they want, that they can find them elsewhere. And when conditions are deplorable and there's no sign of improvement, The "A" employees will do exactly that and your firm will be left to eke out a business with lower-performing employees. When things get bad enough, even the "B" and "C" employees will run as well.
Even if your firm isn't in immediate distress and running in constant "emergency room" fashion, a culture adjustment to improve performance may be necessary. The company that is just getting by today may find itself struggling tomorrow, and is vulnerable to external forces. The strongest companies weather economic downturns with very little effort, those that are weaker are swept away. Many firms are in a state of slow attrition, with their best customers and their best employees slowly leaking to their competitors. When a culture isn't working as well as it should, a company is not working as well as it should.
This shouldn't come as a shock to leaders, but it often does. Many leaders avoid speaking to their people and bury their heads in the ledgers. They may even think that they have a great relationship with the rank and file because people applaud when they speak, and the inner circle of sycophants with which they have surrounded themselves never mention that anything is going wrong. One of the values that develop in struggling firms is the need to protect the leadership from bad news - whether it's out of pity for a struggling leader or out of fear that he will shoot the messenger, employees at such firms keep their leaders in the dark.
The author spins off a moment to talk about airlines that did not join in the practice of charging travellers for baggage during the economic downturn. It's suggested that they did not do so because charging for baggage did not fit into their culture. They could make a great deal of cash in the short term by imposing these charges, and could avail themselves of the excuse that other firms were doing so, but recognized that customers would be unhappy and that their employees would take the brunt of negative feedback - which would lead to serious consequences down the road, when customers no longer associated the brand with good service and the morale of front-line employees whose daily work involves interfacing with customers would be significantly diminished.
There's also a moment's pause to consider that companies profess one culture and practice another - a reality check is in order, as the real culture of a company is what it does, and not what it says. Often the two are out of joint. This gives rise to the question of whether a given firm needs to change its values, or merely live up to them. Some could benefit from changes in both areas.
The author points out some of the other "red flags" of a cultural issue:
- Employee Turnover. A firm that has higher turnover rates than its competitors is clearly in trouble. Employee satisfaction surveys can be a harbinger of this, though they should be taken with a grain of salt. Surveys represent talk, turnover represents action.
- Customer Satisfaction. A firm that is losing customers to its competitors, particularly when the best customers are leaving, has a culture problem. Satisfaction surveys are much like employee surveys - a possible indicator, but surveys are talk and desertion is action.
- Quality Scores. A fall in quality represents a fall in performance, as most of the defects identified by quality control are preventable errors that are not being corrected.
- Facilities. This gets an oblique mention. Where employee restrooms and break areas are a mess and work areas are cluttered with debris, it's an outward sign of an internal attitude of disrespect for the firm.
- Trust Issues. Where employees have little faith in their leaders' stated intentions, or feel the need to reinterpret what is said, it is a sign that they do not regard their leaders as trustworthy.
There's a pot shot at companies that have been in the news in recent decades for their ethical failures. Some of these firms had very impressive-sounding statements of corporate values, but their interest in culture was skin-deep, which was quickly exposed after their collapse.
Culture By Design
In any organization, a culture will develop - and the author strongly advocates that a company take a hand in the development of its culture rather than letting it emerge of happenstance and accident. But there is no set of ideal values for every firm: the values that are right for each company depends on its competitive space, its product offerings, its target audience, and many other factors that will be unique to a given firm.
When designing a culture, the goal is to develop a set of values and corresponding behaviors that everyone in your company can embrace. When written down and summarized into a one-page document, this is what the author calls a "values blueprint."
The first step ion developing such a blueprint is to consider the values that are in effect presently - to assess what employees at all levels believe them to be as a starting point to determine what changes will be necessary. The difference between the as-is and to-be states will indicate the extent of the work to be done. More detailed information on developing this blueprint will be provided later.
The second step is to gather a committee of five to thirty people that will be in charge of the overall process of change. This should involve the rank and file employees to ensure that the process has credibility, and is not merely executive pipe-dreaming. It's also important to involve those individuals who will be critical in making the changes to be involved in the process of design.
The third step is to go on a "values retreat" - getting offsite and out of the work for a day or two to consider the data collected and hammer out a draft of the blueprint. The draft is subject to discussion and vetting throughout the company (again, not just in the executive suite). The author suggests that firms that use such a process most often find that they get more praise than criticism for the blueprint they develop.
Once the blueprint has been vetted and finalize, it needs to be executed - this involves translating the blueprint of values into specific guidelines for behaviors, which will relate to hiring, compensation, operations, and every decision made within the organization.
Without the last step, putting values into action, there's little point to having a values statement - it becomes an interesting poster to hang on the wall. Those who don't know better may be impressed; those that do will snicker.
Hiring By Design
Not every talented person will thrive in every corporate culture - that is, the most skilled an experienced person may not be the best fit for your company, and hiring must be focused on people who share the organization's values.
Some employees will act as square pegs, questioning the culture and struggling to succeed in spite of it - but the economic reality is that people need their pay, so the choice most employees make is to keep their heads down, their mouths shut, and just go along with the culture - because they need to keep their job until they can find a better one. Poor hiring practice loads a firm with people who aren't excited or happy about their work.
An interesting example: Zappos.com offers new hires $2,000 to quit within ninety days after training if they don't think they are a match for the corporate culture. (EN: Interesting, but the amount likely not enough for most workers - so it's really more of a publicity stunt than an effective technique.)
Where the "A" players have left and a firm is staffed with people who are biding their time, there us clearly a dysfunction. The narcissistic response is to take the position that you are hiring the wrong people, but it's more likely that you are hiring the right people into a wrong culture. The company they believed, and were led to believe, that they were being hired into does not match what their experience has shown them.
A bad sign is when hiring managers have much to ask about a candidate and little to say about their firm or their department: they cannot articulate the purpose and values of the firm. In these instances, managers seek to hire people whose resumes look good, whom they "like" in a vague way, and hope for the best.
A good sign is when managers know their purpose and values, and look for candidates whose skills are applicable to their purpose and whose personalities are a fit for their culture and values. If you don't know what your values are, or feel that they are something that needs to be hidden from a prospect, you can't hire the right people.
The author speaks vaguely about hiring for values: evaluating skills and aptitudes is easy - it's a matching game between the job description and the applicant's resume. Evaluating a person's values is harder. This will be discussed in chapter four, and the only hint the author provides for now is to ask them to tell a story about past experience that demonstrates their values.
A Blueprint For Values
This section is a long narrative about a hospital where the author consulted. The hospital had a good reputation in the community, but a Gallup survey of patients found their satisfaction to be shockingly low.
The assembled a committee of doctors, nurses, staff, and a few administrators who concluded that their existing values were suitable and who boiled them down to a spiffy acronym ("Twice" for teamwork, wholeness, integrity, compassion, and excellence - also useful in the catch phrase "think twice about values).
The author asserts that many culture change efforts end right there - make a poster and expect everyone else to figure it out. But to ensure that the values were "percolated" through the organization, they translated these values into character attributes (to be used in hiring) and specific behaviors for each task and position (to be used in coaching).
The point that is ultimately distilled from this case study is that culture doesn't arise naturally, even in organizations that are generally good. A firm cannot hire for the right values, nor encourage the right behaviors, if it doesn't have a clear understanding of the values and behaviors it wants in its people.
Leaders Drive Culture
Employees look to the top management of companies for guidance. "Look to" is significant - they don't "listen to" what they say, they "look to" what they do, and often find the two are in stark disagreement: employees are laid off while executives collect bonuses, employees are told to work long hours while the executives check out mid-afternoon, etc.
Leaders must demonstrate the kinds of behavior they expect of their people, and share in the same sacrifices. Their stated values must resound in the actions they take. A few examples are provided of CEOs who cut their own pay in difficult times, who are visible and accessible to employees, who put their hands to the unglamorous work they ask of others, who stop the production line in order to provide training and support, etc.
The good behavior of top management can be inspiring, but it's periodic. It's far more important for the lower ranks of management, including the manager they interact with every day, to embody the values of the corporate culture, and whose actions and decisions follow suit.
The Circle Of Excellence
People in general are driven by the desire to achieve success. What differentiates a leader from any other ambitious person is their focus: an ambitious person wants to achieve success form himself, whereas a leader wants to achieve success for an organization. Consequently, many ambitious people seek leadership positions to achieve personal success, but fail as leaders because they never translate that ambition to the organizational level.
In smaller words: leaders must live by the values and demonstrate the behaviors they expect of others.
When a leader has the right values, his vision will generate a self-reinforcing circle of excellence among those with whom he works closely, and that energy will be carried through the organization to create a positive culture. In some instances, the leader generates enough energy to power the entire organization. In other instances, especially in larger organizations run by a top executive who is not the founder, the energy will not be strong enough or it will be lost or significantly diminished along the chain of command.
This is where management comes into play - motivating and inspiring others to share the leader's vision for the future of his organization. To ensure that it carries beyond his immediate reach, a leader must communicate his expectations and reward the behaviors that conform.
People will do what they are encouraged to do - and encouragement stems more strongly to incentives and rewards than it does to motivational speeches. Where a company pays lip-service to one thing and ties a financial incentive to something else, the latter wins every time.
It is critical for leaders to be attentive to this, and to make sure that the values of an organization are translated into action by tying incentives to behavior that supports those values.
Some key points are summarized:
- A leader must embody the values he wants for his organization and conduct himself accordingly. This is "leading by example."
- A leader must communicate the values to the organization, explaining not only the values but the attitudes and behaviors.
- Behaviors, not speeches, drive the culture because the collective behavior of people in the organization are, by definition, its culture.
- The culture of an organization drives its performance
This follows through the complete cycle of operations for a firm - hiring the right kind of people, teaching them the values of your organization, giving them incentive to support these values, getting them to pass along the energy to others, and retaining them for the long term.