Performance and Culture are Linked
Company Culture and Performance
As business leaders, we all too often default to the disciplines of business planning, finance, and marketing to grow our bottom line. Sometimes we go to operational efficiencies and examine processes but all too infrequently unless ours is a manufacturing business. The foundational disciplines are essential, to be sure, but they are only part of the story.
In his book The Advantage, Patrick Lencioni asserts that companies need these disciplines, they need to be smart, to be successful, but they need to be healthy as well. Without being a smart and healthy long-term sustainable success is unlikely.
How to improve your company culture
Long thought to be the province of HR, how to improve company culture is being re-evaluated in terms of its role in strategic and financial thinking. More family business owners understand the negative impact on margins as trends towards commoditization of their products and services increase. Price too often is the defacto transaction determinant. So, the question follows; in an environment where market forces are commoditizing our services and products, how do customers choose?
How do you win in that kind of environment? Research shows those companies that win are not winning based on “what” they offer. They are winning based on “how they’re” offering it.
Research shows that high performance is linked to culture.
In 1992 Dr. John Kotter and Professor James Heskett of Harvard University published Corporate Culture and Performance. They presented their findings to support the notion that
companies with strong, adaptive cultures outperformed their competitors whose emphasis on culture was less pronounced.
In a 2011 Forbes article, Dr. Kotter shares a table illustrating just how demonstrable the difference can be. In light of this data, we owe it to ourselves to revisit our answers, to question whether what we’ve been doing is truly what we should be doing and whether the culture we have is contributing to the solution or the problem. If the latter, how do we change direction?
What is organizational culture exactly?
So, what is company culture, how does it happen, and can you influence it? Companies have historically tackled this topic using Corporate Values as touchstones for what a company stands for. These Values, as undefined abstract ideas are not very useful in guiding and coaching how team members behave with each other and externally with customers, vendors, and suppliers.
For starters, as I’ve said, these values are always aspirational, usually abstract, and rarely well-defined, if defined at all. They might be well-intentioned but they miss the mark. Anthropologist and Corporate Strategist, Don Schmincke defines culture as the aggregation of our behaviors. That is, how we behave collectively defines our culture. I agree. Culture impacts team members’ actions from day to day and over time determine whether your culture is adaptive (effective) or nonadaptive (ineffective).
Make no mistake; ALL companies have a culture. In the recent past Fox News, NBC, and CBS have had their cultures exposed for the lack of virtue set by leadership. Where leadership is silent on the subject, the corporate culture we get is likely formed by the tone of the room’s loudest voices.
A strong corporate culture should be intentional.
Where leadership is intentional or where the loudest voices are well intended and aligned with the mission, you might luck out with a positive adaptive culture. More often, however, it’s the case that leadership is focused on the traditional disciplines of strategic planning, finance, sales, and marketing at the expense of culture. The culture that emerges then is one that evolves along an unpredictable path that fails to produce the predictable engagement, productivity gains, and long-term institutional knowledge that happens as a consequence of retention. This is how one creates a sustainable competitive advantage that can counter the impact of eroding margins!
Let me give you a non-business but relevant example that can only be explained by an intentional culture that is used to coach behaviors that are aligned with the organization’s mission. For twenty years this North Jersey public high school won as divisional or state soccer champions. This despite completely turning over their roster every four years, losing their most seasoned players annually, working with the new talent a new year brought without having the ability to recruit the finest players.
Asked how the coach explained the success over these two decades, he answered…culture. “We expect our kids to behave in certain ways and to the extent, we coach to those behaviors is the degree to which they “bring it”.
It is no different in your organization.
Business schools don’t teach culture.
I have been puzzled for over 30 years as to why business schools have not made the leap from organizational development to the discrete behaviors that form the foundation of that organization’s culture. Anthropology has long understood the behavioral link to culture. Why haven’t those truths made it across the commons to the business school?
While I might not have the answer to that question, I can tell you the data is irrefutable. Behaviors in the aggregate are what make up our organizational culture. It is not the policies that allow jeans on Friday or pet day or flex schedules, though those perks are nice. Explicitly identifying the behaviors leadership believes are critical to the mission, defining those behaviors so there is no ambiguity, then wrapping them in rituals that help us get through the drudgery of practicing something new until they become habitual IS the path forward.
This failure to express and apply the research to intentionally developing your corporate culture is a missed opportunity that will cost you more and more every day. It will cost you in employee turnover, it will cost you in productivity, it will cost you in customer loyalty, it will cost you in failed innovation, and in the extreme, it will cost you your business as competitors increase the distance between them and you.
Pathfinder Group US in Tampa, Florida
Learn more about how you can create a sustainable competitive advantage that will help your business operate in the top quartile of its industry and close the gap between its current value and what it could be worth.