Want to Increase Performance?
Look at Your Culture
And we don't mean plan a pizza party.
In our current and relentlessly difficult business environment,
executives continue to rack their brains, do more with less
and push through every performance initiative they can think
of. And still, lackluster performance. Maybe it's time to
examine whether the company's culture is helping or hindering
Culture is not fluff. Culture is not soft. Culture is not
a nice-to-have option. A strong and purposeful culture is
a significant factor in an organization's performance and
can tie directly to positive bottom-line results.
There's overwhelming evidence to prove it. A 1992 landmark
study by John Kotter and James Heskett, described in their
book Corporate Culture and Performance, revealed that over
a ten-year period, companies that intentionally "managed
their cultures well" outperformed similar organizations
- Revenue increased 682% vs. 166%.
- Stock price increased 901% vs. 74%..
- Net income increased 756% vs. 1%.
- Job growth increased
Why Bother with Culture Now?
Because in tough times, culture can have an even more significant impact. A company's culture becomes way more visible in tough times, when employee programs and other nice-place-to-work features often disappear. If a company has a strong and purposeful culture, it can not only survive difficult times, it can thrive.
Just look at JetBlue.
To be a profitable airline today is practically an oxymoron.
But JetBlue is one. According to a May 17 Fortune article,
the three-year-old discount carrier booked $55 million in
profits in 2002, earnings are on track to rise 42% this
year, and business is robust enough to support hiring an
average of six new employees a day. All this as the domestic
airline industry as a whole — coping with losses of $18 billion
since September 11 and projected to lose another $10 or
so billion this year — founders in, or on the brink of, bankruptcy.
JetBlue's culture is palpable. It mixes "corporate commandments" of customer service like safety, caring, integrity, fun and passion, with early-adopter use of technology (first to implement e-tickets, etc.). The company's energetic and highly visible CEO, David Neeleman, makes it his business to fly once a week, talk to passengers and clean the planes like the other "crew members" (the word "employee" isn't used: another feature of their culture).
How Does a Purposeful Culture Affect Performance?
Look at what it provides.
Stability: Culture grounds people in something unchanging. Like what families and communities do. And the positive effects are particularly important in difficult times.
Alignment: Culture builds an environment in which all employees share the same purpose and ground rules. Think how this factor supports effective teamwork.
Filter: An established culture becomes the virtual "filter" for all actions and decisions. Handy, when doing business today means not having the time to write a policy for every new situation that pops up.
Exports: Culture broadcasts what the organization stands for to the customers, business partners and shareholders. It deepens all the relationships beyond just the usefulness of the product or service, and builds something in very short supply these days — loyalty
A clear, compelling purpose plus an explicitly stated set of guiding principles to drive how business gets done. Dig into any consistently high-performing organization, and that's what you'll find — an equally high-performance culture.
Take the Pulse:
What to Look For in Your Organization
If culture provides the context for actions and decisions and is, as some have defined it, the sum of all the behaviors of all the people in the organization, likewise, any employee at any level in the organization should be able to observe the culture — or lack thereof.
The first thing to look at is values and core beliefs. Are they unknown? Posted? Known? Embraced? Lived? Embedded in all daily decisions and practices?
What about business practices? From organizational mechanics, to processes and functions that touch the employee, the customer and other stakeholders, where are business practices on the culture spectrum? Are they reinforcing the culture or flying in its face?
Do managers walk the talk? Are they clear on what they stand for and lead from their personal convictions? Do they model the values and behaviors they talk about? According to our research, 83% of respondents in best-practices organizations with established and purposeful cultures said their senior leaders' behavior is "mostly or very" consistent with the organization's values. Only 55% said the same for middle managers.
Then there's overall brand integrity. Take a giant step back and look at the macro picture of your company. Does it operate internally and externally in a way that is consistent with what it promises? Brand integrity demands that an organization be intentional and cohesive in all that it says and does.
When it comes to business performance, culture matters. As essential as the rudder on a boat, a strong culture has been proven to keep many an organization upright and moving forward through all kinds of rough seas. And the activities around shaping such a company culture could be the most critical investment of time a company makes.