Management guru Peter Drucker said, “Culture eats strategy for breakfast.” Is there a direct cause and effect between having a strong culture and business performance?
Management guru Peter Drucker said, “Culture eats strategy for breakfast.” But many business owners do not see focusing on culture as necessary and practical. The concept of company culture may seem soft, intangible and disconnected to making money. Even if a business owner sees the link they are uncertain how to create and sustain the culture they want. Is there a direct cause and effect between having a strong culture and business performance?
In their 2011 book, Corporate Culture and Performance, Harvard Business School researchers John P. Kotter and James L Heskett, conducted a groundbreaking analysis of how the culture of a company powerfully influences economic performance, for better or for worse. The researchers identified key measures of a healthy performance culture and compared them to company performance. The findings were very profound. Compared to unhealthy culture companies those with a healthy, performance culture showed:
Revenue growth was over 4 times better
Employment growth was over 9 times better
Equity (stock price) was over 12 times better
Net Income growth was over 750 times better
Who would turn down 700% net income growth over a decade? So the questions for the business leader on a practical level:
What is company culture?
How do I create and sustain the culture I want?
The textbook definition of culture is “Characteristic patterns of thinking and behaving shaped by the shared beliefs, values and underlying assumptions of an organization’s members.” The key part of this definition is the organization’s members: its people. Computers, inventory, websites, assets, liabilities and equity do not create the culture, your employees do.
Human Resources systems and procedures are the blueprints for building a sustainable healthy performance culture. Business leaders can clearly determine what this infrastructure is and must be the guardians of its health. Let’s look at the building blocks of a culture.
Do you have a written definition of the culture you want? This takes the form of a Mission, Vision and/or Purpose statement, coupled with a statement of values. These written documents ensure consistent, repeatable communication of the company culture.
Does your recruiting reflect your culture in tone, ad placement, images and requirements? A well crafted recruiting strategy will only attract those applicants that are consistent with your culture for your further consideration.
Does your selection process eliminate candidates that do not fit? Use focused interview questions designed to identify values that drive successful behavior. Background and reference checks can also identify the traits you want, and more importantly, that you do not want. Even the pace and timing of the selection process can send signals. Your selection process needs to yield only fitting candidates.
Do you have an on-boarding process that gives employees a consistent communication of your culture? Look at your offer letters, orientation, mentoring programs, job descriptions and performance plans and make sure they are grounded in your culture. First impressions are after all lasting impressions.
Is your work environment project your culture? Open office floor plans versus private offices, décor, dress codes, signage, and stationary are physical statements. Attributes such as cleanliness, organization and formality can be modeled. The work environment is also represented by jargon, humor and meeting styles.
Have you implemented intentional formal and informal feedback processes reinforcing your culture? Training programs are a great place to re-state and affirm cultural values. Performance feedback should consistently point to these values. The nuances of how an employee performs their work can be as important as the quantity or quality of the output. Each opportunity to provide feedback is a chance for cultural reinforcement.
Do your reward and recognition programs tie to your culture? Be sure these powerful tools are not flavor of the month type, reactionary events. Design reward programs with the culture in mind equally with business objectives.
Do you defend your culture with a disciplinary process rooted in your culture? Reprimand, and when appropriate, terminate employees who exhibit behaviors that are inconsistent with the culture. If you do not constantly defend your culture by ejecting misfits, you will lose to competing and subversive cultures.
The most important consideration regarding your company culture is that you do have one. Unfortunately it may not be what you think it is. Frequently participants in the reality TV show Undercover Boss learned that the culture they thought that they had was not the one that really exists. Get out and listen. Hear what isn’t being said as well as what is. It is within your control to define and champion the healthy performance culture you need. What is your culture: Wheaties or Fruit Loops?
Russell Lookadoo is the HR Guy for small business. As president and chief strategist for HRchitecture®, he works with business leaders so they accomplish their goals by effectively using their teams. Russell brings over thirty years of experience designing and implementing performance management, motivational and rewards solutions that achieve business strategies in organizations ranging from a small manufacturer to the second largest bank in America. He holds the Senior Professional in Human Resources designation from the Society of Human Resources Management and the Certified Compensation Professional designation from World at Work. Russell attended the University of North Carolina on the prestigious Morehead Scholarship and graduated with a Bachelor’s in Industrial Relations. www.theHRguy.biz