Changing your company culture with feedback

Contents

01

INTRODUCTION

02

01|WHY CULTURE MATTERS

05

02|NEGATIVE INFLUENCES ON COMPANY CULTURE

07

03|IMPLEMENTING A CULTURE CHANGE

08

04|MAP OUT YOUR COMPANY’S CULTURE

09

05|CREATING NEW NORMS

11

06|REINFORCING YOUR COMPANY CULTURE WITH FEEDBACK

INTRODUCTION

Company culture has been painted as the remedy to the major challenges facing companies today. From employee engagement to customer satisfaction to growth, thought leaders and HR experts have prescribed a strengthening of culture to treat a wide range of issues.

A 2015 study by Deloitte University Press found that 87% of the organizations surveyed cited culture and employee engagement as their top challenges.[1] However, there are also many misconceptions about what culture is and how much control we have over it.

87%

OF THE ORGANIZATIONS SURVEYED CITED CULTURE AND EMPLOYEE ENGAGEMENT AS THEIR TOP CHALLENGES

Company culture is made up of the norms, values, beliefs and vision that define how people interact within an organization. Rather than perks and office spaces, company culture is the driving force behind your entire company’s motivation and actions. It impacts your company’s focus, influences behaviors and sets guidelines.

When a company lacks mission and purpose employees don’t have a clear roadmap for what the company wants to achieve, how they want to achieve it, and what skills are needed.

Whether or not you are aware of it, your company has its own culture. The question is how can you guide your company’s culture to achieve your company’s objectives?

This white paper will elaborate on the positive and negative influences that can impact your company’s culture.

Then we’ll discuss implementation, including the importance of mapping out a clear and inspiring purpose and set of values to guide the process. With this roadmap in mind, we’ll then discuss the three stages to norm socialization that will help you infuse your vision within the company. Finally, we’ll discuss how you can maintain and reinforce your culture over time.

01 | CHANGING YOUR COMPANY CULTURE WITH FEEDBACK

01| WHY CULTURE MATTERS An effective culture can impact your company in several ways: Motivation: In an article in Harvard Business Review Lindsay McGregor and Neel Doshi, authors of Primed to Perform: How to Build the Highest Performing Cultures Through the Science of Total Motivation, explain that play, purpose, potential, emotional pressure, economic pressure and inertia are the six main reasons why people work.[2] They found that the first three have a positive impact on motivation, while the last three were negative forces that actually drain motivation. Based on studies they concluded that: why we work determines how well we work. When employees enjoy their work (play), identify with the values and goals of the job (purpose), or when it contributes to their own professional goals (potential), performance levels skyrocket. These three elements can only be achieved when a company has a strong culture and set of values in place. By combining these elements they came up with the ToMo (total motivation) formula to measure the worth of culture: (10 x the score for play) + (5 x purpose) + (1 2/3 x potential) – (1 2/3 x emotional pressure) – (5 x economic pressure) – (10 x inertia)

41%

ONLY 41% OF EMPLOYEES ACTUALLY KNOW WHAT THEIR COMPANY STANDS FOR

Customer Satisfaction: Your employees are your company’s representatives. If they’re engaged at work and believe in your brand this will come across to the customer.

Through their studies in the airline and grocery industries, McGregor and Doshi identified a distinct link between customer satisfaction and company culture. This correlation was so strong that the difference in revenue between salespeople in strong and weak company cultures was 30%. However, a Gallup poll showed that only 41% of em-

02 | CHANGING YOUR COMPANY CULTURE WITH FEEDBACK

ployees actually know what their company stands for and how their brand differs from competitors.[3]

A STRONG PURPOSE BOOSTS EMPLOYEE CONFIDENCE

65%

55%

48%

Growth: Having a strong culture in place allows you to give more autonomy to your employees, allowing you to scale, while still holding on to what’s most important for your business. This was a chief concern of Zappos’ CEO Tony Hsieh. As the company began to grow he wanted a way to maintain its commitment to customer service and its motto of ‘keeping things weird’. To do this he institutionalized a set of company values that all employees live by and centered recruitment around culture fit, rather than simply skill set.

Deloitte found that employees who work for companies with a strong sense of purpose are more confident in their company’s ability to deliver top quality products and service (65%), focus on long-term sustainable growth (55%), and have a clear understanding of the company’s purpose and commitment to core values (48%). A further 83% of respondents working for companies with a strong sense of purpose believe their company is prepared to meet industry disruptions, compared to 42% in weak culture environments.[4] Attracting Top Talent: It also helps you to attract the best hires. Today potential hires are looking for more than just a good salary. Generating profit is not enough. Millennials in particular are motivated by working environments that have a strong sense of purpose and values. When Deloitte asked respondents what the most important aspects of their company culture were most responded: providing business services and products that have a meaningful impact on customers (89%) and on society (84%). Another 77% cited education, experience and/or mentorship ben-

03 | CHANGING YOUR COMPANY CULTURE WITH FEEDBACK

efits as being important aspects of their company’s purpose. Volunteering and donations were also an important factor.

PROBABILITY OF TURNOVER RICH CULTURES

13.9%

WEAK CULTURES

48.4%

Employee Retention: Finally, employees today are not just looking for a job, they’re looking for a community in which collaboration and knowledge-sharing are fostered. A Google survey found that 88% of respondents who strongly agreed that their company’s culture fostered collaboration and knowledge-sharing also agreed that employee morale and job satisfaction were high in their company.

[5] According to a survey by Officevibe, 58% of men and 74% of women would refuse a job with higher pay if it meant not getting along with their colleagues.[6] Columbia University found companies with rich cultures only have 13.9% probability of turnover, compared to 48.4% in those with a weak culture.[7] In an employee survey, peers and camaraderie were cited as the number 1 reason employees go the extra mile, not money.

Company Image: The information age has brought about increased transparency and scrutiny. Glassdoor, Linkedin, Indeed and Fortune’s ‘100 Best Companies to Work For’ all base their rankings on employee critiques of company culture. However, employees and potential hires are not the only ones impacted by a company’s culture, customers and stakeholders also base their decisions on this information.

In a survey, Deloitte found that 81% of respondents working for companies with a strong sense of purpose also said stakeholders trusted their leadership team. Seventy-four percent said investors were confident in their growth prospects over the next year. In fact, the companies included in Fortune’s ‘100 Best Companies to Work For’ list (based on employee reviews of company culture) experience a 14% average rise in stock prices per year, compared to 6% in the overall market.[8] As Hsieh explained in a blogpost on the Zappos website: “Your culture is your brand”.

04 | CHANGING YOUR COMPANY CULTURE WITH FEEDBACK

Finally, a combined Columbia and Duke University study of over 1400 CEOs and CFOs found:[9] • More than 90% said that culture was important at their firms.

• 92% said they believed improving their firm’s corporate culture would improve the value of the company.

• 78% said culture was one of the top five things that make their company valuable • More than 50% said corporate culture influences productivity, creativity, profitability, firm value and growth rates.

• Yet, only 15% said their firm’s corporate culture was where it needed to be.

• When considering acquiring a new company, 46% would not make an offer to a company that did not align with their own company’s culture.

02| NEGATIVE INFLUENCES ON COMPANY CULTURE Only 12% of employees believe their company is effective at driving their 12% desired culture.

Feel they do not have a strong 64% work culture

Company culture should be the vision you have for your company, but this is not always the case. Only 12% of employees believe their company is effective at driving their desired culture. Another 64% feel they do not have a strong work culture. Whether you are aware of it or not, your company has its own culture. Without direction and positive influences, negative factors can take hold, shaping your culture in a way that can become harmful for your business. These elements can hinder your company’s development of an effective culture: Performance Management: A company’s performance management system can sometimes have a negative influence on its culture. Though once extremely popular,stack ranking has now been discredited by HR experts, thought leaders and even its founder, General Electric. By

05 | CHANGING YOUR COMPANY CULTURE WITH FEEDBACK

“

A HARVARD BUSINESS SCHOOL STUDY FOUND THAT EACH TOXIC WORKER COSTS A COMPANY

$12,000

IN TURNOVER COSTS.

OF RESPONDENTS SAID LEADERSHIP FAILS TO SET AN EXAMPLE FOR THE REST OF THE ORGANIZATION BY FOLLOWING THE COMPANY’S PURPOSE

21%

ranking employees against each other, the system generates a fear of failure. This leads to low risk-taking and innovation. Another popular system, once a year performance reviews, hinder modernisation and learning agility by failing to provide coaching and feedback at a pace that matches industry changes.

Little communication: Companies must ensure leaders at all levels communicate values, vision, norms, goals and major changes effectively and regularly so that employees fully understand the processes taking place. When there is little bottom up communication employees don’t feel their voice is being heard or feel intimidated to speak up, encouraging fear rather than respect. A survey by the American Psychological Association found that 1 in 4 employees don’t trust their employers.[10] A study by Fordham University found that roughly half of managers did not trust company leaders.[11] People will never be happy when jobs are being cut, but taking time to communicate the reasons for downsizing and where the company is going shifts the mood from abandon ship to mutual understanding.

Toxic employees: Competition and a toxic work environment lead to a decrease in knowledge sharing, an increase in company politics and a transfer of destructive norms. A Harvard Business School study found that each toxic worker costs a company $12,000 in turnover costs.

Employees exposed to a toxic worker are 46% more likely to be fired for misconduct themselves, resulting in the spread of toxic behaviors to the rest of the team.[12] This is magnified when the individual is in a position of authority, causing a cascade effect from managers to employees. In a survey, Deloitte found that 20% of respondents said leadership fails to set an example for the rest of the organization by following the company’s purpose.

While it may seem common sense to hire the candidate with the best technical skills, hiring for culture fit will help you to maintain the vision you have for your company.

06 | CHANGING YOUR COMPANY CULTURE WITH FEEDBACK

Focus on Profit: Deloitte found that companies without a strong sense of purpose tend to focus more on the bottom line (69%) and short-term returns (52%). A combined Columbia and Duke University study, found that a focus on figures over people can encourage unethical behavior.

Shiva Rajgopal of Columbia University explained, “Our research provides systematic evidence - perhaps for the first time - that effective cultures are less likely to be associated with short-termism, unethical behavior or earnings management to pad quarterly earnings.[13] Several scandals that have appeared in the media lately, including Volkswagen, Toshiba, Zenefits and ANZ Bank have all been attributed to toxic cultures that encouraged unethical business practices.

Resistance to change: Phrases such as “We always do things this way”, “That won’t work here” and “It’s not my problem” hinder progress. Google’s study on collaboration found that within 258 companies, 73% of employees believed their company would be more successful if they were encouraged to work in flexible and collaborative ways. Yet the biggest barriers to creating a culture of collaboration were: changing working styles and habits (22%), a lack of incentives to work collaboratively (17%) and a lack of leadership (14%).

03| IMPLEMENTING A CULTURE CHANGE If these elements are not addressed they can infect your company’s culture. A toxic culture can disrupt business, result in low engagement and high turnover, ultimately damaging your company’s reputation. However, culture can be influenced and new norms can be internalized to help companies bounce back. Even if a company is not suffering from the effects of a negative culture, creating a strong purpose and values from the beginning helps to institutionalize the right kinds of behaviors.

07 | CHANGING YOUR COMPANY CULTURE WITH FEEDBACK

04| MAP OUT YOUR COMPANY’S CULTURE As McGregor and Doshi’s study highlighted, identifying with the values and goals of your job (purpose) is one of the three key factors that motivate employees at work.

Therefore, the first step to creating your company’s culture should be mapping out a clear and inspiring purpose and set of values.

Your company’s vision and mission statements are important for mapping out where you want your company to be in the future and what you want to achieve. Unlike these elements, a company’s purpose describes the value your company seeks to contribute to society, beyond financial and personal goals. Teachers are notoriously underpaid but the purpose of their profession, opening their students minds to new ideas, is the driving force that motivates them to go to work each day. As such, your company’s purpose should connect your employees’ work to how it impacts your customers daily lives, creating an emotional rather than financial incentive to the job.

For example, Southwest Airlines’ vision is “To become the World's Most Loved, Most Flown, and Most Profitable Airline” but its purpose is to “Connect people to what’s important in their lives through friendly, reliable, low-cost air travel.”

Purpose and values are two different but intertwined concepts. Values provide guidance on the way you’d like your goals to be achieved. In an article in Harvard Business Review, managing director of Strategic Factors, Graham Kenny, describes values as the, “behavioral compass” of your company.

08 | CHANGING YOUR COMPANY CULTURE WITH FEEDBACK

Some of Southwest Airlines core values include demonstrating proactive customer service and having fun. They reinforce these values by recognizing employees for going above and beyond to help a customer in their Spirit magazine and encouraging staff to get creative with their daily tasks (a Youtube video of a flight attendant rapping safety instructions went viral). As a result, the airline has reached a 20 year customer satisfaction high and is recognized as one of the best places to work by Glassdoor, Indeed and Fortune.

However, keep in mind that this doesn’t have to be a complete overhaul. Sometimes changing just one practice can have a major impact. In his book The Power of Habit: Why We Do What We Do in Life and Business, Charles Duhigg explains how Alcoa’s new CEO boosted innovation and output by making worker safety a top company value.

Eliminating accidents on the job not only decreased hospital leave, but also increased employee trust. By encouraging communication across hierarchies about ways to improve worker safety, people were also encouraged to communicate other ideas they had on technical improvements to upper management. This increase in upward communication generated profitable new ideas. When the CEO retired, Alcoa’s annual net income was five times higher and it was considered one of the safest places to work.

05| CREATING NEW NORMS

70%

of all change initiatives fail

Once you have a purpose and list of values it’s time to start institutionalizing them into your company. For values to truly be adopted and internalized a simple top down process isn’t enough. A study by Meliorate found that 70% of all change initiatives fail. They attributed 33% of this to management behavior that does not support the change, 39% to employee resistance to change and

09 | CHANGING YOUR COMPANY CULTURE WITH FEEDBACK

28% to budget and other obstacles.[14] To complete an effective culture change a socialization process needs to occur during which values are transformed into norms that guide behavior in your company.

In their seminal paper, International Norm Dynamics and Political Change, Martha Finnemore and Kathryn Sikkink describe three stages to norm evolution: emergence, cascades and internalization.[15] Though their paper is focused on how norms are developed in society, it is also highly relevant to the creation of norms at the organizational level. The steps of the norm life cycle are as follows: Norm Emergence • During this stage communication is key. Your company’s norm entrepreneur (or the figure leading this change) should begin by calling attention to the issue you want to change by using the appropriate language and interpretation, known as a process called ‘framing’.

• Norm entrepreneurs must start off by convincing leaders to embrace the new norm. These norm leaders will play a critical role in communicating your vision and then acting as ambassadors for change within your organization.

• Stage one and two are divided by a tipping point in which a critical mass of people begin to adopt the new norm.

Norm Cascades • After the tipping point comes a process during which international socialization occurs to induce norm breakers to become norm followers.

• At this stage emulation, praise for norm supporting behavior and publicizing negative behavior is important to support the socialization of new norm(s).

• A major factor that pressures actors to adhere to new

10 | CHANGING YOUR COMPANY CULTURE WITH FEEDBACK

norms is their identity as a member of society. “State identity fundamentally shapes state behavior and identity is, and that state identity is, in turn, shaped by the cultural-institutional context within which states act.”

• In the company context, if enough employees adopt a new norm it can redefine the behaviors that are appropriate for that particular identity. At that point, the legitimacy of those who fail to adopt the new norm is called into question.

Norm internalization • At this stage norms are almost taken for granted an become second nature.

To put the norm life cycle into context, a study of nearly 20,000 employees conducted by Harvard Business Review and Tony Schwartz found that 54% feel they’re not regularly respected by their leaders.[16] When asked to respond to this claim, 25% of these leaders explained they were simply following the example of other leaders in the company.

To avoid the negative impact of bad management, Google’s Project Oxygen set out to identify the qualities that make a good manager. They found that the best managers were good coaches, empowered their team and expressed interest in their employees’ well-being. These qualities were then institutionalized into the system by creating feedback surveys and management training centered around these skills. Thus they evolved into norms that came to define what it means to be a good manager at Google. As a result, Google has retained the No. 1 spot in Fortune’s ‘100 Best Companies to Work For’ list for six years in a row.

11 | CHANGING YOUR COMPANY CULTURE WITH FEEDBACK

06| REINFORCING YOUR COMPANY’S CULTURE WITH FEEDBACK

THE BENEFITS OF COMPANY VALUES BASED RECOGNITION

88%

90%

68%

Factors such as new hires, growth and acquisitions will all continue to impact your company culture. Though giving more autonomy to your workers is a good thing, spreading out responsibilities and different layers of management makes it easier for new practices to grow that may go against your vision. It’s therefore essential that you continue to reinforce and institutionalize your values throughout all aspects of your people management strategy.

Start by promoting and recognizing behaviors that align with your new company culture. The 2015 Employee Recognition Report by Globoforce and SHRM found 88% of HR leaders saw company values based recognition to be helpful in reinforcing common values. It resulted in 90% employee engagement and 68% employee retention. The report also revealed that 32% of employees feel that celebrating milestones with peers is emotionally impactful.

[17] WorldatWork found that 94% of companies that have peer recognition programs incorporated into their company culture see a positive effect both on employee motivation and engagement.[18] At the same time behaviors that undermine the focus and values you’ve created can also be remedied with continuous feedback and coaching. This is especially important during the onboarding process and after training sessions to reinforce new skills.

Remember that McGregor and Doshi’s study into employee motivation identified play, purpose and potential as top motivating factors. Employees, especially millennials, want the opportunity to grow and develop. Developing

12 | CHANGING YOUR COMPANY CULTURE WITH FEEDBACK

their skills with values based feedback will ensure they grow with, not away from the company, generating an engaged and culturally minded workforce.

At Impraise we’ve seen that customers facing rapid growth, structural change and internationalization increase their chances of success exponentially by giving values based feedback. Using the system’s feedback customization option, companies are encouraging leaders to think, not only about results, but also about how each employee demonstrates the company’s values when undertaking assignments. By doing this, companies are encouraging employees to think about their actions in relation to company values and live them on a daily basis.

Now that you’re ready to start your own culture change remember these key steps: • Come up with an inspiring purpose and set of company values • Turn managers into role models • Root out practices and behaviors that hinder the development of your new culture • Reinforce positive practices through feedback

13 | CHANGING YOUR COMPANY CULTURE WITH FEEDBACK

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