IN REAL TIME
PART How to Create and Measure High-Performance Company Culture
By Joseph Fung
How to Create and Measure a High-Performance Company Culture
About TribeHR TribeHR helps companies achieve greatness by being the world’s first Social HR Platform: The first to connect people, values, goals and results; The first to connect employees to managers and teams to each other; The first to create an HR platform that helps leaders truly engage employees to the mission and values of the organization, and create engagement by helping celebrate successes in all parts of the organization. It does this with software that is a joy to use, delivers insights without the social media noise, and eliminates the usual drudgery of HR administration—so there’s more time to focus on what’s important.
Copyright © TribeHR Corp. 2012 Waterloo, ON, Canada and Waltham, MA, USA. All rights reserved. First Published September 2012. http://www.tribehr.com
The$World$Has$Changed—Has$Your$Business?$.....................................................$5 What’s&Culture&Got&To&Do&With&it?&....................................................................................&5 Ingredients&of&High&Performance&Cultures&........................................................................&6 Clear&Vision&....................................................................................................................&6 Shared&Values&................................................................................................................&7 EndGtoGEnd&Culture&........................................................................................................&7 Everyone’s&Job&...............................................................................................................&8 Transparency&.................................................................................................................&9 Communication&...........................................................................................................&10 Learning&.......................................................................................................................&11 The&Bottom&Line:&the&Value&of&Values&.............................................................................&12 Adaptability&.................................................................................................................&12 Enagement&...................................................................................................................&13 Return&on&Investment&(ROI)&.........................................................................................&14
How to Create and Measure a High-Performance Company Culture The World Has Changedâ€”Has Your Business?$ Business has changed because our world has changed. Information moves at a breakneck pace, and accumulates even faster. Competitors morph in response to market shifts as leaders strive to create business models that can pivot on a dime just to remain relevant and preserve market share. Todayâ€™s employees are better informed and have higher expectations of their employers. At the same time, employers desperately need people with commitment, creativity, resilience and agility to succeed in this whirlwind of change. In response to these needs, the human resources industry is evolving; growing beyond its compliance roots to emerge as the primary driver of corporate culture and employee engagement. Now more than ever before, business success is about finding, engaging, and keeping the right people. In this new world of business, there is a single question you need to ask yourself: Is your business keeping pace?
Whatâ€™s Culture Got To Do With it? Whether or not you acknowledge it, your company already has a culture. All businesses have one, either by design or (more commonly) by default. The challenge lies in fostering a culture that is truly exceptional. Why? Because companies with exceptional cultures attract and retain the best employees, nurture strong and lasting customer relationships, and deliver consistently solid business results. In Corporate Culture and Performance, authors John P. Kotter and James L. Heskett share evidence that companies with strong adaptive cultures based on shared values outperformed other companies by a significant margin. Over an eleven-year period, companies that emphasized all stakeholders grew four times faster than companies that did not. These companies also had job creation rates seven times higher, stock prices that grew 12 times faster, and profit performance that was 750 times higher. In Built to Last, Jim Collins and Jerry Porras show that over a period of several decades, companies that consistently focused on building strong corporate cultures
outperformed companies that did not by a factor of six and outperformed the general stock market by a factor of 15.i Ironically, the pursuit of these successes often sets the stage for a poor culture, which in turn undermines any chance of business excellence. It is an unfortunate truth that the importance of building and maintaining a great culture often gets lost in a deluge of other business tasks that are perceived to be more urgent. While driving revenues and controlling costs are important to the success and growth of a business, when a company’s culture erodes (and it will, if unattended!), profits and overall performance will soon deteriorate. A weak or uninspired business culture leads to unsatisfied and despondent employees—disengaged, unhappy people who do not foster excellence. In other words, while the lack of an exceptional culture may go unnoticed for some time, the negative impact of a poor business culture will eventually destroy competitive advantage and can lead to business decline or failure. Conversely, investing time and resources into developing a culture of success early in the life of the business will pay immediate and sustained dividends. A poor or deteriorating culture is common when the workplace is chaotic, company values are unclear, employees feel unappreciated, and managers are ineffectual. These conditions often occur when management focuses solely on bottom line results, rather than on culture, the basic driver of high performance. The evidence shows that businesses are stronger, healthier, and more profitable when leaders and managers pay attention to developing a high performance culture.
Ingredients of High Performance Cultures Simply saying, “we want an exceptional culture” doesn’t create one; it takes time, focus, and a few key ingredients. While the specific details of your high-performance culture will vary depending on your leadership style, company brand, and business identity, the essentials remain the same. Clear Vision High performance culture begins with clarity of vision that springs from clarity of purpose. Everyone in an organization needs to know what they are striving to achieve and why. People work best when they believe in the vision of an organization; when they can make decisions on their own in pursuit of that vision; when they have the skills, knowledge and training necessary to be successful in their roles; and when they understand the purpose of their jobs and how they contribute.
As a leader, you know that you must always be driven and passionate about your “why”, but you can’t be everywhere all the time. You have to rely on each individual in your organization to effectively represent the company to partners, customers, and the community. If they cannot explain why the company exists, your vision will not permeate throughout the organization to create the necessary foundation for the highperformance culture you need. It is not enough to articulate what the company does and for whom—you must also clearly explain why the company is in business. You’ll have to persistently communicate this vision in a way that helps employees at all levels see how the vision relates to their jobs and enables them to pass the message along to others. Shared Values At its most basic level, business culture springs from the character, beliefs, and behavior of decision makers. Values, expressed verbally or in writing, that are not reflected in the actions of company executives and managers will not become part of the organizational culture. In fact, any contradiction between what is communicated about company values and what is done by management will generate cynicism and may result in significant backlash from employees. To prevent this, as a leader you must examine your own values and address any inconsistency between what you want your organization to stand for, what you personally believe, and your day-to-day actions. Having established clear organizational values and gained a commitment from everyone in a leadership position to operate by those values, it is essential that you communicate what is expected from your entire team—and make sure to be the first to lead by example. In high-performance cultures, core values are shared by everyone in the organization and are demonstrated daily through the actions and decisions made at every level. This “lived” value-based foundation becomes the spirit and driving force of the working culture at a fundamental level. In the most effective organizations, shared values extend beyond the company to reflect a common perspective with suppliers, partners and customers. End-to-End Culture Companies with high-performance cultures know that combining culture and brand is a recipe for success. Integrating corporate culture and branding means exposing your customers and business partners to your internal culture. Do not hide what goes on behind the scenes, but instead take every opportunity to openly express what it is that makes your company great. Just as company values are more than words on the reception room wall, your culture is more than something you talk about when interviewed by the media. Deliberately or
by default, company culture is expressed in everything your company does, everything it creates, and every interaction that takes place; it is demonstrated at all levels of your organization, both internally and externally. From suppliers to customers, from technical support to accounting, from the CEO to the receptionist: company culture is everywhere and it pays to make defining and communicating your end-to-end culture a priority. Everyone’s Job If you call GoDaddy’s customer service line you will quickly get a feel for the company itself. When talking to a customer service representative (CSR), you soon see the company’s culture shine though. The person on the other end of the line has a personality, doesn’t sound like an automaton, and generally sounds happy with their job. All-in-all, when talking to a GoDaddy CSR you get the feeling you are talking to a helpful friend. They offer exemplary customer service. You can multiply that positive experience in your organization by making customer service everyone’s job. When all employees consider themselves to be CSRs, your customers benefit. But when all employees consider themselves to be CSRs and they embrace that everyone is someone’s customer, every person in your organization and every person connected to your organization benefits. In high-performance cultures, people think about how their jobs affect both internal and external customers, and they are given latitude to make decisions and solve problems in alignment with company values. The idea that employees who have no direct interaction with customers can ignore customer service cannot co-exist with a culture of success. Leadership must do whatever it takes to erase this idea and replace it with the belief that customer service is everyone’s job. Imagine your company’s CEO spending a day working directly with your most junior employees. This kind of job swapping can be one of the most powerful tools in a high performance culture. To implement it properly, senior employees (the CEO, COO, CFO, etc.) temporarily take on the roles of front line employees and vice versa. This accomplishes three important goals: Management gains direct insight into the daily experiences of employees; employees see management experiencing their reality; and employees get first-hand experience of what management does. This creates a very strong symbiotic relationship and reinforces the recognition of internal customer relationships. To be effective at building the perception that customer service is everyone’s job (and everyone is a customer), job swapping requires commitment. If the CEO is answering the customer service line, she has to stay there and work a full shift, just like everyone else, and take standard breaks, just like everyone else. Likewise, employees can’t abuse
the day of “power” they have been granted by going golfing. Within the limits required by issues of confidentiality, employees filling executive level and upper management positions should be given the opportunity and authority to deal with real situations. Zappos.com is ranked as one of the top ten companies to work for and is a leader in high performance culture. The CEO of Zappos.com, Tony Hsieh, regularly works the phones and it has inspired his employees. His employees are faithful, happy, and productive because Tony is one of them (even though he happens to own the place). “For%me%as%a%team%member,%knowing%that%my%CEO,%who%is%in%the%media%talking% about%our%exceptional%customer%service,%is%one%of%the%people%that%make%it%happen% is%huge.”% –%Corey%Schreiber,%Zappos%Sr.%Representative%
Tony is not new to business success. At age 24, he sold his first company, LinkExchange, to Microsoft for $265 million. Zappos.com was started in 1999 and is now worth more than $1 billion. Tony credits his employees and their acceptance of customer service as everyone’s job for most of that growth. In turn, his employees feel they are an integral part of the company’s success and project a positive energy and mindset that is immediately evident to all customers, internal and external. Transparency “Transparent organizations must share information that allows stakeholders to make informed decisions regarding their relationship with the organization. This is true of all stakeholders, internal and external. This does not mean that they must share all information, but that information is substantial and useful to the stakeholders. Transparency also requires accountability. Transparent organizations are accountable for their actions, words, and decisions, because these are available for others to see and evaluate.”ii A 2009 studyiii of the relationship between organizational transparency and employee trust concluded that the results “…provide strong evidence that trust and transparency are positively related. As employee perceptions of organizational transparency increased so did trust… Additionally, the three components of trust (competence, integrity, and goodwill) and three components of transparency (participation, substantial information, and accountability) are positively related, while the fourth transparency component, secrecy, has an inverse relationship with the other components.” In other words, “Because I told you to” won’t cut it if you want a truly high performance culture. For that, you need trust—and trust can’t grow in the dark.
This doesnâ€™t mean that confidential or sensitive competitive information should be broadcast, or that employees should be made to stress over every obstacle the company faces. It does mean that employees need to know what impacts them directly and why. It means that they should have access to as much information as can be shared about company strategy so they can understand what drives the vision, and contribute in a meaningful way. It means that informed employees should be encouraged to ask questions and offer feedback in an open dialogue. Extending this environment of openness beyond the boundaries of the company also allows customers and other external stakeholders to make informed decisions about dealing with you and builds your reputation as a trusted organization. Communication Communication has always played a significant role in the workplace in various forms, including phone calls, meetings, memos, one-on-one conversations, reports, and more recently, email and text messages. In recent years, the requirement for communication has expanded, beyond a largely top-down management-driven flow of information, to become a matrix of vertical and horizontal channels each carrying a steady, bi-directional stream of data. Employees at all levels are finding that the ability to communicate effectively plays an increasing role in their success on the job. This is especially true as our economy relies more and more on knowledge and service workers and increasingly requires even production workers to incorporate collaboration and teamwork into their work and to master complex technologies.
Communication is more than just a tool for getting a job done—it is also a significant factor in the development of trust and organizational culture. Timely, accurate, and useful information communicated in an open environment that encourages feedback and participation supports a culture of success. Of course, for true communication to happen, the intended message must be received accurately. A recent blog post by China Gorman discusses MetLife’s 10th Annual Study of Employee Benefit Trendsiv. The finding that caught her eye was the widening gap between employer and employee perceptions of company loyalty toward employees (reproduced above). The study results show that more employers feel a very strong sense of loyalty to their employees, but these same employees perceive an opposite trend. To ensure that communication reinforces a culture of success, make it clear, make it unambiguous, and confirm that it was received as intended, because perception is reality. It is also important to note that more is not always better. Increased communication that is contradictory or inaccurate creates distrust and apathy. On the other hand, if increased communication consistently demonstrates and reinforces company values, it is an antidote to apathy and help build trust. Research into the role of communication in fostering trust and employee involvement shows "that in the relationships with coworkers and supervisors, it is quality, not quantity, of information that best predicts trust. In contrast, in the relationship with top management it is the quantity, rather than quality of information, that is significant. In all cases, trust was very closely tied to perceptions of organizational openness, which in turn predicted employee involvement."v Learning High performance cultures recognize that “Learning is valuable, continuous, and most effective when shared, and that every experience is an opportunity to learn” vi. It is generally agreed that ‘Learning Organizations’: • • • • • •
Provide continuous learning opportunities Use learning to reach their goals Link individual performance with organizational performance Foster inquiry and dialogue (making it safe for people to share openly and take risks) Embrace creative tension as a source of energy and renewal Are continuously aware of and interact with their environmentvii
One accepted definition of learning organizations states that they are “characterized by total employee involvement in a process of collaboratively conducted, collectively accountable change directed towards shared values or principles.”viii In these
organizations, learning begins with an employee’s first onboarding experience and continues through every stage of his involvement. In a learning organization, employees look to their leaders for direction, and see a demonstrated commitment to learning and personal growth in both policies and actions.
The Bottom Line: the Value of Values When employees, customers, and even suppliers recognize that a company stands for something, believes in something, and pursues a worthy vision with a passionate sense of purpose, they all try harder to make it succeed. Employees become focused and fully engaged in the mission. They adapt to change with astounding nimbleness and become a continual source of creativity and innovation that fuels growth and value creation. Adaptability, employee engagement and improved profitability are the true measures of the value that values bring to your company.& Adaptability A company that accepts a default culture often operates much like a Flintstones cartoon rerun. Fred shows up to work unenthused and begrudgingly stamps his timecard. Boring work is punctuated only by his daily summons to the boss’s office for the standard bullying tirade over something that is entirely out of his control. At the end of the day when the whistle blows, Fred yells “Yabba Dabba Doo!” in celebration as he escapes one more day of tedium with his paycheck clutched in his hand. If your business culture is ailing, this likely reflects the typical workday for your employees. With little to motivate them beyond a paycheck, employees are listless about their work and give little thought to the company’s success or survival. Worse still, when employees and managers are just punching time-clocks and saving their energy and creativity for the weekends, a company becomes rigid and inadaptable. Changes in products, procedures, and processes, which may be vital to continued success, are met with feigned enthusiasm at best and more often with resistance or outright subversion. That’s why the top companies in the world, such as Boeing Aircraft and Zappos.com, put substantial resources into maintaining exceptional business cultures. They don’t do it because it is the chic thing to do; they do it because they recognize the value of a loyal, committed and adaptable workforce. Every employee, from the CEO down to the most junior intern, is part of a family committed to seeing the company grow, which translates into better opportunities for everyone. This commitment shines through, not only in behavior in the office, but also through interactions with external parties. Consequently, an exceptional culture translates into greater customer satisfaction – the cornerstone of successful businesses.
When a business culture is exceptional, employees enjoy going to work. They are there for more than just a paycheck. They are part of a team that has a common interest, a common goal. Their coworkers are their friends. They know that if they succeed in their individual tasks on a regular basis, the company is more likely to succeed overall. They know that the company’s success will translate into even more positive energy, as well as perks, bonuses, raises, and recognition. Employees know this, not because it is written in the staff handbook or posted on the wall; they know it because they experience it in the way things are done every day, by everyone in the organization. Culture permeates an organization. When the resident culture is one of success and high performance, it makes a company extremely adaptable. Employees readily accept changes that push them outside their comfort zone because they know that stretching is needed, recognized and rewarded. They know that being adaptable leads to success for them and the company. They know that they are an integral part of an organization that excels by taking on new challenges. When all employees feel this way, the adaptability of the entire company is boundless. High adaptability is one of the strongest advantages that companies realize from developing and maintaining exceptional cultures because exceptional business cultures are the most effective breeding grounds for adaptability and resilience. Enagement According to Inc. magazine, disengaged workers cost companies approximately $350 billion dollars a year in the United States. But what exactly is employee engagement? In 2006, the Conference Board reviewed the extensive volume of research available on the subject and distilled the following definition: "employee engagement is a heightened emotional connection that an employee feels for his or her organization, that influences him or her to exert greater discretionary effort to his or her work"ix. From the data, the Conference Board identified a number of recurring themes, representing factors that contribute to or support employee engagement, including; • • •
• • •
Trust and integrity: How well managers communicate and 'walk the talk'. Nature of the job: Is it mentally stimulating day-to-day? Line of sight between employee performance and company performance: Does the employee understand how their work contributes to the company's performance? Career growth opportunities: Are there future opportunities for growth? Pride about the company: How much self-esteem does the employee feel by being associated with their company? Engaged coworkers/team members: Engagement is contagious.
Employee development: Is the company making an effort to develop the employee's skills? Relationship with one's manager: Does the employee value his or her relationship with his or her manager? x
The overlap between these themes and the ingredients of high performance cultures is immediately evident. Indeed, a culture of success springs directly from deep employee engagement, which in turn emerges from an environment that fosters trust and the alignment of vision and values throughout the organization. & Although implicit in the themes above, it bears noting that employee engagement is also driven by recognition and appreciation. And it’s not always money that has the greatest impact. Often the day-to-day acknowledgement of work well done and recognition of the value it brings to the organization can mean as much or more. Encouraging peer recognition of achievements also bolsters employee engagement. Fully engaged employees are often so committed to the company’s success, they will even stay with an employer that pays less than the competition. Committing the time and resources to develop a high performance culture pays dividends in the form of employee engagement. One last finding from the Conference Board report that illustrates this fact: Engaged employees bring a 20-28% productivity and performance advantage to the table. Return on Investment (ROI) As the concept of high performance culture gains traction in the business world, there can be little doubt about the correlation between culture and financial performance. However, actually quantifying how your culture is affecting revenue, net income, productivity or stock price can be challenging. In the absence of internal data, most companies first look for external examples to begin to determine how a high performance culture might impact their financial results. One such example is a 2007 proprietary survey of over 115,000 individuals in 231 organizations conducted by McKinsey & Company. This study found strong correlations between organizational performance culture and financial performance. The survey found that companies in the top quartile of organizational performance, for example, were 2.2 times likelier to have above-average EBITDA margins than companies in the bottom quartile of organizational performance. Comparing results across nine measures of organizational performance, the study determined that performing well in at least five of these metrics (i.e. exhibiting a high performance culture) “provides an 83% chance of beating median EBITDA margin”xi.
Another good source of information is Kotter and Heskett’s book “Corporate Culture and Performance”, which shows that firms emphasizing input from all managers and people in leadership positions, regardless of level, performed much better than companies without those cultural features. Over an 11-year period, firms were compared across multiple categories with the following results: Figure 1 - The economic and social costs of low performance cultures
Source: John P. Kotter and James L. Heskett, Corporate Culture and Performance.
Companies that actively fostered performance-enhancing cultures substantially outperformed those that did not emphasize culture, in every category. According to their research, companies lacking an exceptional culture (i.e. performance-degrading cultures) inhibit the adoption of strategic or tactical changes, and generally experience a negative financial impact. Kotter and Heskett conclude that corporate culture will likely be a deciding factor for the success or failure of firms in the next decade. Surprisingly, corporate cultures that inhibit their own long-term financial performance are not rare. In fact, performance-degrading cultures often develop slowly in the background, while a company is performing well, and go undetected until well established. Once the negative culture digs in, like an invasive plant species, it begins to strangle the organization and is almost impossible to get rid of. In a March 2012 NY Times op-ed piece, “Why I Am Leaving Goldman Sachs,” Greg Smith, the former Executive Director of Goldman Sachs’ derivatives business in Europe, the Middle East and Africa, shares the following impression of the cultural decline within Goldman Sachs: It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility,
and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief. Just as high performance cultures enhance financial performance, negative cultures corrode it. The resulting employee apathy and disengagement makes it almost impossible to achieve corporate goals, leading to frustration and even desperation among top-level managers who are responsible for delivering results. Unfortunately, many managers fail to make the connection between culture and performance. According to a 2005 survey by the Aspen Institutexii, senior management at 365 companies in 30 countries answered questions regarding company values. Most of those surveyed believed that values can influence relations and reputations but did not see a direct connection between corporate culture and growth. A majority of survey participants indicated that adaptability, productivity, product quality and innovation are important to strategy, but they have no real direct effect on revenue and growth. Essentially, their responses suggest that they believe culture has nothing to do with the bottom line. The kicker—a full one-third of those surveyed were chief executives or board members! In spite of this disconnect, there is a growing body of evidence that shows a direct and substantial connection between organizational culture and financial performance, primarily through improvements in employee effectiveness. And employee effectiveness depends on culture and the environment in which employees work. Company leaders and managers would do well to bear in mind the words of Dr. Lloyd M. Field, PhD, SPHR: “The successful company will also recognize that its human resources are the only ones that can reason, and that its people should be treated with the dignity and respect it affords its customers.”xiii *** If you are not ready to build a high-performance culture by defining and measuring your company values, then stay tuned for Part 2 in this series, Why Real-Time Technology Matters to Human Capital, coming October 22nd. If you’re ready to unleash the power of your human resources, then get started with TribeHR for free today.
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Published on Jan 8, 2013
Published on Jan 8, 2013
Joseph Fung, CEO of TribeHR, a social HR platform, has published an e-book, “How To Cultivate Success In Real Time.” In the first installmen...