We hear so much these days about how important “culture” is for an organisation. It is, but there’s a common misconception that a happy team means that we have a good culture. While it’s definitely preferable to an unhappy team, there’s more to high performance than flexible hours, free lunches, and bean bags.
Let me explain…
Culture Is The Best Predictor of Performance
As I was preparing to speak at a conference a while ago, I started thinking about all the companies that I’ve worked with, read about, or spoken with over the years. I realised that I could put each of them into one of the following “6 culture categories” and that those categories were directly correlated to company performance.
As you read this article I’d really like you to think about which of the following descriptions best describes your organisation? And what that might mean for you as a business?
Before I get started I want to highlight that I’m writing this post a little bit “tongue in cheek”. And just to clarify – when I talk of company culture I’m referring to the norms within an organisation. The way people predominantly think, what they believe, what they value, and how they make decisions and act.
And strangely enough – (according to BCG) organisational culture is one of the best predictors of current, short term and long term business performance. From my perspective, that makes it pretty darned important for all business owners, leaders, and managers – not just HR.
So – let’s dive right in.
6 Views Of Company Culture
1. The “Default” culture
The “default” culture is created unconsciously – as opposed to by design. In this type of organisation, culture is never really thought about, spoken of, or mentioned. It’s often severely underestimated, and considered a warm fluffy that has nothing to do with business performance. There’s no intent, system or process surrounding it.
2. The “Flagstaff” culture
Have you ever come across companies who have vision and purpose statements, and values on their website and maybe even walls – but nobody really knows them, or cares about them – and your experience of the company doesn’t reflect them?
Oh, and the values are generally quite generic, insipid and spineless. They’re frequently just one word basic human qualities – not what will really set an organisation apart from anyone else; or what will decide who is hired, fired, rewarded, and promoted. And they’re certainly not reflected in the systems, processes and practices in the company, and how resources are allocated. This is what I call the “flagstaff” culture.
3. The “Happy” culture
We all know that a happy worker is a more productive worker – right? Organisations with the “happy” culture experience lower absenteeism, higher presenteeism, and lower employee turnover than the default and flagstaff cultures.
In organisations with what I call the “happy” culture, HR tends to “own” culture, and one of the primary or key metrics will be employee engagement.
But, let’s look a little closer – the questions in their employee engagement surveys are really more about being satisfied, happy, inclusive, and nice; than they are about being “engaged” – or driving improved business performance.
In these organisations it’s not unheard of for business improvement initiatives and changes to be dropped as soon as they ruffle a few feathers. Effort goes into avoiding conflict, tension or disagreement – and keeping people “happy”. And believe me, in these organisations when the apple cart is shaken there WILL be unhappy people – as there is often significant resistance to change. The employee engagement scores are often at odds with the actual behaviour of employees.
4. The “Engagement” culture
And then there’s the “engagement” culture. This is where real engagement truly kicks in. It describes a culture where employees get involved; go above and beyond; stick their neck out by challenging the status quo; question authority and each other; and are open, candid and respectful. It’s where employees are curious and pro-actively learn and stretch. In this environment – conflict, disagreement and failure are not necessarily negative – they’re seen as a necessary source of friction to polish a precious gem. This is where people are predominantly willing to experience personal discomfort for a “greater good”.
Engagement cultures are typically associated with high trust and “decentralised” environments where coaching and courageous conversations are the norm – and innovation, adaptation, and progress is a natural by-product. Although this culture is often largely facilitated and nurtured by HR – it is either driven by, or actively supported by the business owner or senior leaders. And values are indeed heuristics for decision making.
Any company who tries to scale agile or innovation without having at least an “engagement” culture will experience a “culture crunch”.
5. The “Strategic Alignment” culture
One of the reasons why reportedly only 1 in every 8 or 9 business strategies actually succeed is because the strategy is not supported by an appropriate culture. In the “strategic alignment” culture the business strategy and culture are consciously “designed and aligned” at the highest levels. They are supported by associated and complementary practices, systems and processes – and nudges (see Richard Thaler).
The impact that culture has on the success or otherwise of strategy implementation is why management guru Peter Drucker is famously quoted as saying that “culture eats strategy for breakfast”.
6. The “Culture As A Strategy” culture
And then there are a few (very few) companies where their unique culture is their strategy and key to success. It’s what makes them stand out as unique, and quite possibly provides the most sustainable source of competitive advantage that there is.
Bill Gore left Du Pont in the late 1950’s where he felt his creativity and innovation was stifled and undervalued to create a company culture designed to encourage and support innovation and creativity. It’s not surprising that today W L Gore is one of the most successful and prolific companies on the globe when it comes to innovation. They’ve created over 1000 products including Goretex – and they’ve supposedly never made a loss.
Tony Hsieh sold LinkExchange because even he despised the workplace they’d created, and didn’t want to work there any more. He went to Zappos to deliver wow and happiness to employees, customers and everyone involved – and that’s exactly what they’ve done. In 2009 Zappos sold to Amazon for $1,2Bn with the condition that Amazon would do nothing to tamper with the culture – and why would they?
Bridgewater Investments manages approximately $150Bn in investments, and is the world’s largest hedge fund firm. Many years ago the founder Ray Dalio almost sent the company broke by believing he had all the answers. His response was to redesign the company to become a deliberately developmental organisation devoted to “challenging the truth”; meritocracy, and learning.
Jos De Blok started a nursing services company in the Netherlands designed to bring the human touch and relationships back to health care – challenging an industry where “efficiency” was getting in the way of good health and affordable quality care. Today just 10 years on, Buurtzorg provides more than 75% of the nursing services for the entire country, and by focusing on customer care has ironically boosted efficiencies massively – reducing the cost of care and recovery time by approximately 40%. Their success and ability to scale rapidly has been created on the back of “autonomy” of those at the front line, and unwaivering commitment to a culture of coaching.
As you can see, there are a huge range of opinions on the importance and role of culture, and it’s relationship to business performance. They range from culture means nothing to…
Culture is not the most important thing, it’s the only thing – Costco’s Jim Sinegal
If you enjoyed this article, you may also enjoy 6 Ways To Motivate Your Team To Excel.