Corporate Culture: Is it Worth the Hype?
So much has been written about corporate culture, and there are many different theories about how what makes a great company culture and how important it really is. But when it comes down to it, Is it worth all the time that companies and employee spend talking about it and trying to implement it?
Well, the answer is not that simple - it’s yes and no. Let’s start with the no.
As with most things, it comes down to leadership. If company leadership is not completely bought into it, with full energy and passion for culture, there are going to be issues.I've seen too many companies that talk about culture all the time and actually make it worse because they set unrealistic expectations for their customers. They set unrealistic expectations for their employees. They set expectations for their boards about driving a positive cultural change in their company.
The focus on culture is half-hearted. They don't focus enough on it. It's not in their measurement systems. They don't even know how to measure it. And in the end, people are just disappointed, discouraged and some actually leave the company.
On the flip side, If you're going to focus on culture and you're going to do it in a serious way, the ROI is tremendous from the customers’ perspective, from the employees’ perspective, and even from the share owners’ perspective.
A culture that is driven throughout the company that really drives employees to do the best they can possibly be. They are excited to come to work every day and excited at the end of the day about what they've accomplished.
Those types of cultures pay off in spades. And if you look at the most successful companies in the world, you'll see that driven from the top, from the middle, and from the bottom.
How Do You Calculate the ROI of Corporate Culture?
We said the ROI can be tremendous if you have a truly spectacular corporate culture, but how do you actually measure it? There are a number of ways.
Start by looking at it from all the constituencies’ points of view. I think when you have a stellar corporate culture or one moving in that direction, you'll see your customer satisfaction scores rise.
Why? Your employees will be happy, motivated, and totally jazzed. Employees will deliver a superior customer satisfaction to their customers.
That will pay off in ROI because the happy customer tells three to five people about how satisfied they are, and that creates more business, more leads.
On the other side of that coin, an unhappy customer tells 20 people how unhappy they are with a vendor or a supplier.
When you look at today's environment, there is a war for talent. Look at retention rates, particularly retention rates of the A-Players in a company. Companies with poor cultures have lots of people leaving. That means you have to hire headhunters to hire new ones. You have to train them. They're really not producing anything for six, nine months.
Severance packages, sign on packages all cost money. It's easy to calculate retention rates and the cost of retention, particularly for your top 50% of your performing employees.
So that's how I look at it. I look at it from the customer's perspective. I look at it from the employee's perspective and I look at it from the P&L perspective - it costs money when you're changing employees all the time.
Determining the Strength of Your Corporate Culture
If you’re a manager, you know employee satisfaction is tied with employee performance. But, how do you really know if the culture is as great as you may think it is?
1. Managing by Walking Around (MBWA)
Get involved and talk with your employees regularly. Touch down in coffee talks and individual one-on-ones, talk at the water cooler or over a cup of coffee with everyone from first level employees through leadership. You’ll quickly get a sense of the culture. You'll get a sense of what's working, what's not working.
2. Customer Satisfaction Scores
Customer satisfaction scores are very tied to the culture. Not 100% (there can be product issues that can affect customer satisfaction scores that have nothing to do with the culture), but it’s often a good marker.
3. Customer-Driven vs. Product-Driven
This is one you can figure out very quickly. I’ve worked for a company that was very customer driven, and I’ve worked for a company that was very product driven.
If you're in where I’ve spent my entire career (in the B2B section of the marketplace), customer driven is where you need to be. If you’re driving a product strategy into a customer-driven market, it’ll create a culture that's a negative and the results will be subpar.
4. Employee Retention
What's the flight or the retention of top performers? If you're a really top performer, you're not going to stay in a bad culture because you can get a job in many, many other places where the culture is positive.
If you start seeing a higher than average (or even average) departure rate of your top 30% of your employees, you know you've got a culture problem. It’s an indisputable number and very easy to monetize into what that costs the company.
“Culture Eats Strategy for Breakfast.” - Jack Welch
Jack Welch is famous for saying “Culture eats strategy for breakfast.” Is this just a cliche or is there really something there?
I passionately believe he's spot on. I've seen corporate cultures just destroy some of the brightest ideas I've ever seen. It’s usually companies that it should be customer driven and employee driven that become product driven and bottom line driven. It leads to demoralized employees and demoralized customers.
I’ve seen culture that's set in cement, or maybe even steel, that is very difficult to break through. These companies still do well but they're sub-optimized. Again, they operate at a high level of stress and unhappiness because they just won't break out of that negative culture.
The natural follow up question is “Why don’t they just change?” and the reality is that they just don’t know how. They run back to the home of their comfort zone at the slightest downtick of an indicator, whether it’s top-line revenue, midline margin, or bottom line profitability. Or it could be something as simple as an executive getting a customer complaint.
Bottom line, I think Jack Welsh was spot on and unfortunately I've witnessed fabulous business initiatives destroyed by a negative culture.
Culture is complex, and everyone defines it differently. But when it comes down to it, it’s essential to define and implement a strong culture. Your bottom line depends on it.