Tools For Leaders

Understanding the Mystery of

Culture Drives Performance

What are some words and phrases you might use to describe the culture of your organization? And if I were to ask your employees, what are some words and phrases they might use? Interestingly, I’ve actually asked thousands of employees that question, and have received a fascinating mixture of both positive and negative descriptors.

For example, employees may use words like “family” on the one hand, but turn around and say “finger-pointing” on the other hand – both describing the same organization! Most employees are savvy enough to recognize that organizations have both positive and negative cultural elements at the same time. (And I suppose a “finger-pointing family” isn’t all that unusual!)

The question, of course, is whether the positive elements outweigh the negative elements. It’s certainly tempting to immediately think “of course they do,” but unfortunately that is simply not often the case. And most importantly, there’s a pretty compelling body of research that suggests strongly that your organization’s culture actually affects the performance of your people.

In their recent book Corporate Culture and Performance, John Kotter and James Heskett share the results of their Harvard Business School study which indicates clearly that culture has a strong – and in­creasing – impact on the economic performance of every organization, and will be an even more important factor in determining the success or failure of firms in the next decade. Corporate cultures that inhibit strong long-term financial performance are not rare; sadly, they develop rather easily and commonly.

Mark Fields, former President of Ford Motor Company, has made a powerful but unsettling comment on the subject:

No matter how far-reaching the leader’s vision, nor how brilliant the strategy, neither will be realized if not supported by culture.”

So what is culture? It’s certainly an often over-used word; bandied about in conversation but little understood, and rarely acted upon. Essentially, culture is the aggregate personality of the organization. It’s what we collectively value. It’s the essence of the stories that are told about us – whether by employees, customers, or competitors. (Whether those stories are true or not!) Culture is our shared vision or lack thereof. Culture is what is acceptable in our organization (like “finger-pointing” for example). Culture is how it feels to work here or to do business here – is it energizing? Or de-energizing?

There are some uncomfortably important problems in the exploration of culture. The first is, para-phrasing management guru Peter Drucker, that most leaders are largely unaware of the real culture of their organization. There’s the culture that we think we have – and then there’s the culture that your employees know to be “the real deal.” You know – the culture that’s described to new employees after our fancy new-hire orientation session when the veteran employees take them aside and say “let me tell you how it really works around here.”

Another uncomfortable problem with studying culture is the reality that it can never be created simply by putting out emails, hanging up posters, handing out wallet cards, or putting a plaque in the lobby. And don’t even think about trying to get it done by convening a cross-functional team of employees to meet in the conference room with flip-chart pages on the walls! Core values are not something we can simply state;  rather they describe the reality of the organization. If we collectively invest a lot of time and emotional energy in finger-pointing and blame-placing then, in all reality, those are actually the things we value! What we invest the emotional energy of ourselves and our people in is what we de facto value.

Perhaps one of the biggest frustrations in trying to work on culture is that it’s so darned abstract. It’s hard to understand, define, and make progress on. And worse yet, there’s a pretty significant time-lag in the cause-and-effect relationship of your effort – the things we work on today will probably not have a visible impact for some time to come. And conversely, the cultural dynamics that are present in our organization today are the result of a series of elements that have been percolating for perhaps years.

But here’s the thing: Lou Gerstner, former CEO of IBM, in his wonderful book "Who Says Elephants Can’t Dance?"  has said:

“I came to see that culture isn’t just one aspect of the game – it is the game. Nothing in business is more valuable than a powerful.culture. It took me to age 55 to figure it out, but the thing I have learned at IBM is that culture is everything.”

An extraordinary statement from one of the most highly regarded business leaders of our time.

So here are a few foundation concepts relative to culture to get us started – most of which you probably already know intuitively:

1) Employee attitudes are largely shaped by the environment in which they function, because of our natural human tendency to conform to the behavior of people around us.

2) If an organization’s leadership doesn’t consciously create an intentionally planned culture, the culture will simply default to the employee(s) with the strongest personality (you may have seen this occur).

3) A dynamic, vibrant culture yields natural compliance, as well as significantly greater potential for gaining employees’ actual commitment. (Simply put, if people would rather be part of what you’re doing than not part of what you’re doing, they are more likely to do what you ask them to do.)

4) More effective management of culture reduces the need for incessant management of individual issues.

5) Sustainable growth only comes from a stable cultural platform.

For some great insight into how the development of culture can play out on a practical level, I can’t encourage you enough to read "Delivering Happiness" by Tony Hsieh, CEO of Zappos. That’s the online shoe retailer who grew from a few hundred-thousand dollars in sales to over one billion dollars in sales in just nine years. Tony has spent significant time on building a dynamic culture (self-acknowledged as weird, but definitely dynamic), saying:

“…it’s critically important to have values you can commit to – and by commit, we mean that you’re willing to hire and fire based on them.”

Consciously thinking through the nature of the culture you want to create in your organization, and then engineering it’s creation are simply two of the most powerful things you can do as a leader. Because the culture of the organization that drives everything else: from revenue, to net, to employee satisfaction, turnover, and retention, to customer satisfaction, to market innovation – and on and on.

Start by asking your employees for the words and phrases they would use to describe both the positive and negative aspects of the organizations’ culture. Then think through what you’d really like it to be – with as much specificity as possible. What would you really love those descriptive words to be? Then the question becomes “If we wanted to live this value, then would would our day-to-day actions and decisions look like?

Values drive decisions. So the decisions we make, individually and collectively, describe what we value. And we can build a powerful, vibrant, exciting, high-performance culture by consistently making our individual and collective actions and decisions be driven by a set of shared, compelling values and defining how they can be credibly demonstrated.