Saturday, January 10, 2009

Benefits of a Better Corporate Culture

Just before Christmas Harvard Business School's Working Knowledge Newsletter contained an article about corporate culture. I had just been blogging about culture a week before.

The article asks: Why is it that many of the same companies appear repeatedly on lists of the best places to work, the best providers of customer service, and the most profitable in their industries? The answer lies in recognizing that

strong, adaptive cultures can foster innovation, productivity, and a sense of ownership among employees and customers.

The article lists top 10 lessons from the new book Ownership Quotient by HBS professors Jim Heskett and Earl Sasser and coauthor Joe Wheeler.
  1. Leadership is critical in codifying and maintaining an organizational purpose, values, and vision. Leaders must set the example by living the elements of culture.
  2. Like anything worthwhile, culture is something in which you invest. An organization's norms and values aren't formed through speeches but through actions and team learning. Strong cultures have teeth. They are much more than slogans and empty promises.
  3. Employees at all levels in an organization notice and validate the elements of culture. Converatsions such as the "fairness of my boss" have the underlying theme of the strength and appropriateness of the organization's culture.
  4. Organizations with clearly codified cultures enjoy labor cost advantages for the following reasons:
    - They often become better places to work.
    - They become well known among prospective employees.
    - The level of ownership—referral rates and ideas for improving the business of existing employees—is often high.
    - The screening process is simplified, because employees tend to refer acquaintances who - behave like them.
    - The pool of prospective employees grows.
    - The cost of selecting among many applicants is offset by cost savings as prospective employees sort themselves into and out of consideration for jobs.
    - This self-selection process reduces the number of mismatches among new hires.
  5. Organizations with clearly codified and enforced cultures enjoy great employee and customer loyalty.
  6. An operating strategy based on a strong, effective culture is selective of prospective customers. It also requires the periodic "firing" of customers.
  7. The result of all this is "the best serving the best," or as Ritz-Carlton's mission states, "Ladies and gentlemen serving ladies and gentlemen."
  8. This self-reinforcing source of operating leverage must be managed carefully to make sure that it does not result in the development of dogmatic cults with little capacity for change. High-performing organizations periodically revisit and reaffirm their core values and associated behaviors.
  9. Organizations with strong and adaptive cultures foster effective succession in the leadership ranks. In large part, the culture both prepares successors and eases the transition.
  10. Cultures can sour. Among the reasons for this are success itself, the loss of curiosity and interest in change, the triumph of culture over performance, the failure of leaders to reinforce desired behaviors, the breakdown of consistent communication, and leaders who are overcome by their own sense of importance.

It is amazing how important culture is, how easy it is to notice and distinguish good culture from bad, and how difficult culture is to define and measure.

Personally I am happy that I work in a great company with a great culture, great products and great business results.