By Corpwrite Strategy’s Jeremy Plint.
Imagine you’ve just convinced an investor to sink millions into your growing business. Then imagine, if after the finalising the deal, he gives you only one piece of advice. What do you think it would be? Increase sales revenue, improve gross margin or maybe keep costs under control?
In the case of Brian Chesky, Co-founder and CEO of Airbnb, it was none of those. His investor simply implored him not to f**k up the culture! And Peter Thiel is not your ordinary investor. An entrepreneur, venture capitalist and social critic, Thiel co-founded PayPal and was also the first external investor in Facebook with a 10.2% stake. Airbnb’s culture and core values were obviously key factors in his decision, maybe even the most important factors.
So why is culture so important?
You’ve probably heard the quote, usually attributed to the famous management consultant and author Peter Drucker, “culture eats strategy for breakfast”. Despite the fact its origin has never been confirmed, this framed quote still hangs in the ‘war room’ of the Ford Motor Company. A great culture will get you through tough times more so than the best strategy in the world. Look at Starbucks, a company whose collapse turned out to be a lead indicator of the crash in consumer confidence of the early 2000’s. With a strong culture that focused on customer experience and employee relations, the company has survived and is back in strong profit growth. At Corpwrite Strategy our business revolves around building great strategy but without a resilient culture you’re already on the back foot. People can execute a strategy but they’ll be loyal to a great culture. For many organisations their culture is so pervasive it has effectively become their brand and their market differentiation. It’s simply the way they operate their business – it guides their decision-making process, their strategy, and defines their relationship with employees and customers.
You might think this is a new trend reserved for funky start-ups but it’s not. Think about Japanese icons such as Canon and Sony who built their brands by pursuing continuous improvement and excellence in every facet of their operation. As if in response to the growing dominance of Japanese manufacturing, US companies such as General Electric, General Motors and Ford achieved phenomenal success by creating corporate cultures that inspired workers and customers alike to support their brands for the betterment of country. Legendary CEO Jack Welch transformed GE by creating a small business culture of informality inside his multinational conglomerate. He valued everyone’s feedback and encouraged people to break systems and processes in order to drive massive change and find better ways of doing things.
Sadly however, many companies allow short term transactional thinking to relegate this aspect of their business to the background. Without visible reinforcement of core values a culture will not thrive. So many businesses today face enormous challenges to review, adapt and re-invent themselves in the face of market disruption. You’ve heard it before, Alibaba is the world’s largest retailer, yet it has no stock and Airbnb books more rooms than any other hotel chain in the world, yet it has no hotels. The recent collapse of Dick Smith may provide insights into why some companies don’t have the resilience to manage change in a disruptive environment. Obviously there’s been significant changes to the brand since Dick Smith sold it many years ago, however the core values that once drove the staff to ensure their somewhat ‘geeky’ passion for electronics translated into great customer service, were probably their greatest strength and a key differentiator in a crowded market. Yet that culture was seemingly lost in a race to the bottom with competing ‘self-service’ and online retailers. Change is the only constant in business today and as the pressure builds, companies without a strong underlying culture become less resilient and are less likely to meet these challenges. They struggle to generate the internal support necessary to drive the change programs needed for continued growth; a clear sign that not everyone is on the same bus .
What are the signs of a great culture?
Firstly , culture is shaped by what your organisation pays attention to and rewards. Once defined and communicated, your core values need to be demonstrated publicly and genuinely modelled by senior leaders. “The culture of any organisation is shaped by the worst behaviour the leader is willing to tolerate”- Gruenter and Whitaker (source unknown). Perception isn’t good enough – people see through the façade pretty quickly when people say one thing and do another. Ultimately the signs of a great culture are people who get on with each other – people who want to be there, in support of management and their leaders, working towards the achievement of common goals.
Secondly, is there a feedback process in place that measures the relative health of the culture? How is that information communicated and acted on? Is there a robust whistle-blower policy? Giving all staff the ability to participate in shaping and developing the culture ensures they feel engaged and valued.
Lastly, look at the on-boarding program. There’s no point bringing someone into a business without clearly defining the culture. Does the program ensure all new employees know exactly what’s expected of them and what they can expect in return? Does everyone understand which behaviours are acceptable and which are not, irrespective of hierarchy? Meetings can tell you a lot about culture. Too many meetings can be a sign that individuals don’t feel empowered to take initiative, or possibly the ownership of responsibilities is poorly defined. Are meetings collaborative, is there an open exchange of views without unfair criticism or hierarchical bias? Negative behaviours that are allowed to stand will very quickly undermine goodwill. How often do you see senior leaders moving through the business talking to individuals? This is so often lacking in large companies, yet it’s so powerful in terms of motivation and recognition of effort.
How do you start growing a great culture?
The main thing to remember is that it’s not something that can be constructed in a single session. It’s an organic process that involves people becoming personally invested in the business vision. Constructing this vision should start with a series of questions that define ‘why’ the company exists, and ultimately ‘why’ everyone is here. Then you should identify the core values that define how the business will operate. Your vision, mission and core values will then begin to define everyone’s roles and what is expected of them. It’s important these become part of every individual’s performance review process. How a person goes about their job is every bit as important what they actually achieve. This may all sound a bit nebulous to start with, but once these foundational elements are in place you’ve effectively set both the direction for the business, the standards of operation and the principles for all key decision-making.
Don’t be afraid to start; once you begin the process you’ll find it’s easier than you think. Often bringing in a third party to help facilitate this process can really make a difference. It gives you a fresh perspective as well as someone who is not emotionally involved in your business.
At the start of a new year, when most people are taking some time out of the business, it’s a great opportunity to reflect on the relative health of your culture. Maybe this piece has given you the motivation to do so? If it has I’d love to know the outcome and welcome any feedback. Have a great 2016.