corporate culture

Corporate culture boost
Feb 03 2015 07:31 *Ian Mann

IT WOULD be difficult to argue with the idea that a “good” corporate culture is better than a “bad” corporate culture.

At the simplest level, a “good” corporate culture assists the organisation to perform well, keep quality staff and make good profits. A “bad” corporate culture is one that makes quality staff desire to leave as fast as they are able to, and reduces the profit the company could earn.

Consultant and author Chris Edmonds cites two well-known companies among many as examples of “good” cultures – Southwest Airlines, and Zappos (the online shoe store.) Both deliver superb bottom-line results, while serving happy customers. Both have formalised their purpose and values which is why, Edmonds argues, they have “good” cultures.

The tangible benefits of a positive culture are “a 35 % gain in profits, 40% gain in customer ratings, and 40% gain in employee engagement”. This effect is evident in six to 12 months of refining the corporate culture.

Presuming that the research on which Edmonds’ conclusions are based are exaggerated by 100% and that gains are only 17.5%, 20% and 20% respectively, they would still be worth pursuing. In our desperate search to improve results, no money from any legitimate source should be overlooked.

“A company’s culture evolves over time based upon the beliefs and thoughts of its leaders, and that logically leads to consistent behaviour, decisions, and actions demonstrated by members that live in that company’s culture.” This is undoubtedly true. Every company has a “culture”, even if it is a confused one.

Successful companies do not leave their culture to chance. It has too serious an effect on the financial results, and the retention and development of good staff.

The value of culture is hardly a new idea. Culture surveys abound, culture training course are common and books on culture are plentiful. What Edmonds does add to the body of knowledge is a slight twist worth noting: the formulation of an “Organisational Constitution”.

To deliberately craft a corporate culture requires an “Organisational Constitution.” This document covers two issues: the organisation’s purpose for being, and its values. Both elements are required to produce financial rewards through a “good” culture.

If you do not run the entire organisation, it is important to note that an Organisational Constitution applies to a team as it does to all strategic business units. It will produce the same practical and social effects for the team or business unit.

The first part of an Organisational Constitution must answer three questions. These are: why do we exist? Whom do we serve? Why should customers care about our team or company?

To describe the company as “Providing high quality products that satisfy our customers and produce above average returns to shareholders” is simply too vague and vacuous to have any value. It is not even clear what the company does, let alone what it does not do. The two descriptions that follow address both issues.

“Our purpose is to deliver quality, on-time product marketing communications solutions that inspire consumers to purchase our customers’ products and services.”

“To build a sustainable mining business that delivers top quartile shareholder returns while leading in safety, environmental stewardship and social responsibility.”

Both these Organisational Purposes answer the three essential questions that guide the organisation’s operations and decision-making.

The second part of the Organisational Constitution should clarify how people are expected to treat each other, the organisation’s values and behaviours. All too often these values are lofty and vague. In this section of the constitution, values are defined in observable, tangible, measurable behaviours. Below are two very common corporate values, “integrity” and “service”, both translated into behaviours.

“Integrity” is explained as: we are accountable for our actions. We do what we say we will do. We do not compromise our organisation’s values, no matter what. “Integrity” requires these behaviours: I hold myself accountable for my commitments and actions, I keep my promises. I attack problems and processes, not people. I accept responsibility and apologise if I jeopardise respect or trust.

“Service” is explained as: our customers are the reason we’re in business. By giving them superior service at every opportunity, we exceed their expectations. When we exceed their expectations, we’re at our best. “Service” requires these behaviours: I initiate friendly hospitality by promptly and enthusiastically smiling and acknowledging everyone who comes within 3 metres of me.

Formulated in this way, staff have a standard for themselves and others. Those who consistently fail to behave according to the standard should be “lovingly set free”, or “shared with the competition”.

Jack Welch, the legendary CEO of the giant General Electric Corporation (GE), was one of the first high-profile leaders of an iconic company to regard values and results as equally important. He rewarded GE staff or “lovingly set them free” based on value adherence and results.

The Organisational Constitution cannot simply be published. It must be taught to all, regularly referred to, and reinforced. Only the leader of the organisation or team can ensure this done. This leadership duty should be taken seriously, because paying attention to results alone is to leave money on the table.

*Ian Mann of Gateways consults internationally on leadership and strategy and is the author of Strategy that Works.

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