QUALITIES OF HIGH-PERFORMING BUSINESS CULTURES

Corporate culture is part of the DNA that permeates the day-to-day organizational life of your employees. As such, it functions as the critical lifeline to your organization’s future—or, as expressed by Sun Tzu, the “minister of the people’s fate” that assures the “state is kept secure.”

Corporate culture also delineates the types and range of strategies you can realistically undertake, which when taken to their extremes result in growth or retreat, viability or stagnation, or in its outermost limits, survival or bankruptcy.

To fully grasp the underlying nature of your organization’s culture and to internalize what makes your organization tick—as illustrated in the example above of the Netflix culture—is to foretell whether your plans have a reasonable chance of succeeding. Accordingly, take the time to sort through the core values, deep-seated beliefs, and historical traditions that shape your organization’s culture.

Such awareness is the primary step in formulating a business strategy. Doing so also strengthens your ability to engage the minds and hearts of the personnel who must take responsibility for its implementation. Consequently, as a tangible outcome of that effort, you will be able to develop more exacting business strategies and tactics that can win in hotly contested markets.

The following case illustrates these points.

General Electric Company CEO Jeffrey Immelt declared, “I’m intense about our competition. But I’m more concerned about our culture and our people.” He further defined his concern when he admitted to two fears: first, that GE would become boring; second, that his top people might act out of fear, meaning that some executives would shy away from taking the essential risks needed to propel the company forward.

From the time Immelt succeeded the legendary Jack Welsh as CEO, he pushed for a cultural revival by driving his people to focus on creativity, imaginative marketing, innovation, and risk taking. That did not mean totally revamping GE’s culture. After all, the company became a worldwide leader by adhering to Six Sigma, continual improvement of operations, cost cutting, and deal making. However, Immelt knew that in a slow-growing domestic economy and a volatile global marketplace, he had few alternatives other than to go on the offensive and push boldly into new products, services, and markets. Taking a less risky approach would mean a backward slide from which it would be difficult to recover.

How, then, is a corporate culture overhauled, where its beliefs and practices have been the hallmark of excellence and the company remains the envy of executives from other high-profile companies?

The following three steps summarize GE’s cultural shift.

First, compensation is linked to new ideas and customer satisfaction, with less emphasis on bottom-line results. It is based on managers’ abilities to improve customer service, generate cash growth, and boost sales, instead of simply meeting profitability targets.

“Immelt has launched us on a journey to become one of the best sales and marketing companies in the world,” says one senior GE executive. Top executives hold phone meetings every month and meet each quarter to discuss growth strategies, think up ways to reach customers, and evaluate new ideas.

Second, executives must go after businesses that extend the boundaries of GE. More than just paying lip service to the order, they must submit at least three Imagination Breakthrough proposals per year for evaluation and possible funding. The criteria for submitting the proposals must include taking GE into new lines of business, geographic areas, or customer groups. For some executives this approach is somewhat unsettling and goes counter to GE’s former culture, which was built on nurturing internal efficiencies and generating favorable financial numbers. Notwithstanding the difficulty in shifting the mind-set toward embracing risk, Immelt supports the change by fine-tuning internal operating systems to make it happen. In other words, the risks are shared and are now culturally indigenous to the firm.

Third, executives are rotated less often, and more outsiders are brought in as industry experts instead of professional managers. That is a big departure from GE’s promote-from-within tradition. Immelt pushes hard for a more global workforce that reflects the markets in which GE operates. He also encourages GE’s homegrown managers to become experts in their industries rather than just experts in managing.

It is even more ridiculous when we consider that these very critics usually exclude all moral qualities from strategic theory, and only examine material factors. They reduce everything to a few mathematical formulas of equilibrium and superiority, of time and space limited by a few angles and lines. If that were really all, it would hardly provide a scientific problem for a schoolboy.

Clausewitz

Although several of the changes at GE seem to deal with current issues related to the economy and “material factors,” in fact the moves aim at revamping the culture and “moral qualities” by recasting the company for years to come. That means holding on to the fundamental beliefs, traditions, and values that embody the soul of the company and which still remain intrinsic to growth.

Similarly—depending on your level of authority—you can make minor or major adjustments to your firm’s or business unit’s culture. The acid test of any changes you undertake, or recommend, is that they form a logical and workable fit with the objectives and strategies of your business plan.

Accordingly, the overall culture of an organization and its individual business units embodies the core beliefs and values that drive business decisions, generate customer loyalty, and ignite employee involvement.

Be mindful, however, when you grant authority to others to make business-related decisions that they internalize the intrinsic values that drive corporate culture and consider their impact on business strategy.

Those skilled in war cultivate the Tao and preserve the laws and are therefore able to formulate victorious policies.

The Tao is the way of humanity and justice. Those who excel in war first cultivate their own humanity and justice and maintain their laws and institutions. By these means they make their governments (organizations) invincible.

Sun Tzu

Corporate culture, as the backbone of competitive strategy, builds on the following six propositions that will directly impact your performance— and your ability to “formulate victorious policies.”

  • 1. The unique DNA lodged in every organization has a direct bearing on how you shape strategies to maintain a competitive presence in the marketplace.
  • 2. When challenged by rivals bent on grabbing your market share or threatening your overall position, the effectiveness of your counteractions relies on your organization’s prevailing culture.
  • 3. The range of available options you can use to differentiate your product, create value, and satisfy customers is governed by the totality of your organization’s culture.
  • 4. Correctly interpreting the deep-rooted values, behaviors, and traditions that drive your organization and inspire your employees can significantly affect the success or failure of your business plan.
  • 5. Even if you are not in a position to alter your organization’s culture or business unit’s subculture, you should know how to select competitive strategies that will likely gain support within the prevailing value systems that drive the organization.
  • 6. Sensitivity to your organization’s beliefs and patterns of behavior acts as both an indicator of past performance and a predictor of what the organization—and you—will achieve in the future.

He selects his men and they exploit the situation. Now, the valiant can fight; the cautious defend, and the wise counsel. Thus there is none whose talent is wasted.

Do not demand accomplishment of those who have no talent.

Sun Tzu

What type of corporate culture will it take to “exploit the situation”? Here are some insightful comments from heads of leading organizations that may shed some light:

A business can become stronger by making itself a community of people who share the same ideals and goals, the same corporate culture.

CEO, Disco Corporation

Sharp has a heritage of creating one-of-a-kind products. It is part of our corporate DNA.

President, Sharp Corporation

Innovative ideas are born of bold dreams and beliefs, and energized through inspired technology and a clear vision.

President, Matsushita Electric

My personal credo of three Cs: Challenge, Create, Commit. I tell all my staff to approach life with a pioneer spirit—several steps ahead of the competition.

President, Itochu Corporation

We have many challenges ahead of us, but perhaps our biggest challenge is the one we have created for ourselves. I mean growing Toyota into a company that truly matters to our customers, our employees, and to the societies where we live.

CEO, Toyota Motor Corporation

Now the method of employing men is to use the avaricious and the stupid, the wise and the brave, and to give responsibility to each in situations that suit him. Select them and give them responsibilities commensurate with their abilities. Do not charge people to do what they cannot do.

Sun Tzu

You can achieve excellence as a leader when your people are disciplined and committed to the organization’s cultural values. Excellence in leadership, however, does not mean perfection. On the contrary, an excellent leader allows subordinates room to learn from their mistakes as well as from their successes—as long as “you give them responsibilities commensurate with their abilities.”

In such a positive climate, people work to improve and take the risks necessary to learn. In contrast, a manager who sets a standard of zero defects, no mistakes, is also saying: Don’t take any chances. Don’t try anything you can’t already do perfectly, and don’t try anything new.

For instance, Twitter Incorporated co-founders Biz Stone and Evan Williams created a positive climate as they looked to grow beyond the phenomenal introduction of their micro-blogging service. As part of their strategy, they emphasized growing Twitter slowly in order to find people who fit with its culture. The culture for Stone and Williams is partially defined through a variety of rituals, such as family-style lunches and “happy hours.”

Expressed differently, Stone and Williams had to reach the hearts as well as the minds of employees. It is heart that collectively describes the underlying emotional qualities by which they would lead. Actively reaching out to win employees’ hearts meant encouraging them, conveying confidence in their work and attitudes, offering appreciation, and wherever possible, providing tangible security through compensation as well as through meaningful training.

Heart, then, is the cultural pathway that separates stability from uncertainty, enthusiasm from discouragement, and courage from fear. These behavioral qualities govern the hearts and minds of individuals. Alternatively, where positive values, beliefs, and traditions are ignored, abused, misinterpreted, or carelessly altered, the organization’s culture is violated, and down comes the instigating manager, which will negatively impact the firm’s product line and market position—and even the stability of the entire company. Up goes the alert competitor who sees the disruption and enters the confusion with well-timed actions to fill a market void—provided its culture is tuned in and responsive to such competitive opportunities.

In part, the above characteristics are explained in the overconfident attitude of we’ve got the market locked up, which often translates to complacency and ends with defeat. Such feelings tend to dry up creativity and stifle the inner drive to push for excellence. It draws off the adrenalin that comes from fighting within a performance-based marketplace.

The marketplace is littered with one-time leaders in such fields as automobiles, electronics, metals, and consumer goods. Some companies in those industries turned around at the last moment. Others were acquired or went bankrupt.

The mind-set was usually supported by the inaccurate notion that high market share means security, which was often followed by a passive defense of that market position and the attitude of being too entrenched in the market to fail. Those conditions at one time or another faced such high-profile companies as Xerox, EMC, and Hewlett-Packard. All, however, have aggressively pulled out of the slump—or are in the process of doing so.

If an army has been deprived of its morale, its general will also lose his heart. Heart is that by which the general masters. Now order and confusion, bravery and cowardice, are qualities dominated by the heart.

Therefore the expert at controlling his enemy frustrates him and then moves against him. He aggravates him to confuse him and harasses him to make him fearful. Thus he robs his enemy of his heart and of his ability to plan.

Sun Tzu

How a business strategy evolves and is ultimately implemented against a competitor generally has the imprint of the individual manager. Yet to succeed, the “ability to plan” must incorporate the innate cultural characteristics of your firm. In turn, it has to embody the “qualities dominated by the heart” of those individuals who must live day-in and day-out with their decisions and ultimately with the good and bad consequences.

And where these same qualities affect your performance, they also concern your competitor’s effectiveness, so that your aim is to be aware of what you can do that “rob his ... heart and his ability to plan.” Competitive strategy and human behavior, therefore, are fused tightly to corporate culture through two tangible applications. First, it forces you to take a broader strategic view of how to approach markets. It also guides your tactical decisions when launching a new product or service, entering a new market, or expanding an existing market. Second, it determines how bold or passive your business plans are likely to be against competitors. See Table 5.2.

Now when troops flee, are insubordinate, distressed, collapse in disorder, or are routed, it is the fault of the general. None of these disasters can be attributed to natural causes.

When troops are strong and officers weak the army is insubordinate.

When the officers are valiant and the troops ineffective the army is in distress.

When senior officers are angry and insubordinate, and rush into battle with no understanding of the feasibility of engaging and without awaiting orders, the army is in a state of collapse.

When the general is morally weak and his discipline not strict, when his instructions and guidance are not enlightened, when there are no consistent rules to guide the officers and men and when the formations are slovenly the army is in disorder.

When any of these conditions prevail the army is on the road to defeat. It is the highest responsibility of the general that he examines them carefully.

Sun Tzu

As you begin aligning your strategies with your corporate culture, one remaining issue requires your attention: beliefs. Beliefs are convictions

TABLE 5.2

Guidelines to Align Business Strategies with Corporate Culture

Would your corporate culture permit you to do the following:

Implement strategies bold enough to frustrate your competitor’s plans, or would they be too limiting to do the job?

Disrupt your rival’s alliances and thereby weaken the impact of the opposing manager’s strategies?

Unbalance the competing manager into making tactical mistakes?

Spread the seeds of uncertainty and doubt among the competitor’s personnel through aggressive actions and disinformation that “rob his ... heart and his ability to plan,” even before the tough marketing battles begin?

employees hold as true. They are anchored to the attitudes, values, and mind-sets that usually originate at the senior executive level and filter down through the organizational layers to shape their employees’ behavior and performance.

Sun Tzu broadens his viewpoint of behavior and performance to include such negatives as undisciplined behavior, morally weak leadership, insubordination, disorder, and lack of discipline that can cause “a state of collapse.” He maintains these issues should be the “highest responsibility of the general that he examines them carefully.” Sun Tzu further declares, “When any of these conditions prevail the army is on the road to defeat.”

Today, as many traditional organizational hierarchies flatten and responsibilities are delegated to the lower echelons, executives in most well-run organizations take very seriously the notion that employees are free to feed off their personal beliefs. They also take into account the widespread and persuasive influence of messaging through social media, which can alter even the most ardent beliefs. All of which puts managers on notice to stay prudently alert to employees’ overt and hidden behaviors.

Ultimately, if not monitored, undetected changes can affect your ability to successfully implement your plans. Beliefs, therefore, can unceremoniously and unconsciously creep into employees’ thinking and impact their behavior—and ultimately influence your ability to lead.

Diversity is still another category that impacts beliefs. Beliefs reflect individuals’ upbringing, heritage, religious practice, and cultural traditions. In turn, beliefs influence in such distinct ways as apathy or support of a new service, drabness or originality in designing a unique product, and courage or fear in taking on an aggressive competitor.

A company’s weakness or strength comes from such diversity. Your obligation, then, is to recognize, respect, and harness different backgrounds and personal convictions, as long as they do not conflict with the core values of your organization.

Your task as a leader is not only to acknowledge that people are different, but also to value them because of their differences, given all the potential ingenuity and complexity that reside in their minds.

Further, you can take advantage of these unique differences and mobilize them into a cross-functional team. The pragmatic issue here is that diversity should be viewed as a desirable situation and that people of different backgrounds bring different talents to the table (see Table 5.3).

Cargill, the agricultural and food-ingredient giant with more than 100,000 employees in 59 countries implemented its first diversity

TABLE 5.3

The Functions and Responsibilities of a Cross-Functional Team

Functions include

Define the business or product-line strategic direction, also known as vision and mission.

Analyze the environmental, industry, customer, and competitor situations.

Develop short- and long-term objectives and strategies.

Prepare product, market, supply-chain, and quality plans to implement competitive strategies.

Responsibilities include

Create and recommend new or additional products and services.

Approve all alterations or modifications of a major nature.

Act as a formal communications channel from the market back to internal departments.

Plan and implement strategies throughout the product life cycle that utilize competitor intelligence to determine indirect approaches that can be put into action with speed at a decisive point.

Develop programs to improve market position and profitability.

Identify product and service opportunities in light of changing consumer buying patterns.

Coordinate efforts with various corporate functions to achieve short- and long-term objectives.

Organize efforts for the interdivisional exchanges of new market or product opportunities.

Develop a strategic business plan aligned with the corporate culture.

blueprint in 1995. The program, known as Valuing Differences, focuses on integrating the principles of diversity and inclusion into the company’s performance-management system.

“Our belief is that diversity is not just about getting people in the door, you must have the right culture and an environment that allows everyone to contribute their fullest to reach their potential. Equal access for promotion and opportunities is a major part of our diversity effort. It is much more than just recruiting,” states Cargill’s vice president of corporate diversity.

The highlights of the Cargill program include the following:

An annual survey to measure response to its diversity initiative, giving the company a baseline index of how well the initiative works.

• Each business unit writes its annual contract with Cargill’s chief executive to outline its tasks and objectives. The contract includes Valuing Differences as performance criteria.

A mentoring system in which junior-level lesbian, gay, bisexual and transgender (known collectively as LGBT) employees volunteer to mentor more-senior managers for a year.

Carried to its extreme, diversity is further magnified by the new technologies that can marshal the talents and inputs of millions of people worldwide. For instance, search engine Google instantly polls millions of people and businesses whose websites link to each other, and companies such as Procter & Gamble and the LEGO Group use Internet-powered services to tap into the collective beliefs of employees, customers, and outsiders, which are then used to transform their internal operations and product development activities. Procter & Gamble now gets 35 percent of new products from outside the company, up from 20 percent three years ago. That has helped boost sales from research and development by 40 percent. LEGO uses the Internet to identify its most enthusiastic customers to help it design and market more effectively. After a new locomotive kit was shown to just 250 train fans, their word-of-mouth through the Internet helped the first 100,000 units sell out in 10 days with no other marketing.

Consequently, if you take into account the expansive role beliefs play in preparing employees to develop and implement a business strategy, you will enhance your chances of achieving objectives. Employees often act and win over tremendous odds when they are convinced of the ideals and beliefs for which they are working.

Therefore, be aware of beliefs and culture in three contexts: First, look to enhance your sensitivity to the diverse backgrounds of your employees, as well as to relationships within the supply-chain. Second, increase your awareness of the active culture that is exhibited in your markets. Third, secure a lifeline to your customers by understanding their customs and traditions, and then incorporate the significant ones into new product features at the beginning stages of development.

The examples of Cisco Systems and Charles Schwab & Company illustrate the irrefutable relationship of business strategy and corporate culture. Cisco Systems is characterized by a near-religious convergence on the customer, a total belief in employees as intellectual capital, and an energetic willingness to team up with outsiders to develop active partnerships. This passion for molding such an outside-in focus is credited to the leadership of CEO John T. Chambers, who clearly saw those attributes as a value system to drive all subsequent actions. In turn, other levels of employees recognized such values and used them to shape strategies that conformed to the culture of the organization, thereby increasing the chances of successfully implementing business plans. Further, by accepting those characteristics as a functional formula, line managers were able to reliably predict the success or failure of their respective strategies— depending, of course, on the competitor’s ability to challenge them, and provided they correctly interpreted the competitor’s culture.

In response to a reorganization at Charles Schwab & Company, employees initially resisted taking brokerage orders over the Internet. Senior management’s approach to change was to assemble nearly 100 managers at the base of San Francisco’s Golden Gate Bridge and hand each a jacket imprinted with the slogan, Crossing the Chasm. The group proceeded to march across the bridge and symbolically walk into the Internet Age. That physical act symbolized the cultural reinvention of the company and the strategy of burning bridges behind them.

Value systems and practices are often wrapped in symbols and rituals as ways to initiate and sustain change. The following is what you should know about symbols and rituals to enhance your managerial effectiveness.

I make the enemy see my strengths as weaknesses and my weaknesses as strengths, while I cause his strengths to become weaknesses and discover where he is not strong.

I conceal my tracks so that none can discern them; I keep silence so that none can hear me.

Sun Tzu

 
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