When you walk through the doors of a high performing organisation, it is said that the difference is palpable.

Like a breath of fresh air, employees are energised, engaged and confident about their organisation’s strategy rather than confused and resigned to it.

And those observations can be quantified by key performance measures like sustained earnings and market share growth.

So how does a company go from being good to great and from great to exceptional? It’s all about the culture… that unique mix of values, beliefs and behaviours that together creates trust and a sense of shared purpose.

And ‘Culture’ – Merriam-Webster Dictionary’s word of 2014 – has established itself as one of the corporate buzzwords that senior executives should ignore at their peril.

According to Edgar Schein, widely regarded as the ‘father’ of organisational culture and author of Organizational Culture and Leadership (first published in 1985): “The only thing of real importance that leaders do is to create and manage culture. If you do not manage culture, it manages you.”

Schein argued that leaders should not confuse culture with other concepts like climate, values or corporate philosophy and said that culture operated at a level below these and largely determined them.

Great culture, great numbers

Like Schein, Jack Welch, for 21 years the head of General Electric, was vociferous about its importance. While boosting GE’s stock market value by over 5,000 per cent and being named Fortune magazine’s Manager of the 20th Century, he boasted that “great cultures deliver great numbers”.

But the GE culture of routinely culling the bottom 10 per cent of GE staff – who were graded annually on a five-level scale – regular public hangings of poor performing managers and excessive pay for top executives led, critics believe, to a culture of backstabbing and a climate of fear.

Toronto-based Human Capital Strategist and Executive Coach, David Wexler, is typical of a new breed of manager that has turned his back on Welch’s management model.

“High performance cultures do not differ from industry to industry or market to market. They start and end with the CEO. And only when that CEO stops paying lip service to the notion of culture do things improve.”

No ‘I’ in team

“If his actions prove contrary to his words, it leads to low trust and high cynicism. The driving factor to high performing workplaces are high levels of employee trust.”

Chris Canazoli, head of New York-based organisational culture consultants gothamCulture agrees.

“A company may say they want to encourage teamwork, but when you look at the compensation model they use for the salesforce, you often find it heavily skewed towards individual performance. And the salesforce is not going to work collaboratively, if the reward and recognition processes are designed for individual performance.”

Wexler commends Xerox and Proctor & Gamble for their longstanding enviable cultures. Both take a long term view in terms of career development and progression, investing in formal training of future leaders. Because their cultures are so strong, they are unlikely to be shaken by one bad hire or bad period of company activity. “Even when firms like Rim (maker of Blackberry) with great cultures hit on hard times, employees want to stay connected either through LinkedIn or social media where former employee pages are set up and regular get-togethers in bars near the HQ organised. Ex-employees then work to help one another find work.”

Small cultural changes can also have huge positive knock-on effects even in rules-based patriarchal firms like Toshiba and Honda he says.

While VP and Global Head of Human Resources for software company Alias Systems about 10 years ago, he appointed a Japanese national with a background in global hotel chains as head of HR in Alias’s Asian operation in Tokyo which instantly led to increased employee morale and engagement.

“The first thing she did was to throw out the traditional rules-based work plan that was in place and replaced it with a more progressive empowering approach which treated adults like adults.

“Workers were told that they no longer had to ask to use the bathroom, and the culture instantly started to improve,” he said.

A climate of openness

Denizbank CEO Hakan Ates is in no doubt about what is driving high performance at Turkey’s fifth biggest private bank, which he started 18 years ago. While he cites transparency, accountability, responsibility and fairness as key, he says his most valuable resource is human.

“I have a motto that whenever anyone joins the firm we recreate the bank from  scratch. His or her contribution and ideas will be instrumental, and as an organisation we reshape culturally.”

A recent winner of a global banking industry award for innovation, Ates says to achieve high performance a bank’s culture must welcome and encourage staf to express their ideas in a climate of openness “because the more you do that, the more eager people will be to give”.

“I am a matchmaker, not a banker,” he says. “On the one side we have our most valuable resource that is human and on the other side is technology. Bring those together and we are on to a winner. Because to win in financial services you have to keep coming up with new technologies to give the customer the best experience and to stay ahead of the competition.”

Rocky Ozaki, HR director of Vancouver-based PaySavvy, which provides software to manage human capital, says that it is in the start-up technology sector that the future workforce (aka ‘connected generation’) is making the biggest waves, because they can rewrite the rules.

No shortage of ping-pong tables

His commitment to building “amazing company cultures” has led him to develop an industry-wide People & Culture (employee experience) survey, whereby technology companies can discover their ranking against other participating tech companies, which will then help them attract, engage and retain top talent in the hypercompetitive tech industry.

“In 2014/15 our team examined countless technology companies. While there were no shortages of ping-pong tables and beer fridges, a surprising number hadn’t considered team member retention or performance impacts as a result of a slightly or fully disengaged staff.

Reaping the rewards

“We’re not a ‘top employer’ competition so we won’t share company names. Instead, we will tell you what percentile your engagement scores fall into. The more companies involved, the more data we can share and the more we force one another to continually improve,” he says.

So how do you know whether your investment in culture will reap dividends? Over an 11-year period John Kotter and James Heskett, authors of Corporate Culture and Performance (first published in 1992) carried out an extensive research project detailing the corporate culture of 207 large US companies across 22 industries, looking at how each company’s culture affcted its economic performance.

From that research, it highlighted the diffrence in results – over the 11 years – between 12 firms that did and 20 firms that did not have performance-enhancing cultures, even looking at companies that were similar in every other way – American Airlines versus Northwest for example – to isolate the effct of corporate culture.

And the results were staggering. The average share price growth in the 12 ‘good’ firms was 901 per cent, compared to just 74 per cent in the 20 ‘bad’.

Those that cared for all their stakeholders grew four times faster than companies that did not. Job creation rates were seven times higher and net income increases 750 times higher than in those companies that didn’t manage their cultures well.

So can we be optimistic about the new millennium workplace? Not according to Wexler.

“If you ask most employees if they are happy at work they will say no.

So it’s for CEOs to take a serious look in the mirror, because it all starts with them.”

Di Rix

Di Rix is a freelance business journalist

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