Best Practices Article - PEOPLE

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CORPORATE CULTURE, CORPORATE SUCCESS, AND CREATIVE LEADERSHIP

By Dr. Doug Tuggle, Partner with Insight Consulting Partners and Professor at Chapman University

Has this ever happened to you? You run a successful, growing company. A critical vacancy opens up on your organizational chart. You hire an executive search firm for that general manager, VP of sales, production superintendent, or whatever the slot is. You conduct a lengthy, costly search. You interview the finalists carefully, but there is great chemistry between one of them (let's call him "Bob") and you. Bob's expensive, but on paper he's perfect, his references are outstanding, and everyone is confident that he can quickly ramp up and become a superior performer. You hire Bob, he comes aboard, and the first couple of weeks are great. But, a month later, he comes into your office to tell you he's quitting. You're dismayed, but he explains that "I just never fit in here, I just never felt comfortable dealing with the system." If you run a formal organization, "Bob" may be complaining about the rules chafing his creativity. If you run a looser organization, "Bob" may be complaining that he could never figure out whom to turn to in order to get things done. The essential problem here is that there is a cultural mismatch between your organization and "Bob's" expectations, characteristics and preferences.

How can you avoid such situations? First, you need to know exactly what your culture is. Culture is destiny for a firm. Companies make money off their employees' knowledge, skills, motivation, and attitudes. If your company does not have a strong, uniform, performance-oriented culture spread throughout the organization, you will not get full value from all of the human talent in your firm. If your company's culture does not line up squarely with your customers' needs, your company is going to be in trouble. If your company's culture does not tap into its employees' knowledge and motivate them to think on the job, your company is going to be in trouble. Cultural differences largely account for why the retailer Target is so successful financially and widely admired and shopped at, and why K-Mart, in the same industry with the same basic strategic approach, is not.

Second, you need to communicate to prospective hires what your company's culture is and what the daily expectations are for performance and behavior. One service firm I know of failed to tell a set of newly hired midtier managers what the start time was - so some showed up at 8 am, some at 8:30 am, and some at 9 am, frustrating their supervisors. Additionally, some of those new managers expected to have secretaries answering their phones and placing their calls, while others planned to answer their own phones and make their own calls. And don't get me started on the wide variation in dress codes!

And third, you need to "socialize" your new hires into your company's culture. Make sure they hear the right stories. Make sure they hang out with mentors. Make sure they understand how customers and coworkers are to be treated. Make sure they learn the unique ways in which your firm gets important things done, such as approving a vacation request, cutting a check, or conducting a performance appraisal.

A quick definition of corporate culture is that it consists of the set of shared beliefs that dictate how work will get done in a firm. Leaders' behaviors set the standards for everyone in the organization. Thus, at Southwest Airlines, pilots and co-pilots may help load and unload baggage or take tickets when turnarounds are tight, while at American Airlines, job descriptions strictly dictate behavior. You can guess which one is more successful financially and which one is more fun to fly.

There is no "best" culture or one culture that fits all firms. It is important that a firm have a culture that lines up with its strategic niche. Thus, Wal-Mart needs (and has) a culture that aligns with its low-cost emphasis, while Google has a completely different culture that supports its extreme emphasis on innovation.

For many companies, their corporate culture is a nonissue - cultural matters simply don't arise. But there are several circumstances where attention to culture is important. For example, if a company is underperforming relative to what it could be achieving (recall K-Mart), examining its culture for blockages to success may be in order. Most mergers and acquisitions fail to attain goals set for them - something on the order of 75-80% of such corporate combinations. In many cases, cultural mismatches are the cause. Recall the prominent case of AOL and TimeWarner, and more recently, Chrysler and DaimlerBenz. Anytime there is a major organizational change (opening up a new facility, introducing a new product or service, adopting a new technological innovation, etc.) the firm exposes itself to great danger from cultural misalignment and ultimate rejection of the change. Finally, if a company operates in a market environment in which creativity, entrepreneurship, and constant innovation are the sine qua non for organizational success, that company needs a culture of creative leadership so the entire organization is positioned both to respond quickly to marketplace challenges and to take the lead in offering new and improved products, features, and services in its marketplaces.

There are some signs when a company's culture is in trouble. When mistakes lead to fault-finding and blame, all problems get covered up and papered over, often, until it is too late to do anything about them. When people are afraid to speak up, important issues get neglected. When there is an attitude of "not invented here" or "we tried that before and it didn't work," innovation is stifled. When managers are overwhelmed and exhausted they tend to micromanage and don't trust their employees - a feeling that is quickly reciprocated. If your firm is organized hierarchically and operates in a command-and-control manner such as the military, decisions will take a long time to be made, and the prevailing mentality will be for people to make choices of the most readily defensible course of action, as opposed to what is best for the company.

The essential idea behind crafting a culture of creative leadership is that by empowering employees you engage their hearts and their minds. They work harder for you and they work smarter for you. There is less voluntary turnover (and today one big business battle is the war for talented employees). Research has consistently shown that satisfied employees treat customers better, leading to more loyal customers-which in turn leads to higher sales and higher profits. Some examples of firms with a culture of creative leadership:

• A bank offered some employees who produce bank statements an occasional day off for doctor's appointments and other personal needs. In return, the bank asked them to work longer during the busiest times. Employees responded by processing bank statements in four days instead of the usual eight, and customer satisfaction soared to new heights.



• A GE Aircraft Engine Assembly plant exhibited trust in its employees. They were instructed to carefully build aircraft engines, they were asked (not ordered) to show up at work on time (there was no time clock to punch), and they were trusted not to steal expensive tools such as a torque wrench (there was no toolbox lock up). The results of that trust led to the cost of engine assembly dropping by 50% over a five year time span and the number of quality defects dropping by 75% over that same time span. Additionally, most of the quality defects that did occur were just cosmetic such as a visible scratch.



• An insurance company gave its employees flextime, a fitness facility, improved training, and merit raises. The results were that valued employees were lured back to the firm, voluntary turnover plummeted, and sales per employee jumped significantly.



• An engine remanufacturing company held accounting training programs for all employees so they could understand the company's financial statements. The CEO then asked all employees to understand how each person's job contributed to higher revenues, lower costs, better cash flow, improved efficiency, or customer satisfaction. The employees then understood that they weren't just doing a job; they were responsible for the success of the company. Morale skyrocketed, costs fell, customer satisfaction escalated, and profits increased significantly.



• An actuarial and human-resources consulting firm evaluates each prospective new hire on how well the person would fit into the company's existing culture, where people are self-motivated, open minded, independent, and jovial. This company understands that one bad apple can poison its already very effective culture. This company's culture does NOT punish people who make well-intended mistakes; instead, those errors are used as learning tools to be shared with others in the company. Projects are peer-reviewed, and employees joke and laugh about each other's foibles, both work-related and personal. There is great camaraderie in this firm.



• An optical components manufacturer holds town meetings with its employees on workplace problems, such as high health care costs or a financial downturn. Management then presents some possible approaches to coping with the problem, and then the employees break into groups to discuss them. Then, the entire assembly reconvenes, and employees present their recommendations, possible new solutions, and their reasoning process. The executives of the company listen carefully to their employees, and, if they feel the need to go in a different direction, they very carefully explain their rationale. The benefit from this approach consists of employees who buy into decisions quickly because they had a chance to weigh in on them.

A firm's corporate culture takes years to develop. Uncovering what a firm's culture actually is, and then assessing its fitness for high levels of performance, corporate marriage, the ready embrace of major organizational change, or altering it to produce a culture of creative leadership are all worthy projects. As you would imagine, changing a firm's corporate culture is an important exercise that also involves a major block of time in order to complete successfully. Simple problems at a company can be dealt with quickly. Enduring, strategic issues take years to develop and commensurately long periods of time to correct. But, merely knowing the true dimensions of your firm's culture often provides ample clues as to what is going wrong and what steps to take to ease the situation.

The foundations of a culture of creative leadership seem to be based upon these principles:

• Respect for all individuals
• Transparency in decision making
• Team building
• Empowerment of employees
• Creating fun occasions in the work environment
• Being balanced and flexible regarding employees' needs
• Having creative quality-of-life benefits
• Opening the organizational vision to all stakeholders
• Maintaining a broader purpose than mere wealth creation
• Being dedicated to servant leadership
• Committing to exemplary leadership and citizenship

Research about young people entering the labor force today is that money is no longer the primary motivation for working. These people seek more from a job-they want meaning, they want purpose, and they want to make a contribution to the organization. The astute leader will tap that energy and enthusiasm.

The astute creative leader will not try to be the sole creative sparkplug for the organization. And, the company's R&D department should not be the sole repository for innovative thinking. Instead, the astute creative leader will institute a culture of creativity throughout the organization so that everbody's creative energies can be unleashed. Research shows that the best ideas for new products, new features, and new services come from customers themselves - so why not let your front-line employees who interact with your customers on a daily basis take the lead in shaping and advocating those innovations? Research shows that those employees who daily execute production processes and deliver services know where the inefficiencies are, where the waste is, and where the duplication lies, so why not let them take the lead at innovating new production/operations processes? Research shows that when departments break out of silo thinking and silo behaviors, more efficient and more effective cross-functional coordination occurs, so why not empower your employees with a culture of creativity? Your employees have a wealth of knowledge and have access to the knowledge of customers, suppliers, business partners, regulators, and others-why not get your employees to share their knowledge by empowering them with an organizational culture that allows all employees to utilize their skills, talents, and insights to the utmost? The highly successful software firm SAS, in place of formal strategic planning, says to "listen to your customers, listen to your employees, and do what they tell you."

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