Build a Healthy and Profit-Boosting Culture
By Priscilla Kohl, HRTools Staff Writer
"A culture is its heroes, values, networks. It has all these things, but something else besides. Culture is a money-in-pocket investment . . ." Terrence E. Deal and Allan A. Kennedy, Corporate Cultures
Would you invest in your company and its culture?
The new millennium started with a rash of corporate scandals---Enron, Global Crossing, Tyco, Worldcom, etc. News of these scandals spread around the world, impacting thousands of people. Stakeholders and investors found little comfort or reassurance in corporate mission statements or codes of ethics. Copies of Enron’s 64-page code of ethics, along with other memorabilia, were eventually auctioned and sold on eBay. While business pledges and statements are important and worthwhile, they alone do not make a culture.
There are many external factors---natural disasters, unreasonable or unruly customers, environmental constraints and economic conditions--- that business owners cannot control, but they can control their own organizational culture.
Every business owner should ask themselves this question. If I were an investor, would I invest in my company, particularly as reflected by its values and culture?
Culture – what is it?
Every business environment shares a common culture or a pattern of human behavior. Although most people can relate to this common human experience, it is a phenomenon. Common culture is hard to explain, but it is observable and felt.
Does organizational culture happen serendipitously or is it carefully developed and maintained? According to a 2002 study, conducted by Towers Perrin-International Survey Research (ISR), “Ethical (or unethical) behavior does not exist in a vacuum, but is part of a broader organizational culture that develops over time.” That study also reports that a values-based corporate culture can prevent ethical crises and boost profits.
What we are talking about is different from a written code of ethics or published employee handbook. Culture is about values, people and behavior. As Marvin Bower said in his book, The Will to Manage, culture is about “the way we do things around here.”
Why is culture important?
The 2002 Towers Perrin-ISR research study stated that a higher percentage of employees from financially-successful companies view their management as trustworthy. These employees also rated their management as behaving in ways clearly in line with their stated values. Moreover, based on this study and other post-Enron studies, experts believe that explicitly-held behavioral values are directly connected to shareholder value.
If publicly-held companies do not heed the caution light themselves, Congress stepped in with The Sarbanes-Oxley Act of 2002, also known as the Public Company Accounting Reform and Investor Protection Act of 2002. Passed in order to rebuild public confidence, this legislation was in response to the corporate scandals that cost investors billions of dollars.
In a June 11, 2003, speech to the Centre for European Policy Studies, U.S. Securities & Exchange Commissioner Roel C. Campos said:
As you are aware, the past couple of years have been ones of upheaval in the US financial markets. Indeed, the reasons for the current troubles are several. The tremendous market rise in the late 1990s was followed by an equally stunning market drop - and the bad news didn't stop there. The depressed markets uncovered the fact that a number of public companies were not being honest with the public. Plain old greed was coupled with business cultures emphasizing meeting earnings projections at any cost. What's more, many of the gatekeepers in whom the public placed its trust, including financial analysts and accountants, betrayed that trust. Congress responded with the Sarbanes-Oxley Act.
What does history say about our values?
On July 4, 1776, American colonists proclaimed their values and declared their independence from British rule. They also pledged their lives, their fortunes and their honor to uphold those values. People today still want to believe and follow a set of core values, like life, liberty and the pursuit of happiness.
Aside from this mini-history lesson, there is another lesson for us in business. Let us concentrate on basic values in our business. They will get us through the hard times.
In their book, Corporate Culture, Terence E. Deal and Allan A. Kennedy say that, "...businesses are human institutions, not plush buildings, bottom lines, strategic analysis, or five-year plans…it is a living organization. The company's real existence lies in the hearts and minds of its employees... cohesion of values... that should mean a great deal to the people who work there."
Why are values important to business and people?
According to many experts, evidence of strong values drives business decisions and perpetuates customer loyalty and employee commitment. For example, take a look at Southwest Airlines. Even through the worst of times (i.e., 9/11), employees stick with them. After 9/11, some could have left for better-paying jobs, but they stayed out of loyalty and commitment. Southwest, unlike the other major airlines, did not resort to reductions in force in an attempt to maintain profitability. Good for Southwest---and their consistent profitability since 1973---as people make businesses succeed.
Authors Deal and Kennedy further state in Corporate Culture, “If companies would treat people like heroes, even for a short time, they might end up being heroes. Employee motivation is a complex science, but its foundations rest on the simple recognition that we all need to feel important in some phase of our lives.”
Denver-based Applied Recruitment Technologies (ART) exemplifies this philosophy. Dedicated to empowering employees, they also demonstrate a concern for their employees’ well-being. Employees enjoy an upbeat, professional work environment and, in turn, the business owners require consistently-delivered superior customer service. As evidence of their concern, ART entered a co-employment relationship with a professional employment organization (PEO). As a result, ART can focus 100 percent of their time on their business and employees’ development. This business attributes their market-share gain to their employee performance and to their low turnover rate. As Deanna Bassett, COO, said, “Our employees know we care about them and their career paths.”
Where do you start building a values-based culture?
As a definition, “Values are beliefs of a person or social group in which they have an emotional investment (either for or against something).” So, begin with passion and feeling. Inherently, values trigger emotional responses.
A universally-experienced example is the Olympic Games. All over the world, people feel the emotions expressed during the Olympic medals presentation. As country flags are raised and the gold medalist champion’s national anthem is played, tears well up. This culminating moment is emotional because values surface in the minds of both spectators and Olympic athletes.
Certainly, while business moments summon less emotional responses, business leaders can inspire emotional buy-in by developing and modeling a strong values-based culture.
How do you start building a values-based culture?
The question for business leaders is: How are values integrated into the culture so that everyone---leaders and employees alike---know what behaviors are expected and what behaviors are rewarded? The ideal goal is to see everyone automatically behave in ways that consistently reflect the cultural values.
As a start, it means fostering an environment where employees feel safe to express opinions or explore alternative viewpoints or solutions. Next, if you want your employees to (1) “buy into” your values and vision; and, (2) behave in ways that reflect those values, you must first clearly communicate them.
Then, business leaders must walk in cadence with those values. Everyone does watch to see if leaders really live by their own words.
Choosing the high road or the low road
Whatever our religious or cultural backgrounds, we all have a list of what is right and what is wrong in our minds:
- It is right to abide by traffic laws; it is wrong to road rage or run red lights.
- It is right to pick up after ourselves; it is wrong to litter the environment.
- It is right to respect others; it is wrong to verbally or physically abuse someone.
Some “what if” personal situations are no-brainers. The same holds true in the business world. Lying and cheating are wrong. If something doesn’t feel right, it’s better to avoid running it up the flagpole 20 times, expecting it to feel less wrong on the 21st try.
Cultural values are judged by more than employees
Everyone who comes into contact with your business, consciously or sub-consciously evaluates your culture---good or bad. They share their experience with others. Here is a list of your potential “pro bono” publicity agents:
- Customers and clients
- Potential customers and potential clients
- Potential employees or applicants
- Present employees
- Past employees
- Stockholders
- Stakeholders
- Vendors
- Visitors (both children and adults)
- Competitors
According to the Walt Disney Company, they strive to “honor and remember the trust that people place in us.” In fact, Michael Eisner, the longtime chief executive and chairman of the board at Walt Disney said that maintaining the culture was his “No. 1 priority.”
So, if yours is a privately-held company today---and you are embedding a values-based culture now---you may be a step closer to benefiting from a competitive shareholder-value advantage should you go public one day. After all, maintaining and protecting your business and its culture is never-ending.