By Stuart R. Levine
Published In, The Credit Union Times
A recent study conducted jointly by the Fuqua School of Business at Duke University and the Columbia Business School, found that 85% of executives feel their culture isn’t where it needs to be. This fact, combined with numerous studies finding a strong correlation between a positive culture and profits, shows the importance of creating a strong corporate culture within an organization. In fact, research by Harvard Professor James Hesket found about half the difference in operating profit between organizations can be attributed to effective culture. Developing organizational culture has gone from unfeasible, to popular, to serious in a short period of time.
Many leaders realize the importance of a strong corporate culture, however, while this number is growing, many leaders still do not. Some do not realize the impact their company’s culture (prevailing ideas, values, attitudes, and beliefs that guide the way their employees think, feel, and act) has on outcomes and financial performance. They also fail to realize the importance of aligning culture and strategy, and therefore do not put the time and effort into building a positive culture that will drive organizational success. Culture has become so important, that in their recent book on Human Capital Trends, Schatzky and Schwartz point out that employee engagement and culture are the number one human capital challenge companies face globally.
Misalignment of the way employees think and act with organizational expectations, can have devastating results. When culture is not aligned, employees become disengaged, costing companies millions in productivity and turnover. A Gallup study found that 65% of managers are disengaged, leading to high rates of absenteeism, higher turnover, and presenteeism (being at work physically but not mentally). Turnover alone costs companies millions of dollars a year, and Gallup estimates the total costs for lack of engagement are approaching $400 billion annually.
So how do leaders create the right culture? Left alone, a company’s culture will develop on its own, for good or bad. Leaders must make a conscious effort to build the culture they feel will drive the organization in the direction they envision. Recently, the Bill and Melinda Gates Foundation set out to build what they refer to as a “high-impact culture”. Through research, internal assessment, and focused leadership, they made a concerted effort to change their internal culture and evolve the organization. Based on the Center for Creative Leadership model, they created a corporate culture based on outcomes. Creating a simple definition that everyone could understand, the Gates Foundation enacted three concepts: Direction, Alignment, and Commitment. Starting with Direction (where are we going) the leadership came up with wide-spread agreement on goals and aims, asking “where are we going?”. With that in place, they moved to Alignment (a coordinated effort across the organization) asking, “how do we get where we want to go?”, and then finally to Commitment (sustaining passion) asking themselves, “how do we stay inspired and engaged to reach the destination?” These questions became the foundation upon which the new culture was to be built.
Surrounding this cultural architecture, the Gates Foundation put forth three guiding principles: First, everyone has a role to play. Although the CEO has a unique role to play, everyone within the organization plays a role in shared direction, alignment and commitment. Second, senior leaders are in the spotlight. Although everyone is important and plays a role, senior leaders must look inward and examine their own values and beliefs, and quite often change their assumptions and patterns of behavior. And finally, the work must be personal. Creating a culture is not simply a model and does not have an endpoint. Creating the direction, alignment and commitment needs to become the way the organization works, and not just another “thing” being done. It is not a “flavor of the month” that will end, it is an ongoing journey with no endpoint.
Although all three of the guiding principles are important for success, leadership makes the difference. According to the Center for Creative Leadership, in order to successfully change an organization’s culture, often executives must change their leadership culture to align with their business goals. Once this happens, leaders will have to improve their ability to create and change the shared direction, alignment, and commitment — the three concepts employed to build a high-impact culture.
Through a concerted leadership effort, consistent communication, employee engagement, passion and the commitment of the entire organization, positive, impactful cultures can be built. The efforts of the organization, leadership, and workforce, will be rewarded with higher profits, organizational sustainability, and greater employee engagement.