Culture shock: A survey of Canadian executives reveals that corporate culture is in need of improvement

A survey of Canadian executives reveals that corporate culture is in need of improvement

There aren't many companies where some employees' duties include writing comedy. But that's what nine flight attendants do at WestJet Airlines. Those cornball jokes you hear at the end of a flight as the plane pulls up to the gate? They're the work of a group called the WestJesters, one of several committees of flight attendants that meet regularly to discuss everything from customer service to language and culture. A pillar of the Calgary-based carrier's culture is that employees (“people” in WestJet-speak) in direct contact with customers (“guests”) not only have a stake in the success of the company through profit-sharing, but also openly contribute ideas about how the airline runs.

As famous as WestJet is for its fun and informal in-flight atmosphere, its corporate culture is no laughing matter. In fact, it has been critical to its success in a cutthroat industry during the company's nine years of flying, distinguishing it in striking fashion from incumbent Air Canada. “Everybody's unique,” says Don Bell, a WestJet founder and the airline's executive vice-president, “and if you embrace people's personalities rather than turn them into robots, and give them the guidelines and the working environment to blossom, it creates something that's very hard to reckon with.”

It's little wonder then that, in a recent study by Waterstone Human Capital Ltd. and Canadian Business, WestJet stood out as having the most admired Canadian corporate culture, noted for its “entrepreneurial spirit,” “delivering what they promise,” and its “winning attitude.” (For more on WestJet, see “People power,” page 125.)

Those are the kind of comments anyone would like to hear about his or her business. And the study–the culmination of six months of in-depth interviews with senior Canadian executives at 107 companies, conducted by Waterstone–shows that senior managers recognize how important culture is to the success of their companies. In fact, fully 82% believe there is a direct correlation between culture and financial performance, while 20% claim it's the No. 1 driver of success. At the same time, though, 72% of respondents said their own organization's culture is not the one they desire in the future–and 64% are actively trying to do something about it.

Marty Parker, Waterstone's managing director, chalks up those statistics partly to executives' Type A drive for continuous improvement. But he says the study's findings also show just how frustrating it can be shaping the collective behaviour of hundreds, or even thousands, of employees–behaviour that has a direct impact on the bottom line. “In large organizations, the ingrained texture of how things are done day-to-day can be tough to change,” says Parker. “Culture is what it is, and that can be a really difficult thing to live with if you don't think it's benefiting the company.”

Corporate culture is one of those management topics that often seems to be about ambiguous concepts like values and mission statements. On the surface, these seem pretty indistinguishable from one company to the next, and invariably use some combination of the words “integrity, respect, community, diversity and customer service.” But corporate culture is much more pervasive and organic than some plaque on the wall in a head-office foyer. A company's culture is a mix of written values, morals and codes of behaviour–and many that are unwritten–and it reveals an organization's true internal priorities. It's everything from how leaders communicate with employees, what kinds of achievements are rewarded and in what way, how accountability is demonstrated, what kinds of people are promoted or hired, and who gets fired (and how). These things can be subtly different from one company to the next. But taken together, they speak volumes about the way a company does business, in a very holistic sense–and can have make-or-break results.

The survey results don't surprise Kelowna, B.C.-based consultant Graham Lowe, who has been studying workplace issues for 25 years. “Over the last 15 or 20 years, there's been such an emphasis on structural change in organizations and changing systems that the soft part of change really gets left behind,” says Lowe. “Changing the lines on an organization chart really doesn't speak to how you improve performance. In order to do that, you have to dig down into the way that people work together. That's the culture.”

Executives' growing awareness of corporate culture is partly a reaction to the rise of the so-called knowledge-based economy, where recruiting and retaining the best people are key to success. But there's also plenty of evidence that culture has played a big role in the success and failure of high-profile mergers and acquisitions, and academic research has shown a link between long-term financial performance and strong corporate cultures.

Of course, there's a bit of a chicken-and-the-egg problem in that. It's only natural that a company that has been successful over many years will have a sense of cohesion about how it does business–or at least its executives will think so. The true tests come in moments of crisis, when the company needs to somehow shift its strategy. The real issue then: Can a corporate culture withstand the need to change? “Organizations that have a strong culture know it: 'Here is what we are,' ” says Parker. “They have a much easier time when they're going through major change.”

Academic research defines strong cultures as those that are prepared to adapt–they facilitate the adoption of strategies and practices that continuously respond to changing market conditions and new competitive environments. Based on the responses of Canadian executives surveyed by Waterstone, only about 36% of their companies could be classified as having strong, adaptive cultures. Some 55% were defined as weak–plagued with top-down managerial arrogance, they suffer from a fear of risk-taking, an inward focus and bureaucracy. (The others were uncertain about how to describe their corporate culters.) Companies with weak corporate cultures may be firing on all cylinders with their current strategies; but when it comes time to shift gears, it will be a grind.

Weaknesses can sometimes be a result of growth–a major concern even for executives at companies that are admired for their corporate cultures. For example, Suncor CEO Rick George defines his corporation's culture as being open and non-bureaucratic, with a clear strategy that employees relate to, enabling them to learn from mistakes. “It's a formula that works for us,” says George, “and it's the only one we know.” But the company is also on a hiring spree, leading George to wonder: “How do we keep that Suncor soul, in light of the massive growth, and the impending retirement of the baby boom generation? As we bring young people in, these are people with different experiences, different expectations.”

Companies expanding into new global markets face similar tests. “Getting big but staying small is a challenge, especially as we expand geographically,” says Jordan Banks, managing director of eBay Canada. “Clearly, there are cultural differences in different parts of the world. We need to spend a lot of time and effort making sure that we all have the same sort of corporate values.”

It's inevitable that the culture inside a growing company will change as it copes with more employees, diverging business lines, shifting goals and responsibilities. “In bigger organizations, culture can be really difficult to describe,” says Parker. “It may have become so watered down, and it may not be as articulated from the top as it should be.” When management believes one thing about what matters most to the company, while everyone else just chuckles cynically, that's known in consultant-speak as “misalignment”–and Waterstone's survey of Canadian executives revealed plenty of it. Only 22% of leaders believed that their own employees would agree their culture is strong; 60% thought others would view it as weak, and 18% were uncertain.

But the payoffs of getting corporate culture right are clear: more productive employees, greater customer satisfaction, better innovation, stronger confidence to develop new strategies and, of course, improved hiring and worker retention. “We've been able to meld a culture that's stuck with us because most of the people have stuck with us,” says Suncor's George. “But every day is a new challenge. Culture is not the kind of thing that you can hang on a plaque and then keep. It's something you have to keep working at.”

In many ways, the best corporate cultures are ones that foster the continuous improvement those Type A executives are seeking. “Culture isn't something you can put in a department, or something you can have be an initiative or a strategy,” says WestJet's Bell. “Culture is something that is. If you create the optimal environment, it's something that manifests itself.”

10 most admired cultures
The 2005 Canadian corporate culture study.

Waterstone Human Capital asked senior management at 107 companies what Canadian corporate cultures they admired. The 10 most frequently cited companies:

1. WestJet Airlines Ltd.

2. Tim Hortons

3. Royal Bank of Canada

4. Four Seasons Hotels Inc.

5. Suncor Energy Inc.

6. Starbucks Corp. (Canada)

7. Yellow Pages Group Co.

8. Dell Inc. (Canada)

9. Canadian Tire Corp. Ltd.

10. Rothmans Inc.

82% Share of executives who said corporate culture has an impact on financial performance; also the share of executives who said it has tangible impact on their organization's ability to recruit, manage and retain the best people

20% Share of respondents who said corporate culture is their company's primary driver of success

62% Share of organizations that do not actively monitor the state of corporate culture through surveys

36% Share of corporate cultures identified as “strong”

55% Share of corporate cultures identified as “weak”

9% Number of respondents uncertain how to describe their cultures

72% Number of executives who said their organization's culture is not what they desire in the future

64% Number of leaders who said managing culture is important, and who are starting to steer their companies in new directions