Stop the rot: Advice for turning culture around

Advice for turning culture around

When 82% of executives agree that corporate culture impacts not only their ability to recruit, manage and retain the best people, but also their companies' long-term financial performance–as a recent Waterstone Human Capital study found–there seems to be pretty strong consensus. So it must be the kind of issue managers take seriously and put high on their agendas, right?

Well, maybe not. Waterstone also found that 62% don't monitor the state of corporate culture at all. Knowing that it is important, and knowing what to do to make it better, are two different things.

So how do you know if your culture is sliding? The study classified cultures as weak when executives called companies “bureaucratic and top-down,” or “evolving from aggressive and nimble to over-regulated and scared.” Others claimed to have a “culture of complicity” and an “underlying fear of making a mistake.”

Sound familiar? Well, your company may have culture rot. You might not even know how it happened. Some execs surveyed by Waterstone could offer no explanation as to how their culture had gone astray. Others described “an inability to change and adapt,” and said a “transition of ownership has led to schizophrenia.” One blamed a lack of competition for breeding “sloth,” while another pointed to constant organizational change. Indeed, any number of scenarios can weaken the culture: upheaval from a merger or acquisition, leadership changes or failed strategies that forced a company to restructure. Or maybe it's less dramatic. If you and your senior managers spend all your time staring at financial reports and sales forecasts, the human side of your company is bound to suffer.

One way or another, your company–assuming it employs humans, that is–has a culture. The question is whether that culture is contributing to your success or hindering it. Here's how to find the rot, eliminate it and keep it from coming back.

Know thy culture

For now, put away the parchment and calligraphy pen, because drafting mission statements and lists of corporate values can wait. First, you have to check the pulse of your company. “You need to engage everyone in the organization in a very focused discussion,” says workplace consultant Graham Lowe. “Virtually every large organization in this country has value [statements]. The problem is, in a lot of instances, they're dead–people really don't follow them.” Executives need to examine what values really guide their organization.

Your employees probably have a better sense of those than you may realize. If you provide the right kind of working culture, most people really do want to contribute and not just show up and collect a paycheque. But asking the question, “How would you describe this corporation's culture?” won't get you far. “It is hard to use descriptors that really capture what a culture is,” says Jim Westlake, head of the personal and business client group at RBC Financial–one of Canada's most admired corporate cultures, according to the Waterstone survey. “And yet, if you answer a lot of specific questions, it starts to emerge.”

A survey of employees shouldn't be about whether they like the foosball tables or the subsidized cafeteria. Corporate culture isn't even about health benefits. It's about the attitudes inherent to how your business runs, for better and worse, and the expectations communicated explicitly and implicitly to employees. (Those messages shouldn't contradict, but often they do.) At its root, culture is the collective behaviour of employees, which, ideally, mirrors the values the company's leaders believe are important. But often businesses are managed in ways that lead employees to behave according to a different set of values altogether–a misalignment that has to be corrected if a culture is going to support corporate strategies. “Culture revolves around the relationships people have day in and day out in the workplace,” says Lowe, who, as a founding partner of the Kelowna, B.C.-based Great Place to Work Institute Canada, is conducting audits of organizations for Canadian Business's Best Workplaces in Canada 2006 project. “And one of the fundamental elements of a relationship is trust.” Are employees given the clear direction and tools to do their jobs well, or do they face barriers that frustrate their assigned tasks and breed cynicism?

The evaluation can be risky. “In some instances, it is opening up a Pandora's box,” says Lowe. “Executives may discover that what's really valued in the organization is absolute cutthroat competition between employees, or other things that everybody kind of knows are there but nobody really wants to talk about.”

But digging can pay off. Ceridian Canada, a Winnipeg-based payroll and other human-resources services provider, conducted a “culture project” last year. At the behest of its U.S. parent in response to a reorganization of its business model, the Canadian division asked its 1,400 employees in an anonymous survey what values matter to them, and what gaps they saw in the workplace. “We wanted to explore the alignment between the employees' perception of culture and the values of the leaders in the organization,” says John Cardella, the company's vice-president of human resources. “We wanted to be sure our leaders were walking the talk, and that our people felt there was honesty and integrity in what was happening.” As it turned out, the values of Ceridian and its Canadian employees were well aligned.

Take me to your leader

What leaders say–and in particular, what they do–sets the tone for the entire company. “Leaders' behaviours make or break a company,” says Barbara Leavitt, president of Baxter Corp. (Canada), a biotech and pharmaceutical company. “Good leaders might not say 'I work on the culture.' But good leaders do think about what they do and why they do it, and to me, that impacts culture.” Leavitt points to changes at Baxter International Inc. since Robert Parkinson became chairman and CEO in May 2004. “What he talks about, where he spends his time, and what he recognizes–it's picked up in nanoseconds within the company,” says Leavitt. One change was communication: whereas his predecessor used to broadcast updates to the entire company every two weeks, Parkinson does so less frequently, and says less, too. “He communicates the top three areas that he's focused on, and that's enough for us to know,” says Leavitt.

Parkinson has changed over half of the leadership team, too. Before, executives were oriented toward different functional areas, with a focus on financials. The new hires have a lot of experience in the markets of Baxter's customers. The result? Baxter is less of a holding company, and more of an operating company. “[Parkinson] never said that,” says Leavitt. “You just observe it by the way he's hiring, what kind of people they're hiring and how they do their job.” She notes that the last seven people Parkinson has hired are advocates of his value triumvirate of respect, responsiveness and results. (For more on hiring and firing for cultural fit, see page 123.)

But corporate culture isn't all about you and your leadership team. “It has to be top-down and bottom-up,” says Lowe. “You can't build a truly healthy, vibrant culture without leadership support and without leaders acting according to those values. But at the same time, you have to engage your front-line employees. If you have one but not the other, you will not succeed in rebuilding the culture.” Lowe stresses that front-line supervisors are particularly important: they're the main conduit through which ideas are passed to employees and reactions are heard.

Reward Behaviours, not just performance

Talking about values and setting a good example is a start, but it's not enough. It's important to consider how you reward employees, and make sure the performance review system and its recognition programs uphold corporate values. If you claim customer service and teamwork are key, for instance, but give employees bonuses only for winning the big deal or finding ways to cut costs, well, guess what kind of message that sends?

At the eBay Canada office in Toronto, all 30 employees vote on the Hat Trick Award, which is given quarterly to a great performance as it relates to integrity, excellence and innovation–“not only what is done, but more importantly, how it is done,” according to Jordan Banks, eBay Canada's managing director. And if someone in the U.S. office goes above and beyond to help out the Canadian division, the team in Toronto will send that person a puck with a message that reads: “Thank you for thinking Canadian.” Globally, the company has the Out of this World award, a monetary prize nominated on an ad hoc basis–and it's not about hitting numbers. Every six months, a “Pulse” survey is sent out to every employee to judge managers, business units and the overall company on some 90 different areas, none of which deal with financials or business performance. The results are part of managers' quarterly reviews and bonuses. “There's no way at eBay that you can be a star performer unless you live the eBay behaviours,” says Banks, “and you care as much about how you're doing things as you do about what you're doing.”

Nurture it

Turning around a culture takes time, and once things start to move in the right direction, you need to be vigilant that the culture is always doing the most for your company's strategy that it can. Leaders need to consistently and clearly communicate what values and behaviours are important for success, and, on a regular basis, check to make sure that what they think is happening, really is. “Corporate culture is a living, breathing organism,” says Lowe. “You have to nurture it.”

7 habits of strong company cultures

Don't fake it: Corporate values must accurately reflect the priorities of an organization, and be compatible with the strategic mission.

Engage employees: Find out what values currently affect their work, and what they think would help the business.

Lead by example: The top exec sets the standard–if you don't live the values, no one will.

Hire for cultural fit: Training for skills is easier than teaching values, and at every level leaders need to be consistent.

Reward behaviours: Internal recognition programs reinforce how things get done, not just final results.

Make values pay: Include cultural behaviours as a requirement for annual performance goals and compensation increases.

Perform checkups regularly: Monitor cultural shifts with annual surveys, peer reviews and 360? feedback.