Culture cannot be manufactured. It has to be genuinely nurtured by everyone from the CEO down. Ignoring the health of your culture is like letting aquarium water go foul. ~ Shaun Parr
Culture assessments and corporate culture audits are all the rage at the moment. Even the venerable and analytical McKinsey & Co. have come up with a culture assessment tool. The whole point of these assessments is to measure the strength of your corporate culture along a number of dimensions and categories, like employee engagement, customer focus, agility, innovation, quality of leadership, values and behaviours, etc. The result is a graphical display of your current and desired culture, with the obvious goal of closing the gaps.
Sounds reasonable and often these exercises give the senior leadership team good insight into what could be called enablers and derailers within their existing corporate culture.
In my book, LEVERAGE: The CEO’s Guide to Corporate Culture, I look at corporate culture as not static, but able to move along a continuum. I also, based on over 30 years of consulting experience in multiple industries, estimate the relative proportion of companies along this continuum from Toxic Cultures to Cult-Like.
Functional Cultures work well for all stakeholders concerned and are characterized by a good degree of alignment between Strategy, Structure and Culture. Most employees know where the company is going and understand the company’s competitive advantages. They know how to get things done with a minimal amount of time wasted, and are clear on the behaviors required for fitting in and getting the job done with quality and timeliness. A functional culture is adaptive to shifting business and market conditions; people have a high degree of trust in upper management and generally feel the company is a good place to work and develop themselves. Functional cultures deliver average to good business performance.
People in Functional Cultures tend to focus more on the work and the benefits of the job than on the company culture. Often employees remain in these companies because they like their immediate boss and they like the work, and are willing to put up with minor frustrations. When asked about the company, most employees respond with “It’s okay.” Few employees go out of their way to introduce their friends into the company. The overall viewpoint of leadership seems to be one of: “good products and good financials will build a good culture and employees can have a good career here.”
Dysfunctional Cultures deliver erratic performance, sometimes posting good performance and at other times disappointing Wall Street and shareholders. A dysfunctional culture is characterized by lots of blaming and excuses for poor performance. Turnover is moderate to high, depending upon the job market externally. Subcultures are strong and powerful and often display more loyalty to members of their group than to the company or customers. Management spends more time looking at and fixing internal problems than focusing externally on customers. Normally we see power and decision-making concentrated at the top, with lots of meetings, most of which are described as a waste of time. Senior executives tend to focus more on their functions (silo focus) and their functional objectives than on cross-functional teamwork or the overall strategic objectives.
I believe that the majority of companies across the globe tend to fall into the dysfunctional culture category. This doesn’t mean they can’t turn out good products, grow, compete effectively or deliver on stated business goals. They can, but it takes more effort and hard work than is actually necessary since a large amount of energy is wasted on internal turf battles, politics, rework and redesign, workarounds, late shipment costs, daily crises and ‘firefighting’, not to mention the human toll of stress, emotional and physical abuse. Working in a dysfunctional culture is hard, like trying to sprint through molasses. When asked about the company, an employee will often reply, “It’s not great, but it’s a job”.
When small men attempt great enterprises, they always end by reducing them to the level of their mediocrity. ~Napoleon Bonaparte
Healthy, High-Performance Cultures
High-performance cultures seem to have a solid foundation of trust. Employees trust management and their co-workers to act with credibility, respect and fairness. Trust is built and nurtured through progressive HR policies, caring and concerned leadership, selective hiring, recognition and rituals. The company produces goods and services that people can be proud of. They talk positively about their company to all who will listen. People really like each other and like working in these types of cultures and performance on all levels, growth, profitability, and share price is well above average. High-performance cultures are built from the inside-out. Employees tend to recruit their friends to work there and all around you hear such statements as: “This is a great place to work and I believe I can learn and grow here.”
Cult-Like and Toxic Cultures
At the extreme ends of the continuum are cult-like and toxic cultures.
Cult-like cultures are fascinating to observe. I use the word ‘cult-like’ here in a very positive sense (as opposed to the negative connotations of religious sects and other cults). These rare organizations are characterized by intense passion and devotion to the company shown by not only employees, but customers as well. Cult-like cultures literally attract employees and customers (as opposed to most other cultures which must use ‘push and pull mechanisms’ to find employees and customers). A cult-like culture was one of the fundamental attributes of the successful companies profiled by Jim Collins and Jerry Porras in their classic book Built to Last, regarded as one of the most influential business books ever.
A cult-like culture is usually built on a passion and devotion to a core ideology that enhances the well-being of its customers and staff in ways that other company products and services cannot. Cult-like cultures don’t just happen, they are designed, nurtured and sustained by the founders and/or senior leadership, but are not dependant upon one or two individuals. It’s the ideology, not the person that people are attracted to. Cult-like cultures often deliver superior performance at all levels; staff satisfaction, customer delight, sales per square foot, profits, growth and innovation.
One of the longest sustained cult-like organizations is the Walt Disney Company. Walt Disney invented a new language that would signal and reinforce the core ideology of the company. Instead of employees or staff, he called them ‘cast members’, and customers were ‘guests’. Roles and responsibilities were called ‘parts’ in the Disney performance. He even helped implement an ‘audition’ instead of the standard job interview and all those hired, no matter at what level, had to attend and pass the ‘Disney Traditions’ employee orientation training, where they were indoctrinated into the real purpose of the company: ‘to make people happy’.
Toxic cultures are bad news for just about everyone; employees, customers, suppliers, shareholders, communities and often, the environment as well. A toxic culture has a single-minded focus on profits, often at any cost. They are characterized by posting highly erratic business performance numbers that are either superior or poor in their category, sometimes swinging from one to another over a short period of years, or quarters. They are full of ‘flavor of the month’ improvement initiatives, usually around costs or sales, rarely around people development. They are often the company of last resort for customers and often win short-term business through special discounts and other incentives. Employees feel very little loyalty or love for the company; their main focus is on getting a paycheck. They are characterized by high turnover at all levels (before 1985 Continental Airlines had 10 CEOs in 10 years!).
Toxic cultures favour secrecy to openness and display poor internal and external communications. Rumors and the grapevine are the only conduits for news and information. Often we see toxic companies trying to acquire other companies to bolster their numbers, a tactic that only works in the short-term. Unless culture is a priority at all levels, older companies can slide towards toxicity as they grow larger and ossify their bad habits.
A toxic culture is characterized by a specific set of behaviors:
- Widespread anger and frustration
- Common use of foul or abusive language
- The workplace bully is admired
- High degree of finger-pointing and blaming, “not my job” is a common phrase
- Dysfunctional relationships with low trust and respect
- Dysfunctional meetings
- Obvious hypocrisy where “rank has its privileges”
- Overly restrictive or controlling polices, procedures and systems
- Incompetent or powerless HR manager
The old GM car manufacturing plant in Freemont was another toxic culture company, where employees would purposely put half-eaten sandwiches inside door panels that were then welded shut to get a semblance of revenge on management. It was the worst performing, poorest quality, most-strike-ridden plant in GM worldwide. Another example is the corporate culture of Enron, which slid in a few short years from functional to toxic under the reign of new CEO, Jeff Skilling.
In a recent study on why talented women leave corporate jobs, only 1% cited the glass ceiling. Most said they left because of toxic cultures of bureaucracy, back-stabbing, poor management, useless meetings, harassment and bullying. The costs to physical and emotional health, and their own personal values, was just too much..
What’s your corporate culture?
If you don’t really know, I suggest you find out. It just may be the wake-up call your leadership team needs to dramatically improve performance.
Written and Posted by: John R. Childress
Senior Executive Advisor on Leadership, Culture and Strategy Execution Issues,
Business Author and Advisor to CEOs
Visiting Professor, IE Business School, Madrid
John also writes thriller novels!