“I know corporate culture impacts business performance; but I don’t have a clear understanding of how to manage culture to ensure we achieve the business results we have planned and promised.” ~ a frustrated CEO
Corporate Culture is one of the most talked about topics by business leaders today, and for good reason. The business impact of a weak or misaligned culture has become more pronounced over the last 10 years as company after company, from banking, insurance, airlines, auto manufacturers and energy utilities have experienced billions of dollars in fines and share price declines as a result of issues ultimately stemming from a misaligned or even toxic corporate culture. Culture has a powerful positive or negative impact on business performance, company reputation and brand value.
Consider the banking fraud at Wells Fargo perpetrated by a culture of relentless pressure on staff to meet very aggressive sales quotas. Or the cover up by Volkswagen of fake CO2 emissions data. And recently the toxic culture at Uber allowing its rival, Lyft to gain significant market share. Then there is Equifax covering up the public exposure of millions of private customer records through multiple cyber hacks.
On the other hand, Southwest Airlines and its “culture of LUV” has contributed to 43 straight years of profitability, plus the highest customer satisfaction scores in the airline industry. And the “innovation culture” at Amazon enables it to penetrate and dominate in multiple business sectors by disrupting old business models and revolutionizing the customer experience.
The economics are compelling, manage culture well and your organization can experience growth, brand recognition and financial rewards that attracts and keeps employees and builds customer satisfaction and loyalty. Manage culture poorly and your organization may experience massive fines, customer defections, high employee turnover and loss of brand value.
There is growing consensus among business leaders and academics that culture matters. Corporate culture often provides the key differentiator that elevates performance to the next level. What is not so clear is precisely HOW business leaders can actually MANAGE culture to add value to their brand and capture sustainable industry leading business performance.
The Evolution of Corporate Culture
The evolution of modern business has evolved over the last several centuries in discrete phases, each powered by a significant advance in technology and scientific understanding. The first industrial revolution started in the late 1700’s with the introduction of mechanical production powered by water and steam. In 1784 the first mechanical loom revolutionized weaving and reshaped many early industries. The second industrial revolution arrived in 1870 with the first assembly line, a product of the introduction of division-of-labor and mass production powered by electrical energy.
In 1969 we witnessed the third industrial revolution, the use of electronics and programmable IT systems to further automate tasks and production. And today we are experiencing the fourth industrial revolution, the explosion of disruptive innovations through the digitization of business processes, open access to massive amounts of information, hyper-connectivity, artificial intelligence and the Internet of Things. The evolution of business has led to massive improvements in productivity and speed and added more and more value to the world GDP and to the wellbeing of many people.
In a similar manner, our understanding, application and approach to corporate culture has evolved over the past 70 years. And with each new phase the effectiveness, value and ability to impact business results has increased. In the chart below we summarize our view of the evolution of Corporate Culture.