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Is company culture your competitive advantage or hidden inertia?

November 23, 2022 - 21 min read
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    Company culture can be hard to define. Depending on the organization, you might struggle to put your company culture into words, especially if the day-to-day is misaligned with the company’s values.

    In thriving organizations, culture looks like (and often is) the hidden “secret sauce.” On the flip side, in failing organizations, culture is often blamed for preventing change. 

    But how do you improve company culture when it is challenging to nail down to begin with? Let’s take a step back and consider what organizational culture is, how to define yours, and then look at ways to enhance it.

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    What makes company culture so important?

    Have you heard the quote, people will not remember what you say but they will remember how you made them feel? Culture is kind of like that. It impacts every aspect of the employee experience. From the way co-workers speak to one another to the feedback cycle for upper management, to the way teams manage workloads and burnout. 

    Each of these areas involves crossroads and nuanced decision-making. The company’s culture informs how these various activities (among others) are approached, discussed, and acted on.

    Why improve company culture?

    Given the influence organizational culture has on the way employees conduct themselves, it is incredibly important to invest in it. A clear workplace culture keeps teams aligned and helps strengthen cross-departmental collaboration. Other benefits include:

    coworkers clapping at their desks - improved company culture

    How leaders influence a company culture

    Few scholarly metaphors have had the lasting impact of Edgar Schein’s iceberg model within the organizational culture domain. As with icebergs, the most important and enduring elements live below the surface. In this case, they exist inside the minds of the most influential people in the organization, starting with the leaders.

    Leaders’ mindsets tell a unique and often personal story about their past success. The consequences of their experiences can be seen in all other layers of the culture, including in the values that are shared (“what we stand for”) and in the norms and practices that are supported (“how we do things around here”).

    As with icebergs, these lessons are not easily forgotten. Sometimes their effects persist from one war to the next, literally. In his book Leading Culture Change in Global Organizations, Dan Denison recounts how World War I artillery crews maintained the practice of “holding their horses,” so as to avoid spooking them when firing their guns, despite that horses were no longer used on the battlefield. As Denison would say, how many times do you think the previous generation had to learn that lesson the hard way? Just once, if they were lucky.

    An organization’s culture can be a source of competitive advantage.

    Like the cavalry, all organizations sit on a foundation of mindsets that were at one time adaptive and which will eventually outlive their utility. But in the heyday of this life cycle, the culture looks like (and often is) the hidden “secret sauce”. Research now clearly supports this idea – that an organization’s culture can be a source of competitive advantage.

    How to spot an unhealthy company culture

    Poor company culture can be detrimental to teams and overall productivity. If you aren’t sure whether your organization’s culture could use a refresh, here are some signs of unhealthy company culture:

    • Low employee engagement: Team members are less likely to be enthusiastic and engaged in their work when their company culture is unhealthy. They might still be productive but are unlikely to develop new creative ideas or share them with much vigor.
    • High employee turnover: Companies with an unhealthy work culture often have trouble with retention. If employees are leaving quickly or en masse, you could have a company culture issue.
    • Unbalanced work-life ratio: Employees working within an unhealthy corporate culture might feel the need to work tirelessly into the late hours. They could feel pressure to overwork to the point of exhaustion and burnout.

    Creating a sustainable organizational culture

    Now you know the symptoms of unhealthy company culture, but how do you improve it in a sustainable way?

    Good organizations can become great when they align their culture, strategy, and employee ecosystem. The best create an environment that is not only highly engaging but also highly focused on their strategy and aligned with their values. 

    But, sustaining it in the long run has more to do with what happens as the formula changes. For many organizations, changes in the ecosystem and strategy demand culture change. And in this sense, the change is often quite reactive. The first challenge has to do with seeing the situation for what it is, and the second has to do with making the change on a culturally meaningful (“deep”) level.

    Often, the signals are buried in an incremental performance decline, and the causes are either unclear or the source of stifling internal debates. Alan Wurtzel, former CEO of Circuit City, described how the electronics retailer long ignored changing consumer preferences and dismissed the rise of its eventual successor, Best Buy, as a flash in the pan.

    True to form, the cycle is now repeating itself as Best Buy and other large box retailers struggle to make the shift from their brick-and-mortar strategies toward an omnichannel experience that can compete with Amazon.

    Even when the results are more dramatic, the cultural pre-conditions were often cultivated for years. Aggressive cross-selling was a hallmark of the Wells Fargo strategy and culture long before it was exposed as a systemic cause behind the massive banking scandal.

    In his 2007 best-seller, The Black Swan, Nassim Taleb famously characterized how Fannie Mae was “sitting on a barrel of dynamite, vulnerable to the slightest hiccup.” We now know quite clearly that the dynamite was lit. Increasingly risky practices were institutionalized in the mindsets and practices that came to define not only Fannie’s operations but the industry as a whole.

    female coworker laughing over lunch with male coworker enjoying their improved work culture

    7 ways to improve company culture

    The jury is still out on whether Wells and Fannie can reset the cycle and once again climb back to good and to great. More fascinating still is the much broader possibility that we can learn to do proactively what these organizations, like many others, were forced to do reactively.

    In other words, to read the earliest signals that the sauce is turning into inertia and take meaningful steps to reinvent for a different future.

    In a new era of rapid disruption and where change is the only constant, developing this capacity for continuous, proactive culture change might just become a business necessity.

    How can organizations develop this capability? Here are 7 fundamentals to improving your company culture:

    1. Understand your baseline
    2. Foster open and timely feedback
    3. Prioritize employee recognition
    4. Clearly align the company’s mission with its core values
    5. Invest in your employees’ development
    6. Create opportunities for social connection
    7. Focus on employee wellness and mental health

    1. Understand your baseline

    As with most initiatives, you will want to benchmark the health of your current company culture. Understanding this will also highlight the areas of improvement and ensure you keep investing in the things that are working well. 

    The exact KPIs will vary depending on your organization and priorities. But including a range of variables from different aspects of the business and employee experience will help. Some areas you will want to measure are:

    Your human resources team can use an employee engagement survey to gain the insight needed for these benchmarks. If you ask the right survey questions, you should get enough information to build out a plan for improving your overall company culture.

    2. Foster open and timely feedback

    Companies with a strong company culture often have a strong feedback loop. Employees understand clear expectations and feel comfortable communicating concerns with their managers. In turn, managers are skilled at giving (and taking) timely, productive feedback

    This feedback keeps teams on the same page and moving in a united direction. Additionally, it helps build job security as employees know where they stand. Moreover, a healthy feedback process facilitates continual career growth for employees since their managers are more in touch with employees’ day-to-day priorities, their wins, and their struggles.

    3. Prioritize employee recognition

    An effective employee recognition program can do wonders for building a great company culture. In fact, in a recent study, the majority of respondents rated recognition as the most important driver of great work. This beat out both a promotion and a pay increase.

    For an employee recognition program to work, it should include well-timed appreciation and full organizational commitment. It will fall flat if various levels of the organization or different departments are not also enthusiastic to participate. It is also helpful to get your employees’ input on the ways they would feel most appreciated. Depending on their roles or personality types, they could prefer one of the following methods or a combination of a few of them:

    • Public recognition
    • Private recognition
    • Promotional advancement 
    • Monetary advancement
    • Evaluations and reviews

    4. Clearly align the company’s mission with its core values

    Employees are more engaged when they know what they are working toward and why. And much of this “why” will come from their personal values and those of the company. 

    On the flip side, if teams do not see the value of their work or understand how it builds toward company goals (which are also tied to its mission), then they will lose interest. This is where we see high turnover rates and lack of motivation come in. 

    To keep teams satisfied in their work and expanding their creativity and problem-solving skills, ensure they know why their work matters, how it ladders into the company mission, and where it aligns with the organization’s values.

    5. Invest in your employees’ development

    Most employees want some form of development opportunity. Whether it is making lateral moves or horizontal ones, trying new things keeps people engaged.

    Employee development does not always have to be about career growth. It can focus on building out peer coaching initiatives. Or leadership coaching and mentoring for your high-potential employees. Investing in these areas will help increase employee retention while developing a good company culture. One that empowers and believes in employees.

    6. Create opportunities for social connection

    The pandemic has given social connection a whole new meaning. Whether your team is coming back to the office, working remotely, or taking on a hybrid system, it is crucial to build bridges between employees. Be it encouraging teamwork on a collaborative project or meeting for an employee bonding excursion.

    A positive workplace culture is one where remote workers can also be part of virtual team-building activities. In the same vein, employees who can (and feel safe to) meet in person should have opportunities to do so.

    Some ways to build social connection include:

    • Volunteer days
    • Virtual social hours
    • Scheduled coffee chats
    • Group lunches

    7. Focus on employee wellness and mental health

    All employees, from new employees in the onboarding process to tenured workers, are managing their well-being. Remaining mindful of this fact and open to discussing mental health in the workplace is key to developing a healthy company culture.

    Focusing on employee well-being and helping your teams develop good work-life balance will help drive business results. This kind of effort improves productivity, boosts creativity, and serves as a building block for retention. So bypassing your employee wellness initiatives will lead to issues in the long run.

    male and female coworkers trying to solve a problem on their computer (1)

    5 skills for building a great company culture

    Great leaders looking to foster positive organizational cultures observe the behavior and attitudes of groups. They then relate these observations to better understand the mindsets of individuals.

    One thing that makes the process of culture change uniquely challenging is that you need to work at multiple levels. The sense-making and change happen in a social context and on a personal level. But how do you get at something deeply personal in the normal workplace context?

    The answer is found in specialized skills related to observation, reflection, and dialogue. These skills can be developed with practice. Here are five skills with accompanying questions that you can ask to help get (and stay) ahead of the culture curve:

    1. Cultural introspection
    2. Growth mindset
    3. Curiosity
    4. Cognitive dissonance
    5. Normalizing habits

    1. Develop the muscle for cultural introspection

    Check in daily on whether the assumptions driving the organization are becoming (or have become) outmoded. For this purpose, try a daily practice of asking yourself and others in your organization: What did we believe to be true yesterday that is no longer true today?

    2. Give others permission to challenge your mindsets 

    Accelerate growth and create the opportunity for open dialogue. Marshall Goldsmith’s What Got You Here Won’t Get You There is a great reminder that sometimes the greatest impact is in the process of letting go. But knowing which habits and mindsets are no longer effective is difficult, if not impossible, without getting the right feedback in the right way. Try asking yourself and others: What is one thing we can let go of, starting today?

    3. Be curious in the search for blind spots 

    Uncover what you don’t know that you don’t know. This is the experience of a traveler encountering vastly different world views than her own. Embrace your inner traveler and try asking yourself and others: What bubble(s) are we in today, and how can we step outside to broaden our perspective?

    4. Create cognitive dissonance

    Allow behavior change to have a chance to lead mindset change. Jeff Bezos’s “disagree and commit” is a good example of building cultural support for action and experimentation first and alignment later. Try asking yourself and others: What is a first step that we can take today and revisit tomorrow?

    5. Target behavior change at habits

    This way, the focus is narrow and the impact is wide. Habits are a powerful place to aim because of their repetition and scale and because they often link to core business processes. Some habits become so deeply ingrained over time that we forget that we have the power to choose something different. Try asking yourself and others: What is one habit that we should take off of “autopilot” and disrupt, starting today?

    For organizations to hold onto what makes them great, they need to change. Embracing a new form of proactive culture change might just make all the difference in what happens next.

     Keep a pulse on your company culture

    Now you have the information you need to kick-start your efforts to improve your company culture. But this is not a set-it-and-forget-it system. It is important to continue measuring and evaluating the impact of these changes over time. So keep a pulse on your company culture and adjust where you have opportunities to improve even further. You are sure to see an uptick in the beneficial areas of leading an outstanding place to work.

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    Published November 23, 2022

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