6 Shaping a High-performance Culture Organizational culture is a critical contributor to corpo- rate performance; ignore it and you run the risk of los- ing your competitive edge. Many have known this fact since the days when the link between organizational culture and performance first emerged as a driving force in the corporate world. For them, it's simply obvious, intuitive, and necessary. Others have fought against the current, expecting that their results would improve without focusing on the connection between employees and the business. Developing and nurtur- ing thelr cultures to drive performance and support the achievement of their goals is another common and differen- tiating characteristic of the Best Employers. ‘We know that strategy cycles are shortening dramatically. At ‘one moment, an organization can be focused relentlessly on pursuing growth through market share; then, just months later, growth is virtually forgotten as the company focuses its entire efforts on returning profits. We have seen this happen time and time again in recent years. Major, unprecedented trends, which we have briefly discussed previously, are impact- ing our organizations. These factors, together with globaliza- tion and technological innovation, are driving significant organizational change. Te jury is no longer out.' The votes are counted. WwW118 # LEADERSHIP AND TALENT IN ASIA As strategy cycles shorten and many barriers to market entry crumble, competition heats up and your best talent may be aggressively poached. In this environment, excel- lence in execution becomes a key differentiator between organizations. In fact, today it seems to matter less what the particular strategy is, than how well it is executed. As soon as we begin to consider excellence in execution, organizational culture becomes central to our thoughts. It is our passionate belief, based on our research and experi- ence with these Best Employer companies, that organizational culture and employee Engagement are the worst-managed, significant drivers of value creation in most organizations today. In saying this, we don’t want to give the impression that strategy is dead. That isn't the case, But let us say again that the best strategy in the world comes to life only through the actions of your employees. Without their understanding, commit- ment, and passion, you won't fulfill your bold goals. The contribution of intangible assets to the market value of corporations is larger today than ever before. The market puts a value on your talent. In the same way that you manage other assets to drive the market price of your business higher, so too should you be thinking about your people and culture. Take a moment and think about your current workplace . How would you answer the following questions? ssthe best strategy in the world comes to life only through the actions of your employees. + How would you describe the people who get promoted? What about the people whose careers seem to be stuck in one place? Do you work in a meritocracy where the best talent is promoted, or do nepotism and tenure prevail? * What type of people fit in, and what type of people leave frustrated? What happens to the entrepreneurial risk-takers or the conservative, solid, and reliable? ‘+ What adjectives would you use to describe the way things get done: decisive, agile, and team-oriented; or hierarchical, slow, and bureaucratic? Open or closed? ‘+ Whaat influences the way people behave?SHAPING A HIGH-PERFORMANCE CULTURE #119 Who makes decisions? Is change easy or hard? Is it more important to follow the rules or to get the results? Are your answers to these questions consistent with the espoused values of the organization, or are they quite different? * Do people discuss questions like these passionately around the workplace? The way you responded to these questions will begin to tell you about the culture of your organization and how impor- tantly members of the organization treat the culture. ‘WHAT DO WE MEAN BY “COMPANY CULTURE"? There are numerous definitions for “company or organiza- tional culture.” To a large extent, these definitions illustrate the ability of consultants and academics to wordsmith a con- —____ cept ad infinitum—in essence, they vary only culture is... slightly. The concept of organizational cul- ———_ture was popularized in the management lit- erature of the late 1970s and early 1980s. Since then, we have been subjected to a barrage of conferences, management texts, seminars, research articles, and the recent quest for cor- porate revitalization. It was Deal and Kennedy who, in 1982, popularized the notion of corporate culture as “the way we do things around here ... a system of informal rules that spells out how people are to behave most of the time.”? We can also think of culture as the ways §————_________ of thinking, believing, and behaving «--the way people that members of the organization have behave when no one in common, and the shared values, is looking. norms, and expectations that guide employees in terms of how to approach their work, interact with each other, and relate to their customers. Another useful way of conceptualizing cul- ture is to say that it governs the way people behave when no one is looking.120 # LEADERSHIP AND TALENT IN ASIA Ownership is one of the key core values of Procter & Gamble, the global, fast-moving consumer goods giant. Many organiza- tions the size of Procter & Gamble are stifled by bureaucracy and inertia. At P&G, they work to create a culture where each employee accepts personal accountability to meet the needs of the business and acts like an owner of the company, treating the company’s assets as their own. This level of ownership and accountability enables and encourages employees to deliver their best at work—even when no one is looking. Consider the following story about a P&G employee taking ownership of a situation in the Philippines. During a period of heavy rain which-had caused severe flooding, the government declared a non-working day for government offices. A lot of P&G raw materials were being held at the Customs office, awaiting clearance. If the Customs officers didn’t clear the g00ds for delivery to P&G's plant, there would be costly delays at the plant. The plant engineer took the initiative: he braved the rains and the floods to pick up a Customs official from his house and took him to the Customs office to approve the shipment and authorize its clearance. He then arranged for all the raw materials to be delivered to the plant for manufactur- ing. The production line didn’t have to stop, which saved the company from suffering losses due to production delays. The plant engineer's initiative demonstrated a high level of own- ership. It is culture and Engagement that drives this kind of behavior. Would employees in your business go to these lengths to help your business achieve its goals? Asingle story, of course, doesn’t make a culture. In the Best Employers, stories like this are an everyday part of life. They are retold to frame expectations and set the example and are reinforced through reward and recognition. The data from our studies reinforce stories like these. Employees in The Best perceive their organizations as being cul- turally very different from other organizations (see Table 6.1). Interestingly, The Best and The Rest come closest together on factors such as bureaucracy and hierarchy; these don’t seem to be the differentiator. But the difference on other cultural dimensions, such as agility, decisiveness, and results orientation, is astounding. Close to twice the number of employees in Best Employers describe their organizationsSHAPING A HIGH-PERFORMANCE CULTURE # 121 “REPORT Moy mas Yom 3y8}U Nos yPqHEA 10} 12 se suowzzueo zo 01 axneyes wopeztueBuo nok sf apesDneaINA oY TIA OPOM YRyur Nod yTyM sop ii 9 suopeztueo 19q) of anes uopezue80 Ind OHNE Hot essa ByOM WyBr Nod YDTyAA 305 9s aL ‘SuOpeZ|UEBI0 JLRO 0} aApe[a1 UOREZTUEBIO MOK st [eOTUAS MOY “T1e124Q 20m yBtU NOK Yor 205 8 ay ‘Suofezrte8i0 ratio 04 aanejar UOReZuRBIO mod sj pasnd0}-SyINS91 MOH [eIAC we aL suoneztueBi0 340 0} aatyefar Uo} DuOM YT Nok y>IyAA 205 w se suonezjue8io saqio 0} aajejar uoneztUEBO AMOK s} 2AfeAOUUT MOY. T1940 ftom aust NOs yor 10} we % suoneztue8io soto 01 aanejas uonectueBO MOK sf aAIS1DIP MOY ‘TAO : ‘pH1oM YB NOK yoru J05 ze 9 suoneztuefio soto 0} aatnejar uopeztue8i0 mnod s} ape MOU ‘TEIOAO smo Suakoq du 150 onsen Aaains worido sakojdurg ‘samo aA0gy TI9M 20 aa0ay reqMouos 5} uopecqte8i9 PHL 9A31F" OM, soadojdurg jo a8tyu93894 ‘simling leuonez|uebi9 Jo Uondenieg Bangiulia eT S/STiME”122 ¢ LEADERSHIP AND TALENT IN ASIA positively on these attributes. The difference is palpable; walk into these companies and you feel and see the difference. it’s this difference that causes a plant engineer at P&G in the Philippines not to take the easy option and accept delays, but instead to take action. That plant engineer took action not simply because he was engaged. He was clearly that. He took action because leaders at P&G not only talk about taking initiative; they also role model that behavior themselves, and employees who take the initiative like this are rewarded and their success is celebrated. So, the norms for behavior are influenced by what leaders say and do and embedded through organizational systems and processes. If leaders at P&G only spoke about taking the initiative, didn’t role model those behavior themselyes, only promoted slow, plodding bureaucrats, atid @idig‘t reWard or recognize employees for taking initiative, then they would have created a cultural norm that would have kept the plant engineer tucked up warmly inside during the storm. You can see how a culture that promotes this type of behavior in these ways can be engaging for some employees and how this culture would support a business strategy that called for, say, customer responsiveness. Take a moment to think again about those questions we posed at the start of this chapter. How do your answers to those questions support or hinder the execution of your ; business strategy? What unwritten rules of behavior in your *_ business aré an anchor dragging on yout performance? Jao Every-organizational culture is-deeply ingrained. It is the Faber ,ggenetiecode; the personality, of the organization that deter- ~ Inines the actions that people take day by day. It is shown in the way they respond to different situations, and by their focus on performance and execution. It governs the decisions that managers make, the things that people discuss openly, and the things that employees gossip about in the lunchroom. It influences who gets promoted, how under-performers are managed, and even what clothes people wear. In the same way that our personalities as individuals are deeply imprinted and formed through a number of different forces, so too are organizational cultures formed, developed,SHAPING A HIGH-PERFORMANCE CULTURE ¢ 123 and influenced over time by a variety of different factors. We know this because, as culture is about the way things are done, it is measurable and understandable. It is influenced every day by the interplay of systems, structures, policies, and procedures driven by “signals” from the leaders. It is about the behaviors we reward, the heroes and villains we create, and the stories we tell. What we celebrate and what we don’t. At the core of orga- nizational culture is the shared perceptions of these daily prac- tices. For. example, do people show initiative or depend on direction? Are decisions made by people with authority or by those with the most knowledge? Is it more important to follow the correct process or to satisfy the customer? Figure 6.1 shows that culture is influenced and determined by both leadership behaviors and systems and processes. Consider how these elements come together to form a pow- erful coalition in this example of the efforts that the Ritz~ Carlton went to in order to nurture its employees and the organization’s culture during the SARS epidemic in 2003. In a per- culture Te Tafluenced sonal effort to tjump-start” busi- Gud determined by both ness at its Asian hotels in the wake leadership behaviors and of the epidemic, Ritz-Carlton pres- Pp a ident ‘and chief operating officer SYStems and processes. Simon Cooper launched a series of hotel “Re-launch and Renewal Countdowns” in Hong Kong, Shanghai, and Singapore—the cities where travel was most affected by the virus. xe ‘CULTURE aNd me | ‘GAPS Figure 6.1 ¢ How Cultures are Formed.124 # LEADERSHIP AND TALENT IN ASIA These sessions were created to make the luxury hotels and their staff 100% ready for the anticipated return of business to pre-SARS levels in the months to come. “We understand that the necessary reductions in hours of the past few months, when business dropped so sharply, have been difficult for all of the Ritz-Carlton staff in those cities,” said Cooper. “We want to welcome them back to work, reinvigorated and excited about the prospect of getting back to the business of offering excep- tional hospitality.” The sessions involved five days of retrain- ing, sessions highlighting all aspects of Ritz-Carlton Gold Standards and focusing on the company’s values. At other Ritz-Carlton locations around the world, the daily “Line-up” message shared with employees before the start of their work day reflected what was happening in Asia that week and built solidarity among the 22,000-plus staff at hotels from Barcelona to Bahrain, San Francisco to Sharm el Sheikh. Employees at the three hotels participated in a five-day “countdown” process. The “countdown” is an energizing and training exercise unique to the Ritz-Carlton and typically used to open a new hotel. It consists of daily training classes to focus on the company philosophy, an employee “re-orientation” ses- sion, leadership seminars, review and re-drafting of depart- mental mission statements, and an overall enlivening of the Ritz-Carlton service commitment to guests. “We want to create the same exciting atmosphere our employees have when opening a new hotel. Reviewing their departmental mission statement, re-kindling their sense of teamwork will ensure that all our ladies and gentlemen are focused on the needs of their customers and current business requirements with a fresh sense of purpose,” explained Vice President, Human Resources, International Hotels, Vincent Mercurio. The program was designed with strong involve- ment from all the organization’s senior leaders. At the end of each hotel's five-day countdown process, ‘counting down to the official “re-opening” a decade after many of these hotels first opened their doors to guests, the employees celebrated with parties. Messages of goodwill from the 50-plus other Ritz-Carlton hotels and resorts worldwide added to the grand finale celebration and created a sense of connection and belonging to the worldwide culture of the Ritz-Carlton.SHAPING A HIGH-PERFORMANCE CULTURE # 125 This is a powerful example of the way both leaders and systems and processes need to be aligned in order to build a high-performance culture. Again, we don’t suggest you do what Ritz-Carlton does; we suggest you copy how they think. Consider the powerfully consistent messages that leaders pre- sented, the role they played in building an exciting future for employees, and the way that systems were aligned to support the “jump-start” goal. This type of alignment is rare. |WHY CULTURE MATTERS Let's consider the example of two competing, global high- technology companies—Company A and Company B, both participants in our Best Employers research. Being fierce competitors, both organizations confronted the same market dynamics. This meant that during 2000-02, both companies faced declining profits and contracting markets. It became clear that both organizations would have to take decisive action to improve their profitability. How each business approached their restructuring tells us much about their leaders and about the cultures of the organizations. Ultimately, each business would lay off between 10% and 15% of their workforces. In Company A, this occurred over a period of three months, with one small group cut out each time.-“We never knew who would be next ... everyone was on tenterhooks wondering when it would be their turn to be marched out by security. We never saw the senior managers. They never came out of their offices,” said one former employee. Morale plummeted, and even in a market where jobs were scarce, employee turnover rose. Company B, a Best Employer, approached the same situa- tion very differently. It began with clear, candid communica- tion from senior management. Employees knew the dynamic situation faced by the business and the implications should various targets not be met. Rather than bunkering down and locking themselves away, the leaders became even more visible than usual, taking extra time to talk and listen to their people. When the decision finally was made to reduce the number of employees by 15%, this came as no surprise to anyone. Sure, it126 LEADERSHIP AND TALENT IN ASIA was still painful and unpleasant, but employees were prepared for the announcement. Rather than a series of cuts, the down- sizing occurred on one day—a day on which the company held a special celebration to thank departing employees for their efforts. Rather than morale diving, it became stronger. ‘“'m proud to have been a part of an organization that treats its people like this,” said one former employee. The different approaches taken by these two businesses were, to a large extent, the result of their different organiza. tional cultures, Consider the difference between a senior management team that makes decisions behind closed doors and one that consults exhaustively with its people; where decisions are secret until released, versus broadly shared across the organization; where employees are escorted off the prem ises by security guards, as opposed to having their previous achievements celebrated and recognized. Culture affects the way we make decisions every day. It's not just the day-to-day ways in which we interact with our people—it’s the very basis upon which we make the biggest business decisions we face. This same culture fuels Company B's track record of innova. tion and performance that is admired the world over, Ultimately, culture matters because there is a pot of gold at the end of the rainbow. Today, there is significant and com. pelling evidence that demonstrates the benefit of aligning culture to strategy. The classic studies in this regard are Kotter and Heskitt’s Corporate Culture and Performance (1992), Collins and Porras's Built to Last (1996), and Collins's Good to Great (2002). Other readily accessible and excellent resources that demonstrate the link between culture and performance with case studies include Charles A. O'Reilly and Jeffrey Pfetter’s Hidden Value and Jon R. Katzenbach’s Peak Performance. Our own considerable research into the Best Employers, both here in Asia and around the globe, reinforces the importance of investing in a distinctive organizational culture. A core characteristic ye can aq of Best Employers worldwide is the relent. j-"® cam 2 less effort they make to differentiate them- M9! i selves for their employees and from their ignore culture. competitors through their organizational culture. These are organizations that are passionate in theirSHAPING A HIGH-PERFORMANCE CULTURE 127 focus on performance. They have fervently executed perform- ance management systems, strong reward and recognition mechanisms, and well-developed feedback channels through- ‘out their organizations. (REAL AND PREFERRED CULTURE If execution truly is a key differentiator for today's organiza- tions, then we can no longer afford to ignore culture. If you want to'maximize your ability to attain your strategic objec- tives, you have to understand that the prevailing culture both supports and constrains the actions necessary to achieve those strategic goals. Considering strategy in a cul- tural vacuum will, at best, confine you to sub-optimization. It is vital, then, to closely consider the cultural attributes that will help drive the strategic objectives of the organization. ‘This process, quite simply, involves determining the pre- ferred culture in the context of both long-term organiza- tional sustainability and the current strategic goals. This is usually done with the senior team, but it can also involve the organization more broadly. This quite naturally raises the question of whether there are right or wrong cultural attributes. Our experience with Best Employers tells us that they have very varied cultural attributes with some characteristics in common. First and foremost, the Best Employers share a cultural focus on performance. We will look at the lead practices that drive this high performance culture from a people perspec- tive in the next chapter. The Best Employers also create more agile cultures where communication is more open, feedback is more regular and acted upon, and ideas are valued. It isn't a difficult conversation to have in the organization to think about the cultural characteristics that will support the achievement of your business goals. It’s just that not many organizations take the time to have this conversation around the boardroom table. Most of the Best Employers are explicit about the cultures they need to sustain their per- formers and active in the way they manage the behavioral norms in their organizations. Lion Nathan's leaders, for128 # LEADERSHIP AND TALENT IN ASIA instance, have developed an achievement culture model that helps establish strategic alignment throughout the business, delivers execution and a performance focus, and addresses organizational renewal. Creating this picture of the ideal, and then realistically measuring the current culture, allows the organization to design interventions to close the gaps and bring specific ele- ments of culture into alignment with the strategy and long- term goals for sustainability. It comes as no surprise, then, that one of the first initiatives taken by Carly Fiorina when she took over as chairman and chief executive officer at Hewlett-Packard, was to review and then attempt to reinvig- orate the strong culture of the organization. She wanted the business to get back to its cultural roots in a program titled “Back to the Garage,” a reference to the garage in which Bill Hewlett and Dave Packard started the business, and the entrepreneurial passion that existed. Setting the level of aspiration is easy. Sure, people will argue and wordsmith, but the description of the ideal is a rel- atively easy process to go through. As we saw in our discus- sions on branding, though, delivering on the promise is much more difficult. It requires focus of the type illustrated in the example of the Ritz-Carlton above. One of the gurus of thinking about culture across countries and in organizations is Geert Hofstede. His classic book, Culture and Organizations,3 describes how organizational cul- tures are multifaceted and built over time through practices, systems, and a range of cultural cues that are all based on either explicit or implicit organizational values. In Figure 6.2, drawing on examples from some of the Best Employers we have discussed, we can start to see how these things influence cultures in very different directions for different businesses. A word about values Nearly every organization proudly shares its value statements in glossy posters in its foyer, on its website, and in its cor- orate brochures. Yet, time and time again, we see that the words on the posters are paid not much more than lip service,SHAPING A HIGH-PERFORMANCE CULTURE # 128 symbol Vatu: Thon Cones shops ite ‘ina Caton Sate itl atoy Cuber nso wren gy, Sonnac ore Heroes: MeDonala’s Tino Narayana May esos a conan Pac Rituals: “Lion Nathan's Fay night cin “Fitz Carr's morning ine-upe Innovation intial Ina, porsonal growth, Practices: What omployeesicustomersiesents and outsiders soo, What's angie, Figure 6.2 @ Brand and Culture. ‘Source: Howitt Associates, moiied from Holstade, Cultures and Organications. most especially by the organization's leaders. It’s not just the high-profile cases like Enron, where clearly their core value of integrity wasn’t lived by the leaders. We see similar examples in most organizations every day. Our work with the Best Employers makes one thing very clear. What your values are doesn’t differentiate you from your competitors. The hundreds of Best Employers we have worked with across the globe share only 12 or 15 different value constructs between them. It’s not the values that you choose which will make you different; it is how you bring them to life in your organization that is differentiating. The Best Employers make real business decisions related to their purpose and values. One such example is Lion Nathan’s deci- sion not to invest in the poker machine industry, despite the obvious synergy with their alcoholic beverages and distribu- tion business, because they felt poker machines were at odds with their value of sociability and their purpose of making the world a more sociable place. This is real values-based, culture-building leadership. Hofstede’s work to understand culture across organiza- tions and across nations showed that cultural differences occur at the national occupational and organizational levels. It is a useful model to understand this. National cultural130 ¢ LEADERSHIP AND TALENT IN ASIA attributes are engendered into each of us from an early age; we learn about them around the driver table with our families. Organizational values stem from these national values and are reinforced in our workplaces by the particular dominant practices of that workplace. What is becoming particularly interesting is the trend toward -professionalization and the Westernizing of many Asian businesses, combined with the globalization. trend which sees many Western MNCs attempting to transplant their organizational values and cultures across national boundaries. This trend can certainly create value conflicts for an individual employee when the organizational demand for initiative and risk-taking confronts the national characteris- tics of conformity and risk aversion. There is certainly an argument that can be made that says that in an increasingly globalized world, organizational values will in the future have an unprecedented influence on national cultural values. Every organization develops culture whether it intends to or not. Our experience tells us that organizations such as the Best Employers, which approach their culture deliberately and systematically, are more successful, and their culture is more sustainable. We have seen that you cannot underesti- mate the importance of selecting the right people into the culture; fit is critical. Strong organizational cultures aren’t for everyone, as the following comment from an employee at one of The Best indicates: “This company keeps people on its toes. It treats you nice enough so that ‘you wouldn't actively think about leaving, but at the same time it keeps challenging you so that you would never feel you could ease off. Some people like it this way because it's more challenging, but those who don't will leave, Its a matter of self-selection.” ‘The Best Employers are very different places to work. We recall receiving a long email just after the announcement of the results of the first Best Employers study in Australia. The email was from a former employee of one of the companies just announced as a Best Employer, In all, the message ran to over four pages and described the writer’s disenchantment at the inclusion of his former employer on The Best list. What the writer described was a perfect case of poor cultural fit.SHAPING A HIGH-PERFORMANCE CULTURE # 131 He had been unhappy at the company from shortly after he was hired; he was uncomfortable with the rigorous approach to performance management and the very strong culture of the organization. Yet, this was an organization where the employee Engagement score was close to 80%. Clearly, most of the company’s 5,000 employees were passionate about working there. Not everyone is suited to working at all the Best Employers. The employee value propositions among The Best are quite different. The key to success is in matching the brand and culture of the organization to the needs and aspi- rations of the employees. WHY WE STILL GET IT WRONG “It’s a rare bird that concentrates on building a culture for someone else to inherit,” says Hugh Mackay, Australian social researcher and thought leader, reinforcing the truly special nature of the leaders in the Best Employers. Despite the evidence that investment in corporate culture produces the returns our shareholders seek, why do so many busi- nesses still ignore the issue? One reason is that it is difficult to change culture quickly, and the short-term focus of many of our leaders simply doesn’t allow for investment in the long term. Best Employer cultures aren’t built overnight. Our experience suggests that it's a three- to five-year process to embed the cultural foundation that the Best Employers share. Also, one of the biggest misconceptions about corpo- rate culture is that good cul- tures just happen—that some companies have been fortunate to have founders that simply “got it right.” While this pro- vides a convenient excuse for those not inclined to put effort into building culture, it also masks the relentless pursuit that goes into creating a culture for business success and long- term sustainability. It is far easier to treat the symptoms of poor performance, rather than the underlying cause, the culture. the biggest mis- 's about corporate is that good cultures [ust happen..182 LEADERSHIP AND TALENT IN ASIA Once senior leaders have a clear vision of what the com- pany’s culture should be, they must be prepared to commit the resources required to nurture and sustain it. Think back to those questions we considered at the outset. Who are you hiring and promoting? What behaviors do you reward? What implicit messages are your leaders sending, through their everyday actions and decisions that convey what it takes to be successful? It’s easy to say that your business values initia- tive, creativity, and teamwork—but if that’s true, why do you promote only those who agree with their boss and never challenge the status quo? It is far more difficult to look beyond your espoused and aspirational values—those words on the posters in your training rooms—and to make real investments in seeing the words come to life. Forget the myth that orga- nizational culture is neutral, 2 ora nice-toshave; its impact. Forget the myth that organiza- ing the way your employees tional culture is neutral or a behave today. It is either nice-to-have; it’s impacting the enabling employees to greater. way your employees behave effort or getting in their way today. of achieving your goals. Which is it in your business? So, we know now that The Best take their organizational cul- ture seriously, yet culturally they are quite disparate organiza- tions, ranging from the highly entrepreneurial, loose/tight culture of a Macquarie Bank in Australia to the tightly gov- ered and cohesive environment of McDonald’s Restaurants. ‘The secret for your organization isn’t to try and replicate the culture of the Best Employers, because there is no one Best Employer culture. The key is to replicate the sense of prior- ity and importance that the Best Employers place on their organizational culture. In the next chapter, we will consider the core cultural systems and practices that The Best have in common. Endnotes 1. An early version of this chapter first appeared in HQ, a quarterly magazine for clients of Hewitt in Asia-Pacific.