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HOW DEVELOPING A WINNING CULTURE WILL GIVE YOUR ORGANIZATION A COMPETITIVE ADVANTAGE
By MARTY PARKER
The McGraw-Hill Companies, Inc.Copyright © 2012Marty Parker
All rights reserved.
The leaders of corporate Canada don't usually stand on their chairs and cheer—and certainly not at stuffy awards dinners.
But this was no stuffy awards dinner. From the get-go, we had deliberately gone in the opposite direction for our Canada's 10 Most Admired Corporate Cultures awards gala: we wanted the night to be fun. More important, our objective was for the program's annual winners to "show off their culture" at the event—to bring out their teams and celebrate. And boy, did they ever ...
So there I was, in February of 2010, in the sold-out ballroom of the Four Seasons Hotel Toronto, standing on my chair like the rest of the 500 willing participants. From the stage, Patch Evans, CEO of Goodlife Fitness (one of Canada's 10 winners in 2009), led our audience through a signature element of Goodlife's corporate culture: a ritual at all employee gatherings called the Margarita. Part motivational cheer and part physical stretch, the end result of the Margarita is the reinforcement of the company's brand, "I'm Sexy, Smart and Strong".
Who'd have thought that Canada's leading CEOs and senior HR leaders would be standing on chairs with their hands waving in the air, shouting that phrase at the top of their lungs, at an awards dinner on a Monday night in Toronto in February?
To me, it was yet another reinforcement of a belief that we've had for quite a while in our executive search practice: culture matters to successful organizations. But culture is more than company foosball tables, in-house gyms, and nifty lunchrooms. Culture matters precisely because (and we have proven this) it leads to great performance. In fact, organizations with clearly defined, easily communicated, and well-aligned cultures win in the marketplace and outperform their peers.
Ten years ago, no one thought much about corporate culture. The term was barely used. In fact, as a new search firm back in the early 2000s, the marketing research consultants that we hired advised us to "not go down the culture road". Even our own board of directors warned that we might be going at this alone and that this type of positioning, although noble, might not be the ideal place to stake our claim. Thankfully, our search experience at the time was providing us with enough anecdotal evidence to ignore all of that advice.
What were we seeing? Clients were putting a higher weighting on "fit" in the hiring process. And the candidates we placed, those who were hired for having the right kinds of behaviours—the same behaviours that defined success at the client's organization—were more successful and had longer tenures than the ones who were hired strictly for their skill set. The dynamics became clear to us: we realized that in order to do great work in executive search, we needed to understand the culture of an organization and what makes its high performers, high performers.
Clearly, culture is more than an employee group cheer. It's about how people behave, day in and day out. In fact, in truly high-performing organizations, culture starts with a defined set of behaviours or the values that govern them—behaviours that are then reinforced, communicated, and aligned throughout the organization. And driving those behaviours is leadership.
Great organizations, like our annual group of Canada's 10 Most Admired Corporate Cultures, exercise the principle that I'll call "Know Thyself". This knowledge often begins with a frank assessment of the organization's existing culture—which may not have always been a great one. In fact, cultural assessments (the fastest area of growth in our business) often happen because an existing culture is not well defined, is misunderstood, or is verging on dysfunctionality. But sometimes the situation is not nearly as dire as this. Often, an organization's culture may simply be in need of definition rather than improvement. In any event, knowing thyself begins with assessing your culture. The objectives are to clearly define that culture—and, most important, to articulate it—and to find new and systematic ways to use your culture to unleash the power of your people to perform. With knowledge and understanding come great power.
Knowing thyself also means taking that assessment and driving its outcomes throughout the organization. It means defining the behaviours that should be rewarded and recognized, and aligning those behaviours throughout your organization's HR systems. It also means understanding how your high performers perform and recruiting new leaders based on that knowledge. As we'll learn in Chapter 16, "Recruiting for Fit", finding successful people isn't enough anymore—it's finding out how they're successful that's really important. In fact, the successful people who are currently in your organization are the key to finding the right kind of new talent. In our practice, this is exactly how we approach executive search. Why? Because it consistently leads to the right hire.
The ultimate outcome of the Know Thyself principle is great performance; it's the first step towards that goal. I'll come right out and say it: culture is the single greatest asset that an organization can have. If you don't believe me, take a look at the numbers. We've proven the impact of culture on performance each year through our Canada's 10 Most Admired Corporate Cultures program. For instance, in terms of a three-year compound annual growth rate, our 2010 winners outpaced the S&P/TSX 60 by an average of nearly 600 percent—or six times. And no matter what year we measure this, our Canada's 10 consistently outpace Canada's biggest and best.
Isn't that something to cheer about?
Culture and Values at Maple Leaf Foods
Let's talk about the recent history of Maple Leaf Foods, a leading food processing company headquartered in Toronto that employs 21,000 people in its operations across Canada and in the United States, the United Kingdom, and Asia, and that had sales of $5.0 billion in 2010.
In October of 1998, Michael McCain, then president and COO of Maple Leaf Foods, slid a piece of paper across the table to Wayne Johnson, his (now retired) senior vice president and chief human resources officer. On it, he said, were a list of 21 values that McCain had drafted himself. As he was about to become CEO in January of the following year, McCain told Johnson that cultural change was coming to Maple Leaf Foods, and to make that happen, these were the values he wanted implemented.
As the list came across the table, Johnson rolled his eyes.
"Michael challenged me, and he said, 'What are you rolling your eyes for?'" Johnson told me when we sat down for an interview together. "I said that I'd had some experience where CEOs had tried to do this, and it had failed because it wasn't a good representation of what the CEO stood for, and when you boiled it all down, culture is really driven by the way your boss acts."
After quickly scanning the list, however, Johnson nodded and said that the values would be easy to implement.
"I think that infuriated him even more, and so he said, 'Why the change of mind?' And I said, 'Because this is the way you behave, and so it's believable and we can sell it'", said Johnson.
"He strongly believes, and he is absolutely right, that culture starts at the top and that the CEO has to own the culture".
What emerged from that discussion is what Maple Leaf Foods refers to as the two key components of its cultural DNA. The first is the Leadership Edge, a program based on the idea that leadership drives a company's success, as demonstrated through its 21 stated values (and the behaviours that support them), which include "Do What's Right" and "Be Performance Driven". Second, Six Sigma, a management operating system guided by the organization's values, which assigns "black belts", or project leaders, to initiatives that are the business's top priority and are actively championed by senior leaders in the organization.
If you follow Maple Leaf Foods, you'll know that the organization faced a serious and devastating crisis in August of 2008 when a number of Maple Leaf deli meats were found to be contaminated with listeria, a type of bacterium that infects humans. The contamination led to the deaths of 22 people and made many others ill.
In fact, the organization was hammered with the perfect storm in that year and the following, being faced not only with the fallout from the crisis but also with rising commodity prices and an economic downturn. Despite all this, at the end of October 2009, Maple Leaf Foods reported a net income of $22.5 million compared to a net loss of $12.9 million in the previous year.
What saved it?
Maple Leaf Foods' well-defined, proactively communicated, and strongly aligned culture, combined with an outstanding CEO at the helm who lives the culture and walks the talk, is the reason why the organization survived and thrived through what was arguably the toughest time in its history. To put it in a simpler way, I think Maple Leaf Foods survived the perfect storm because its leadership has mastered the principle of Know Thyself and driven it—aligned it—throughout the organization in various concrete ways. A year after the crisis, on the one-year anniversary of the tragedy, Maple Leaf Foods took out full-page ads in major Canadian dailies. Framed as a letter to consumers from McCain himself, the message reinforced that Maple Leaf Foods would never forget what had happened and was committed to ensuring that this tragedy would never happen again.
If this doesn't exemplify how great leaders "walk the talk", I don't know what does. Here was McCain, a year after the listeria crisis, still dealing with the professional fallout and the associated personal stress. But he continued to behave as the perfect embodiment of the Maple Leaf Leadership Values. Is it any wonder that "Do What's Right", "Dare to Be Transparent", and "Communicating Candidly, and in a Direct Manner" are on that list?
No kidding. McCain wrote those values himself.
Great leaders, like McCain, openly and publicly embody the ideals and values of the company; they have enormous influence in setting the tone for an organization. In many ways they are the guardians of culture.
As a whole new set of challenges faces Maple Leaf Foods in 2011, including the ongoing fallout from the Ontario Teachers' Pension Plan Board selling its remaining stake in Maple Leaf at a discount in November 2010, weaker sales, higher ingredient prices, and a higher Canadian dollar, it remains to be seen how the organization will continue to perform. Will its culture continue to be what saves it in tough times? With its plans to focus on real and lasting changes in the profitability of the business, including restructuring to cut costs, the introduction of new products, and targeting health-conscious consumers—and, most important, the constant communication of these new tactics by McCain himself—my hunch is yes. Why? Because McCain will employ the same behavioural characteristics and leadership style in dealing with future challenges as he has in dealing with everything else.
Corporate Culture as a Foundation
I once sat across from a very intelligent CEO who said to me, "I'm not sure we really have a culture that can be defined", and I remember thinking, "How do I share with him that every organization has a culture? You just have to know what it is". Corporate culture is a critical foundation of any organization. A strong, healthy culture drives performance and helps organizations withstand anything that's thrown at them. A weak and dysfunctional culture is a liability that exposes organizations and makes them vulnerable when times are tough.
With respect to your own organization, ask yourself these questions: Do you know your own culture? Can you articulate it? Is your culture "okay", but not great? Is cultural change needed? If you know that your culture is weak, but the organization is still performing, is the performance sustainable under those circumstances? Is the impetus for change there?
Most business leaders can appreciate that culture affects the functioning of the organization. However, there's a slightly condescending view—surprisingly, still predominantly held in the media as well—that culture is a nice-to-have, and that it revolves mostly around things like posted company values, flextime work arrangements, and the aforementioned foosball tables. But if you take that view, you're missing the mark—completely.
Culture is a competitive advantage. It should be viewed as a weapon in your company's arsenal, because when it is properly defined and aligned throughout an organization, it will become a performance driver. Strategy, products, and tactics—all of these things can be copied, to a certain extent. But culture can't be copied. Like DNA, it's a nonrepeatable marker setting your organization apart from everyone else.
That's what this conversation is about.
Figuring out how to uncover, evaluate, and improve your culture, in order to align it with your business goals, can be a bit baffling—in fact, it stumps many. That's why the cultural assessment is so important, and why it's such a great starting point.
It comes back to the Know Thyself principle: until you examine your organization's culture in detail, you're operating in a vacuum.
Here's how you start.
Carry Out a Cultural Assessment
Every organization's corporate culture can be assessed, and the insights gleaned from that assessment can be used to improve organizational performance.
Think of a cultural assessment as a self-reflection, allowing you to take a deep dive in—to examine the existing values and behaviours of your organization, and also how those values and behaviours align with where you are trying to go as a company. From there, the objective is to determine if—and where—there are gaps.
Regardless of what you do with it, a cultural assessment can provide insights into how your company works, both as a whole and by functional area. Whether you do the assessment yourself or have someone else do it for you, the findings of your assessment—the outcomes—need to be supported by either a set of recommendations or a course of action.
Sometimes the outcome can be quite specific.
When a client of ours in the financial services sector decided to undergo a cultural assessment with us, it did so because it wanted to understand how its people defined their culture. The client also wanted to get a better understanding of the issues it was experiencing with respect to cultural alignment. In fact, through the assessment process, the company discovered that recruitment—specifically, hiring for fit rather than hiring primarily based on skill, which was what it had been and which was leading to bad hires—should be the key platform for strengthening its culture.
This is a great example of how an assessment can reveal an untapped aspect of your organization's culture.
To use an analogy, cultural assessments are like physicals. If you're a pretty healthy person and you have no interest in living beyond your normal life expectancy, you'll stay the course: you'll keep your diet the same, you'll keep your exercise levels the same, and you won't do anything above and beyond what's required to extend your shelf life or improve the quality of it, so to speak. But if you want to live longer and better, and you want more out of that longer life, you're going to do more than what's required. You may exercise more, eat better, and improve your emotional, physical, and mental health in other ways—and it's how you do these things that matters.
Similarly, it's what you do with your cultural assessment that matters.
In any event, for any cultural assessment to truly have an impact, it must be driven from the top—if not by the leader, then by the organization's senior leadership team.
A great example of this is the remarkable story of Four Seasons Hotels and Resorts and its founder and chairman, Isadore Sharp.
The Service Culture at Four Seasons
If you've stayed at a Four Seasons, you'll know that it's an incredible experience. From the moment you walk onto a property, you can't help but notice that every single person working there—the front desk staff, the concierge, the chambermaids, the restaurant staff, everybody—seems to excel at service. It's a remarkable experience for a guest, and it's even more remarkable because this guest experience has stayed the same for 50 years, even as Four Seasons has grown from one hotel to 85 hotels in more than 35 countries.
The idea of building that kind of service culture came on the heels of a tough assessment by Sharp of the company's culture and of its future. In the late 1970s, Sharp made the decision to move the business from what was largely a construction operation engaged in real estate development to a management company focused on creating a group of the world's finest hotels. He then introduced several new concepts to his management team. For instance, the Golden Rule (treat others as you would wish to be treated) became the guiding principle for anyone who worked at the hotel, from how management interacted with employees to how guests were treated. Sharp wanted to empower the frontline staff, enabling them to make decisions on the spot, thus kick-starting the service experience from the moment guests walked in the door. This required a change in management thinking—from seeing employees as a group to be managed and controlled, to a focus on mutual values like respect, fairness, honesty, and trust. In a nutshell, Sharp told his management team to treat employees with the same understanding that they gave the hotel's guests. From this, great service—along with satisfied clients and their repeat business—will ensue. A number of innovations in the hotel business followed. For instance, Four Seasons was the first company to put shampoo in bathrooms, to offer 24-hour room service, and to create floors where smoking was not permitted.
As hard as Sharp sold the Golden Rule, it wasn't always met with enthusiasm by his leadership bench. In fact, there's a great quote in Sharp's 2009 work, Four Seasons: The Story of a Business Philosophy, that illustrates both what he was up against and his resolve to fix it:
Excerpted from CULTURE CONNECTION by MARTY PARKER. Copyright © 2012 by Marty Parker. Excerpted by permission of The McGraw-Hill Companies, Inc..
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