6 Ingredients of a Winning Culture

When it came to defining the number one driver of organizational performance, no one hit the nail on the head quite as well as esteemed management scholar Peter Drucker, who stated unequivocally, "Culture eats strategy." Drucker understood companies that build powerful cultures tend to outperform their peers over time.

Building or revitalizing a culture is easier said than done

The challenges should not, however, prevent leaders from embarking on what will be a long and potentially painful journey. Where do you begin, especially in mature organizations?

A culture is an organization’s norms, practices and values as defined by its senior leadership, history and market position. Culture is vital to corporate and employee performance in that it acts as a mobilizing spirit, an enterprise-wide lingua franca, and a strategic anchor. Building a vibrant culture is equal parts strong leadership, defined values, effective change management and supportive organizational tools.

Research has found that firms with high performance cultures (which include strong organizational competencies like rich communications and focused leadership) will significantly outperform their competition. For example, a 2007 McKinsey global study on organizational and cultural performance (encompassing 115,000 employees across 231 organizations) found companies scoring in the top quartile are 2.2 times more likely to generate superior profitability than likely bottom quartile companies. It is no coincidence that many market leaders such as P&G, Apple, Zappos, Google and Disney are known for their strong, enabling cultures.

Given today’s hyper-competitiveness and rapid diffusion of technology, maintaining a vibrant and distinctive culture may be one of the few areas left where managers can generate long-term competitive advantage.

Nurturing transformation is not easy. It will falter without a sustained leadership commitment and changes to management systems. According to Chris Boynton, principal at human capital consulting firm Red Chair, "Culture is the way we do things around here, so the ideal way to change the culture and make it stick is to get the leadership front and centre, and align the management systems around the desired change."

Through consulting to a variety of sectors, I have identified six ingredients of winning cultures. The role and scope of these drivers will vary depending on the firm’s existing culture, leadership, and external circumstances.

1. A shared vision & values

Strong cultures stress the "we" over the "I" and adopt a unifying creed (i.e. purpose, sense of history)

• We see our market and customers in the same way
• We know where we are going
• We subscribe to the same core values and narratives

2. Free flow communications

Powerful cultures feature high levels of communications

• There is open and frank conversation on any topic based on a commonly understood lexicon
• Information flows freely across silos and up and down the hierarchy
• There are regular conversations between managers and subordinates as well as with key external stakeholders (e.g., customers, suppliers)

3. A right-size organization

Leaders strive to design the optimum management system for the business strategy.

• There are defined roles & responsibilities and information rights
• ‘Structure follows strategy’
• Any organizational change is thoroughly considered and painstakingly executed

4. Commitment to employee growth

Strong cultures view employees as assets, to be nurtured and empowered.

• Firms seek to get employees in the right roles. "Even a motivated and trained employee in the wrong role or team, like a nurtured seed in a poor garden, will just not grow and produce," says Boynton.
• Workers are regularly challenged with interesting work and supported with the right amount of training and coaching
• Organizations strive to get their recruiting, hiring, and on-boarding processes right

5. Merit-based performance management systems

Employees will only perform as well as they’re managed. For example, emphasizing the positive is the typical approach to feedback. However, according to Boynton, "Praise drives greater performance than critiques, yet we spend most performance conversations focused on shoring up their weakness."

• Performance management systems are transparent, objective and regularly utilized
• Individual and supplier metrics align with corporate goals and values
• Companies tolerate a reasonable amount failure but seek to learn from them

6. Comfort with change

Given today’s uncertain business climate, rapid change is critical for success.

• Change is recognized as a fact of life and a strategic necessity
• All stakeholders are regularly consulted and engaged before change occurs
• A high level of trust underpins change initiatives, reducing fear and improving collaboration

No doubt, getting all six characteristics right will not be easy or quick. This is a people-driven exercise so there is no substitute for patient leadership, strong values & narratives, and supporting mechanisms such as collaboration tools and internal training. Fortunately, firms can significantly boost performance if they master only 2-3 of these while continuing to strive for improvement in their under-developed areas. Given the financial rewards, there is no better time to start than the present.

Mitchell Osak is managing director of Quanta Consulting Inc. Quanta has delivered a variety of strategy and organizational transformation consulting and educational solutions to global Fortune 1,000 organizations. Mitchell can be reached at mosak@quantaconsulting.com