What's the Difference?

The difference in these scenarios is culture. And cultural innovation should be a top priority for your company.

We have seen, and you've probably experienced, workplaces where managers yelled at their teams. People keep their heads down to avoid doing something wrong and, as a result, avoid doing something right. The culture of these places tamps down good ideas instead of bringing out the best in people.

What about your organization? Have you ever had someone tell you your idea wasn't good and then share it as his or her own? Or say he wants creativity and innovation only to criticize every new perspective?

Good ideas are regularly squashed never to see the light of day. You get the sense your boss really does not want good ideas that don't originate from him. So, as the employee, you stop and you do as you are told. You know the written rules of the company really are not true and that your place is to be quiet, follow orders, and survive if you can.

Here are real examples from leaders and organizations we have worked with that depict the situation mentioned above.

While we were coaching a senior leader, he vented that his staff lacked creativity. He said, “they never have any good ideas when I ask for them. They just look at me blankly. It's so frustrating.”

When we interviewed his team the picture became clearer. He sent the message to his employees that he really didn't want new ideas from them. He only wanted his own ideas. They shared how they wasted lots of time and energy in coming up with new ideas just to see them go nowhere.

When the team feedback was shared with the leader he was shocked and did not believe it. He actually thought he had a lazy and uninspired staff. The staff definitely was not lazy or uninspired, just extremely frustrated. The boss was creating a culture of low accountability and complacency and did not even know it.

We were told about how a leader in another global organization would grade the work submitted by his team. Work was returned with “red lines and comments,” and ideas that were deemed particularly lacking were often displayed on what was known as “the wall of shame.” Even years after it was dismantled, the wall still cast a long shadow. New ideas were shared cautiously, if at all.

Contrast this with the leadership style of Suhail Bin Tarraf, who we discussed in the previous chapter. He had a “wall of fame” to encourage great customer service ideas and celebrate his team.

These examples amplify how critically important culture is to any organization, especially one that needs fresh ideas and speed to succeed—which is every industry and every organization today.

You will either get the culture you deserve, or the culture you want. Don't leave it to chance, pay attention, take action, and make sure that it is the latter!

We recently spoke with Inc. president and editor-in-chief, Eric Schurenberg, who said, “It's a difficult thing to adapt to a world in which technology and the expectations of customers are just constantly in flux. Business cultures that are more adaptive, that are more horizontal, where leaders treat their employees as the source of ideas and the source of creativity are going to be able to adapt the most. There will be a true competitive advantage for companies that treat their most important assets as real assets.”

Culture and the Customer

Traditional organizations, spawned in the industrial era, had innovation locked up with their research scientists in their labs. These organizations believed their mainstream employees were there to carry out orders, not to think. Traditional organizations of the twentieth century operated with controls and principles that viewed the workforce as the arm that got the work done, not the brain.

An interesting shift happened over time. Customers started expecting better service and had more choices about where they could spend their money.

Along comes Amazon. Amazon quickly and completely converted the book-selling business. Time to say good-bye, Borders.

Not only did Amazon excel in the book-selling business, it also went on to create a reliable online retail experience that customers can't live without. Now Amazon is the largest online retailer in the world, and has one of the largest and rapidly growing Web Services division, and it all happened with lightning speed.

Netflix began sending DVDs to people's homes and completely disrupted the in-store video rental business of Blockbuster. Now Netflix has reinvented itself again, streaming video content on demand, and it even creates some of that content itself.

Think about that for a moment. Netflix has pivoted from DVD retailer, to streaming content, to TV and movie producer. Two pivot points that have transformed their business, and is transforming their industry. Now Netflix is looking to expand globally and stream content to the far reaches of the world and to capture viewer reactions by creating content that appeals to specific viewer tastes.

New entrants are on the scene and trying to eat Netflix's business for lunch. Hulu and Amazon Prime, to name just two, are challenging the business model. Netflix is having to reinvent itself again and credits its culture for its ability to adapt quickly. This is the way of the twenty-first-century world.

Quick reinvention can't be done in the sleepy, highly controlled environments of the traditional organizations of the past. Speed and creativity with more readily available data are the bywords of this century's organizations. Leading companies today are realizing they can't unleash the creativity of their employees with slow, bureaucratic cultures.

The Evolution of Culture

Culture first started being discussed as an element of the workplace in the early 1970s and 1980s. Leading researchers began looking at the hidden elements of what they were calling “culture” and its impact on organizational performance.

Despite the revolutionary discussions of culture, it was still very much a fringe or soft study. Typical of organizations of the day, managers and leaders did not want to talk about the emotional, human side of business. Leaders often steered clear of discussions about trust, values, relationships, and cooperation. They were simply not prepared for this type of discussion.

Business schools did not emphasize the “people factors.” Shareholder value was the Holy Grail. Empirical proof that culture would have an impact on a business's bottom line was required, but not sought.

Exercises we did in the early 1980s asked business focus groups how they treated people they trusted, and did not trust, at work. The results were clear: they shared information and ideas with those they trusted. Team members were more helpful when their trusted coworkers needed assistance, and they were allies to these people from a career perspective.

They tended to avoid and not share information or ideas with those they did not trust. Given the opportunity, they would throw untrusted colleagues under the bus. It was obvious from the discussion that culture—how people related to each other and made decisions together—was a critical success factor for an organization.

Yet, in the hard-boiled business world there were many doubting Thomases who believed that the industrial era concepts about how their workers interacted should prevail. Workers should come to work, do their jobs, and get paid.

Money was the principle bargaining chip for performance, and employee satisfaction was not considered in achieving business goals.

Understanding Culture

We and other researchers began to codify culture and create instruments to measure it. As a result, consistent elements of organizational culture became clearer. Certain cultures drove certain business results.

Businesses that embraced the importance of organizational culture in the early days, such as Southwest Airlines, were showing strong growth. Their employees were engaged, worked to delight the customers, and solved problems in their work arenas.

Compare Southwest's culture to that of General Motors. The contrast is startling and the results are clear. GM was struggling with integrity violations, consumer trust issues, and market share erosion, whereas Southwest is lauded as a customer-focused, employee-centric organization that empowers its staff to take initiative in how they deliver their service. With a focus on culture, and more important, changing their culture, GM is now lauded by Fast Company as one of the “biggest business comeback stories in the last 20 years.” Culture Matters.

Quantification of culture proved there was a strong correlation between employee-focused cultures and organizational performance. Toward the end of the twentieth century, culture was recognized as a key factor for success. Thought leaders like Peter Drucker were talking about how culture eats strategy for lunch.

Fast-Forward Culture

Fast-forward to today. Job markets are changing rapidly, with fewer factory workers and more knowledge workers. More entry-level employees have different expectations, are technologically savvy, and want to work on meaningful projects. Companies like Google, Facebook, and PwC are the new normal. These companies know they can't be fast and flexible with cultures rooted in industrial thinking.

Kodak died because of a complacent culture that missed where the market was going. This was also the case for Blockbuster and RIM (now reborn as BlackBerry Limited). The two areas that worry CEOs the most, according to recent PwC studies, are talent and technological disruption. Culture is a critical part of both of these concerns.

Companies must be fast, but they also have to be flexible learning organizations where innovation can happen quickly—in every part of the organization, not just in the places where the research is done. And execution must be flawless.

Today, culture is a key consideration in leadership hiring. There is hardly a merger or acquisition of any size where cultural impact and cohesion is not discussed. Many companies have failed and failed quickly due to a poor cultural fit. In fact, many companies have hired senior executives from other companies to help change their culture only to have them fail because dysfunction was so entrenched.

Spencer Stuart and other recruitment firms cite a 45 percent executive fail rate attributable to a poor cultural fit. When the new executive tries to do things differently, the cultural antibodies take over and push him out.

One senior leader in a Fortune 100 company we were working with shared how she was struggling in her current position. She stated the challenge of not being able to move any proposals forward as they were always being criticized. She didn't know what to do.

In exploring this challenge further, it became very clear that the environment she was looking for was not the environment she was in. She ultimately resigned at a great cost to the company. In seeking a new position, she paid attention to the culture and was hired by a competitor. She is thriving to this day. This story highlights the crucial importance of the human element—the way people interact and the relationships they build—to the success of the organization.

Cultures that are toxic by their very nature are not innovative. People in these toxic organizations lay low, stay out of trouble, and rarely step forward with an innovative idea or recommendation.

If you're not purposely investing in a healthy culture, your business is already declining, whether you realize it or not.

The Values and Culture Connection

Culture is rooted in values. Not the ones on the posters in the hallways but in the values that really shape the practices of the organization.

Notice the beautiful value statements on the walls: We are a team. We work to bring great solutions to our customers. Our people are our most important asset. Integrity is our core.

But when you ask for help, you get bounced around.

While flying on a very reputable airline, we encountered challenges getting access to Wi-Fi and asked the attendant for help. He said he didn't know how to get access to Wi-Fi because “they [staff] weren't allowed to use it.” What was particularly poignant about his comment was that the CEO of the company had just been on the video monitor talking about how much the company valued its great team of people.

Clearly this attendant missed that value in his day-to-day experience. Interestingly, that CEO was recently fired.

We were chatting recently with Josh Bersin, of Bersin and Associates, about his firm's research that pointed in the same compelling direction. He and his team reviewed 6,000 companies on Glassdoor representing more than 2.2 million employees. They discovered, as did we, that culture and company values were the biggest driver of a company's brand.

Our own study of over 500 Fortune 1,000 companies showed that culture and values statistically had the greatest impact on the company's brand and market performance, followed by coaching and learning.

Bringing Culture to Light

Culture comprises the unspoken rules that guide people every day, not the policy manuals or the organization charts that depict how things are supposed to get done in an imaginary world.

It's the unspoken set of assumptions, values, and beliefs that dictate, often subtly, how people relate to each other in organizations. These shared values have a strong influence on how people dress, act, and perform their jobs. It defines how people in the organization think about their work and contribute to the overall organization.

While we were working with employees from a famous Silicon Valley company, one senior leader told us this story. He came to Silicon Valley from the company's London office, which had a more formal dress code. He wore cufflinks, dress shirts, and gray flannel pants, and he happened to like how he dressed.

After his transfer to the Silicon Valley office, the human resource leader kept telling him there wasn't a dress code at this office. So he kept dressing as he always had, simply taking the comment at face value. After repeated statements by the human resource manager regarding no dress code, he turned to the HR leader and said, “Apparently there is, as you all want me to dress like you.” It was true, there was pressure to conform to this company's Silicon Valley cultural value of dressing informally.

We had the pleasure of working with John Mattone, a best-selling author with his latest book, Cultural Transformations. We were speaking in Mexico, sharing notes and debating our perspective on culture and values. This quote from Mattone sums up the substance of culture.

Culture is the collective character, values, thoughts, emotions, beliefs, and behaviors of your leaders and individual contributors. Your organization's culture is a product of such factors as its history and how your leaders and individual contributors ascribe meaning and value to it, as well as leadership style (legacy and current), which is then reflected in the creation and implementation of your organization's values, vision, mission, purpose, strategy, structure, and roles.

As we like to put it—it's the DNA of a company that happens whether you want it or not.

It's really not about what gets done but how it gets done. To put it another way, it's one of the top three things a company becomes known for.

Culture shapes how employees act, not only with each other but also with the customer. It informs how decisions are ultimately made about everything from who you hire and reward to how you shape strategy and execute it. Culture is everything.

We recently spoke with Mike Derezin, vice president of sales solutions at LinkedIn, about workplace culture. He related,

Culture is who we are and who we aspire to be, and values that we articulate are the set of guiding principles that help guide us in making decisions on a day-to-day basis. We have five cultural tenants and we have six values, but those are paramount to how we run the business.

Culture is going to form whether you like it or not so, you may as well take control of it and shape it the way you want.

If your employees are engaged and they have the right fit and they love your culture, what are they going to do? They're going to tell their friends all about it naturally, and their colleagues and other people they respect. And now you have an inbound flow of talent.

It's very valuable when you're trying to make strategic moves and decisions and establish shared language so high-quality and speedy decisions can be made.

Hamptonality™ is the word used at Hampton Inns to describe their culture. When we were talking to their HR leader in charge of culture, he acknowledged that the hotel industry is a commodity business. They have to compete on the culture they create in the workforce.

If hotels want customers to return time and time again in a highly commoditized business, they have to create a special buzz. What makes Hampton Inn different is the culture. Employees at every level are empowered to make the customer experience great and have a budget they can tap into to go above and beyond.

For example, a frequent guest missed his plane and was coming in very late. The desk clerk knew he would not be able to get dinner and would be hungry. The desk clerk went to this customer's favorite burger place, bought him a burger and his favorite drink, and had it in his room upon arrival.

A cleaning lady knew a mother was arriving with her three-year-old son and made animal shapes out to the hand towels, much to the boy's delight.

These examples are not costly, but they are caring actions that show the staff is trying to make a great customer experience. The culture Hampton Inn is cultivating is this: customers really do matter!

Zappos is famous for the culture it created and how it achieved it. Zappos has a holocracy manifesto that employees write and agree to. It's a living document that is discussed, reviewed, and signed by each employee. Culture is so important to this company that all meetings and discussions begin with their cultural values.

We had the pleasure of interviewing Jason Carthen, an NFL Super Bowl winner. In his career, Jason has seen a number of parallels between corporate culture and the organizational dynamics of sports teams. In particular, one experience on the football field has stuck with him.

While running a play during practice, one of his teammates lost a shoe. The young man kept right on playing, but when the play was over, the coach berated him in the harshest possible terms. The player said, “You don't have to talk to me like that.”

The coach got in the player's face, lambasted him, and yelled at him to get off the field.

Not only was the individual cut from the team, but he was labeled a problem player, and another team that had expressed interest in him withdrew its offer.

“He never played again,” Jason said. “It was tough, because he wasn't a problem. He was a good guy. He was trying to stand up for himself. It just showed that when you have a toxic culture, that culture will either build a champion or hide a hero.”

We can relate to this because we've seen many CEOs berate their people in public because they think it makes them look strong. And it doesn't, not at all. Instead, they're driving their people to operate on the basis of fear. And when people are fearful, they don't do their best.

Jason agreed. “If you're leading by fear, people are going to hedge,” he said. “They're going to do just enough to not get fired, but passive-aggressively they'll let you know they have not bought into the vision.”

Sir Clive Woodward, a successful English rugby coach, takes a very different coaching approach with his team. While at a conference in Dubai, we had the good fortune to meet Clive and interview him later for the radio show. Clive shared how he helps shape his team's talent.

They review footage from previous games and note both the good plays and the bad ones. This system of coaching has created a culture of learning, not fear, and a culture of making sure each player is playing his best.

Clive would show footage of the plays and then encourage a dialogue among the players about what they could change. They listen to each other and learn from each other. He merely facilitates the discussion. The proof of this approach is certainly evident in the success of the team, which went on to win the world cup.

The Queen knighted him Sir Clive Woodward. Clive's cultural values were to bring out the best in others and help people learn. He did this through his actions, and he never deviated from his values.

We had the pleasure of talking with Rich Sheriden, CEO of Menlo Innovations and author of Joy Inc. We discussed our career experiences and what drove Rich to create the working environment he did at Menlo.

He told us he experienced joyless organizations most of his working life and wanted to turn those experiences around. So, he decided to create an organization that valued joy at work. He has been resoundingly successful. Walk into his organization and you can feel the joy.

Rich also shared about Menlo's thin management structure and highly democratic approach to work. Two values of the company are family time and personal well-being. Menlo has established a culture of working only 40 hours a week and never working on weekends. The company never denies a vacation request. Rich himself sticks to the company's values, and his assistant completely shuts off his e-mail and contact with the office when he's on vacation. He did confess that this practice was challenging at first.

Tanfeeth, the UAE outsourcing company introduced in Chapter 2, has an employee-centered culture. We talked to CEO Suhail Bin Tarraf about how the company culture is shaped and what he does to ensure the well-being of the workforce.

Suhail said he believes that each employee has a right to health and to learn and grow. As we shared earlier, he believes that you can't be effective if you are stressed about something at home, or are distracted by family issues. Another interesting benefit of the morning discussion is that team members will talk about and share, what they learned from customers the day before that could be helpful to others.

Employees are also encouraged to express if they are sad or stressed or have something that is causing them pressure. If necessary, they may choose to leave work that day. Other team members fill in and help out. Since they have a healthy culture, no one abuses this approach and the employees support each other as needed, knowing that everyone will, at somepoint, need the teams' support.

Bin Tarraf's leadership style encourages others to share their feelings. As a result, a company culture was created that supports the needs of the business and as well as the needs of each employee.

It's not the twentieth-century culture that valued business first over employees. Instead it's a twenty-first-century culture that embraces both.

Working with Suhail and his team was a chance to see upfront how he created joy at work.

How Do You Create a Culture That Hums?

Culture is king for the twenty-first century. Successful companies are breaking all the rules we believed in the past about how companies need to be run. This means fewer rules, more trust, and more freedom for employees to unleash their intelligence and gifts, no matter what role they play in the organization.

Know your current culture. Understand it not as you would like it to be but as it really is. Get the true facts about the current culture and face the reality even if you don't like it. If you don't like everything you see, it's time to make a serious change.

Define what the culture and values of the organization must be. Then use those values to guide all your business decisions.

A senior executive of a health care organization told us his story of facing the biggest crisis in his company's history. He decided to be true to the values of his company and not base all his decisions on the finances. Despite enormous pressures, he took a deep breath and used the company's values to guide the next steps.

He said this choice was the most important decision he ever made for the company. By using the company's values as the standard for action, his team came up with a completely different approach to making strategic decisions, and it saved his company.

Now they always start any initiative with values as their strategic guide.

Hard Choices

When working with a very famous hospital, we found the leaders would consistently accept bad behavior from employees considered indispensable. The departments were led by leaders who did not live the values of the hospital. They were losing staff and found it difficult to recruit new replacements because the word was out about the hospital's toxic culture.

The CEO, after careful reflection, decided his leaders' support of the hospital's values was more important than their brilliant reputations. He had the courage to stand up to the board and make the right talent calls to remove the bad apples. To everyone's delight, this hospital not only survived—without these toxic leaders—it thrived.

Never reward or promote anyone who does not live the values of the enterprise. Rewarding or promoting an individual who does not live the values of the organization will erode the underlying well-being of your company's culture, regardless of all the good that all your other actions promoted.

Leading a Future-Proof Culture

So how does a company, or division, crystalize its values and create a future-proof culture?

Start by assessing your own personal values and answering the question: What is the culture our company needs to execute a successful strategy?

Daydream about what that would look like. This type of culture is what we need to enjoy the successes we want. This is why we exist as a company.

Then look at the behaviors you see every day—in your staff and yourself. Identify the disconnect and begin to articulate the values you aspire to in order to have the success you envision.

Instead of blaming others, get honest data, psychometric surveys, and 360-degree assessments that can point to what the current culture is and what it needs to be to go where you want to go.

Yes, people often blame leaders, but you can look at the culture in your department and become a shining star in a sea of mediocrity.

We worked with an HR leader in a global business based in Europe. The overall company culture was unhealthy, and the numbers showed it. But the HR leader took a hard look at the culture in her department and made changes. In two years the department became a recognized top performer in company, attracting the attention of leaders in the company headquarters who asked what she had done to create the positive results.

We also see common missteps when leaders try to improve culture. These include not taking personal ownership for cultural change but delegating it to a program or outsourcing it to HR and not modeling the culture the leaders say they want. Most harmful of all, they let people get away with words and actions that are contrary to company values.

As the old saying goes, actions speak louder than words. We imagine this saying originated not in the boardroom but in the break room.

Cultivating a healthy culture is non-negotiable for a leader, and some would argue it's the primary role.

The examples of courageous leaders putting values into action should convince you that you can do it too.

Leaders create the culture that they love.

The future-proof culture is one that everyone can love.

Future-Proof Your Company

• Look for signs of an unhealthy culture like negative engagement surveys and customer complaints. That's when future-thinking leaders admit there's a problem and look for solutions.
• Discuss how you and your teams have lived the values in the past six months and how you plan to live them in the next six months.
• Cultural problems often masquerade as tech issues or people problems. Stop rearranging deck chairs on the Titanic. Quality problems are always the result of unhealthy culture.

Future-Proof Your Career

• Crystalize your personal values and embody them at work. Decide which personal values overlap company values and model them with your peers. Create a peer culture that will be an example for others.
• Give colleagues permission to call you out when they see actions that don't reflect company values.