We publish an excerpt from Gavin Russell’s new book Transformation Timebomb, focusing on culture.
Organisational culture is a set of shared assumptions that inform how an organisation behaves. Culture guides the workforce on how to act in different work situations, be it dealing with a challenging customer request, collaborating with colleagues, escalating a burgeoning commercial problem, or proposing a radical but risky new idea.
According to Frances Frei and Anne Morriss at Harvard Business School, culture essentially tells employees what to do when the CEO isn’t in the room, which is of course most of the time.
Culture includes the values and behaviours that “contribute to the unique social and psychological environment of an organisation”. It’s shown in the way that organisations conduct business and treat their employees, customers, and the wider community. It exists separately from The Plan but plays a fundamental role in how The Plan is delivered.
It defines the extent to which freedom is allowed in decision making, new idea development, and personal expression. It outlines how power and information flow through the hierarchy. It impacts how “committed employees are towards collective objectives, influencing happiness, engagement, and the productivity of human capital”.
It also exists whether you like it or not. The internal IM conversations, the team meetings, the chat in the bar after work, the holiday request process, the conversations around the board table. These are all part of the everyday human capital experiences that create an organisation’s culture.
Why should leaders care?
There is plenty of evidence suggesting that cultivating a positive culture around shared values gives companies a significant advantage over their competitors. In The Hungry Spirit (Random House, 1998), Charles Handy stated that individuals who perceive that their very human need for meaning and purpose is being met at work exhibit higher levels of performance and put in greater discretionary effort.
James L. Heskett goes further in The Culture Cycle: How to Shape the Unseen Force that Transforms Performance (Pearson FT Press, 2011), saying that beyond simply work output, culture is a powerful driver of engagement, which leads to better financial performance. In other words, happy, engaged workers are more productive workers.
Peter Drucker reputedly claimed that “culture could eat strategy for breakfast”, such is the importance of positive culture in the success of an enterprise. As money is the language of business, it’s worth quantifying exactly how much culture impacts the bottom line.
The University of Warwick’s Department of Economics found that happy workers are 12% more productive than average ones, while unhappy workers are 10% less productive.
In fact, according to Gallup, unhappy employees already cost American business over $300 billion each year. The Harvard Business Review reported that lowlevel engagement results in a 33% decrease in operating income and an 11% decrease in earnings growth, whereas companies with high-level engagement see a 19% increase in operating income and a 28% increase in earnings growth.
Other studies support these conclusions. Ontario’s Queen’s School of Business and Gallup reported that disengaged workers had 37% higher absenteeism, 49% more accidents, and 60% more errors and defects in their work. In organisations with low employee engagement scores, there was 18% lower productivity, 16% lower profitability, 37% lower job growth, and 65% lower share price.
However, a strong culture can also deliver unprecedented success beyond the balance sheet.
The All Blacks, New Zealand’s national rugby union team, have become the world’s most successful sporting franchise based in part on their culture. Their mantra “Better People Make Better All Blacks” helped them rebuild their team following a poor run of form and propelled them to international dominance. Since the introduction of world rankings in 2003, they have ranked first 87% of the time and since 2011, they’ve boasted an 89% win record.
Put simply, developing and maintaining a genuine, positive culture delivers improved performance and productivity.
Impact of the forces
Despite mounting evidence over the past 30 years, many leaders still don’t consider cultivating a positive culture as an important tool to shape their company’s success. Some organisations are unwilling to invest in initiatives without quantifiable returns on investment (ROIs) or tangible short-term financial benefits.
Others remain unconvinced by the evidence, while a minority seem to accept poor culture as a necessary by-product of previous success. Despite its proven value, culture has often been de-prioritised in favour of tactical initiatives that appear easier to deliver and simpler to measure.
Many leaders still don’t consider cultivating a positive culture as an important tool to shape their company’s success.
However, the digital world magnifies the role of culture in delivering commercial value and growth. Evolving stakeholder expectations highlight the importance of engaged workforces to connect and retain customers.
Organisational collaboration and trust are key drivers of speed, agility, and innovation. As workforce characteristics change and talent seeks greater career fulfilment, aligning values and behaviours in an organisation has become essential in improving performance. As such, culture is now a critical lever in driving profitability.
Impact 4: Culture has become an essential leadership tool
Positive culture is a key driver of competitive advantage.
Author, speaker, and organisational consultant Simon Sinek claimed: “People don’t buy what you do; they buy why you do it”. His advice to companies is not to sell to people what they have, but to sell to people who believed what the company believed.
Customers, investors, employees, and candidates are increasingly motivated by ‘the why’ rather than ‘the what’, making a company’s culture key in connecting with all their stakeholders. It provides tangible evidence of an organisation’s values, beliefs, and alignment to their stated purpose, becoming a key litmus test of authenticity.
In fact, culture is now critical in creating exceptional customer experiences and loyalty. The workforce (full-time, independent, and outsourced) is an increasingly visible and important interface between an organisation and its customers.
Subsequently, culture has become essential in finding, engaging, and inspiring this human capital to deliver the customer experiences that make the difference between a loyal customer and a disgruntled antagonist.
Unsurprisingly, happy, engaged workers deliver better customer experiences than unhappy, disengaged ones. In their ‘State of the American Workplace’ report, Gallup reported that engaged employees are more likely to improve customer relationships – with a resulting 20% increase in sales.
Positive cultures are also essential for innovation. As consumer expectations increase, organisations have to constantly find new ways to excite and delight their customers, keeping them engaged and loyal.
Consequently, an open, supportive culture where innovation is fostered and encouraged (and failure is acknowledged as a necessary step to success) has a clear commercial advantage over closed environments that restrict creativity and punish mistakes.
About the author
Gavin Russell is a strategist and author of Transformation Timebomb. You can purchase the book here.
