83. Create a Culture of Execution
Consulting firm McKinsey & Company believes that there are seven key elements that drive successful business practice, all of which begin with the letter “S.” Strategy, Systems, and Structure are viewed as the “hardware,” while Style (common thinking and behavior), Skills, Staff, and Shared Values are considered the “software” of business success. It’s interesting that four of the seven attributes are “soft” elements, yet comprise the majority of business success criteria. These attributes describe a company’s culture and they are the “glue” to drive successful execution of your plan.
Extensive research proves that company culture drives business performance. It’s a fact that companies that focus on creating a thriving culture are the most successful. A culture that values accountability and execution requires commitment. It also helps to have a framework. The ten principles are short, concise guidelines that you can use to create a culture that is focused on execution, integrity, and accountability.
If your goal is to create a high-performance company, you cannot choose to implement just a few of these principles and hope for the same results as you would if you followed all of them. Implement these top ten “rules” to create a healthy, innovative, and responsive company where Culture Rules!
Culture Rules! 10 Principles to Drive Business Success... and Have More Fun
1. It’s the Economics, Stupid
Rule number one is to create passionate believers. This starts at the top. The CEO and senior executives must passionately believe that culture is the most important driver of a company’s ability to execute and win in the market. Otherwise, culture initiatives will fail to get off the ground, let alone sustain any momentum. If senior leaders don’t get it, forget it. They must be act on and support culture change—not just talk about it.
I learned this lesson the hard way. Several years ago, I worked in a company where we were beginning a large cultural change effort. Some of the top executives were on board and some weren’t. The CEO clearly understood the importance of culture but his ideas were not shared by everyone on the executive team. One day, one of his direct reporters (who was third in command in the company) pulled me aside during a meeting and asked, “Why are you working on that fluffy people shit?” Clearly this individual was not on board. But this one person was responsible for leading thousands of people and responsible for half of the company’s revenue. If he didn’t believe in the value of culture, how could the program possibly be successful? Although the CEO was a strong believer, somehow his passion and enthusiasm were not embraced by even those closest to him.
One of the questions I am asked most often is, “How do I convince company leaders that we need to focus on developing our culture?” If you want to be the catalyst for change in your company, I recommend that you start by making a business case for change. The best place to start is by simply sharing the facts about how culture is the driver of business growth. There is a preponderance of evidence to support this fact which will help you get even the most conservative business leaders on board. All the data points to one simple fact: Companies with strong corporate cultures outperform other companies.
Some of the best research on the link between company performance and culture was done by management and leadership expert John Kotter of Harvard Business School. He and colleague John Heskett conducted a study to correlate the financial results of culture improvement programs. Here are the results:1
• Revenues grew more than four times faster.
• Job creation rates were seven times higher.
• Stock prices grew 12 times faster.
• Profits were 750 percent higher.
• Net income grew more than 700 percent.
• Return on equity increased.
• Sales rates improved.
• Customer satisfaction more than doubled.
In another study, Success Profiles, a performance measurement company, studied the business practices of more than 600 companies over eight years and found a critical link between business practices related to culture and performance outcomes including employee turnover, profit per employee, and revenue growth.2
Denison Consulting is another organization that has done extensive research to link culture to superior business performance. In a study of 950 businesses, Daniel Denison and colleague William Neale found a correlation between culture and bottom line financial performance measures including profitability, quality, innovation, sales growth, market share, employee satisfaction, and customer satisfaction.3
So aside from the commonsense reasons to create a healthy company culture, you now know key financial facts to create a business case for change. If you believe that the culture in your company drives business success, start by helping others understand what culture means and why it’s important.
2. Walk the Talk
Leadership flows from the top down in organizations. Leaders inspire and teach others to lead through their own actions. Great leaders possess extraordinary communication skills and foster trust through an open and transparent leadership style. They let people know what is expected of them and why it matters. They energize people by describing the larger vision while focusing on short-term accomplishments and quick wins that create momentum. They set milestones and follow through to make sure people keep their promises, commitments, and deadlines. If a roadblock prevents a person from executing the plan, a leader helps him or her create an alternative solution that will work under the changed circumstances.
Leaders take every opportunity they can to lead by example and “walk their talk.” If they say risk and innovation are important, they not only show this in their actions, but also encourage and support others who take initiative. A culture of risk and innovation can only be created by allowing people to make mistakes, and even celebrating them if they lead to positive change.
Leaders turn every situation into an opportunity to teach others. By addressing an issue in front of a team, people learn how to make decisions and take initiative quickly and effectively. The lessons learned will help everyone, both individually and collectively, improve their performance over time. This is the essence of a learning organization.
Senior leaders must be decisive; once a commitment is made, urgency and action plans must be made and followed through. One of the biggest frustrations in companies both large and small is indecision. It can paralyze a department, a division, or even an entire company.
Leaders know that competitive advantage is temporary, so their goal is always to create a flexible, adaptive organization. They teach others how it’s done through systems, processes, and actions.
3. Integrity, Accountability, and Trust
If your goal is to create a culture of execution, then integrity, accountability, and trust must be woven into the fabric of the company culture. These values are the foundation for getting things done.
Accountability is doing what you say you will do. If leaders demand accountability, then they are accountable to others. They keep their promises and feel a sense of personal responsibility to do so. Personal accountability doesn’t just create better results in the area of execution, it creates a culture of trust. Trust, in turn, creates confidence. When people trust and believe in each other and in the senior leaders they follow, they begin to see what’s possible. They have increased faith in the company purpose and vision. They begin to expect what they believe in—and guess what? Science proves that people get what they expect.
Live by the Golden Rule, which is to do unto others as you would have them do unto you. Yes, this sounds like the basics your mother taught you, and she was right. Be nice, be fair, don’t lie. It’s easy enough to say the words, but action is everything. Integrity is about honesty and truthfulness.
These personal characteristics are in short supply these days. Consumer skepticism is at an all-time high, and who can blame folks for being skeptical? Executives from Enron, Qwest, Tyco, and other once-respected firms are now in jail. The life savings for loyal employees in some of these companies has been wiped out. Other industries have also been hit hard. Banks and mortgage companies created an unrealistic housing market, causing it to crash. Well-established companies like Lehman Brothers and Merrill Lynch experienced devastating losses or ceased to exist. U.S. automakers, once a pillar of strength in America, now depend on the government for bailouts as the industry reinvents itself. We are in our first global recession and the stock market has reacted with volatile swings. U.S. unemployment levels have reached a 14-year high with over 15 million Americans unemployed, nearly 10 percent of the U.S. workforce.
Trust was once a given, but now it seems more and more people are from Missouri, the “Show Me” state: They need to be shown they can trust others before they do. So what can you do? Create a company that values transparency, and then make it real by fostering open and honest communication. If you do this, it will cultivate a culture of accountability, trust, and integrity, and you will be doing your part to help rebuild faith in business.
4. Create a Compelling Vision
If you want to create a kick-butt culture but you’re not certain where to focus your efforts first, here is the answer. Research proves that companies that clearly define their mission, vision, and guiding principles, and communicate them consistently across the organization, have significantly higher profit per employee than companies that do not. A survey by Success Profiles found that the average profit per employee increased from $7,802 to $27,401 in companies that make mission, values, and communication a best practice in their organization.
One of the most interesting results in the Denison study was that one attribute—mission—stood out more than any others, impacting six out of the seven performance measures.4 These are profitability, sales/revenue growth, market share, quality, employee satisfaction, and customer satisfaction.
This study is fabulous news for companies that are driven by purpose. The key to driving strategy and execution is a message that communicates the higher purpose of the organization. This is accomplished by creating a compelling vision that inspires everyone toward a common purpose and mission.
Bring the vision alive by making it visible in as many ways as possible. For example, post a strategy map or vision board on the walls of conference rooms. Frame visual reminders and pictures that celebrate achievement toward milestones. For example, Zappos has an entire wall framed with T-shirts that celebrate the company’s million dollar milestones...from 1 million to the first $1 billion.
Strategy describes how a company will achieve its vision and purpose. It communicates what must be achieved and the initiatives and tactics describe how it will be implemented. Priorities and personal objectives are linked to strategy. Through regular dialogue, employees understand the link between purpose, strategy, and their own activities. When performance metrics are tied to the execution of activities, this creates personal accountability and a stake in the outcome.
In a high-performance culture, people make commitments focused on priority objectives. There is active discussion about what to do, as well as what to stop doing. This dialogue creates not only focus, but alignment, because there is strong communication about what must be collectively achieved.
5. Product Myopia Is the Death Spiral
One of the biggest reasons behind a company’s inability to innovate and adapt to change is a structural flaw. It is caused by organizing the company around products, not customers. Often this creates product or service silos that only accentuate the problem because each department or division has a myopic view of its own products and markets. It drives people to defend their turf and focus on achieving revenue targets for their division instead of creating an integrated portfolio of solutions to fulfill customer needs. It wastes precious internal resources and is counterproductive to developing solutions that customers need. The result is lost opportunity—that is, revenue.
A result of aligning around customers instead of products is customer knowledge. A company will stay one step ahead of customers because it understands their needs so well. Because the company understands customer needs so well, it is more keenly aware of the broader market of substitutes available to customers, which makes it more competitive, flexible, innovative, and responsive. In contrast, a product-focused company will always be spinning to catch up to changing customer needs and market conditions.
If you look closely at the most innovative product/service companies (Google, Apple, and Zappos, for example), you will observe that the focus is not actually on the cool products, it’s on fulfilling customer needs. Google delivers a simple user interface for search, making it as easy and intuitive as possible for people to find what they are looking for. Apple delivers customers an experience that drives the need for products consumers didn’t even know they needed. Zappos is not just a shoe store; it is a service company that happens to sell shoes and clothing.
6. Love Is the Killer App
When a company treats employees, customers, shareholders, vendors, and suppliers, and the community with equal respect, they build long-term sustainable competitive advantage. Do you remember the Firms of Endearment case study? The companies that embraced and honored all stakeholders returned 1,025 percent to investors, versus 122 percent for the S&P 500.
All five stakeholder groups are important to the success of a business; however, I do think employees deserve some special attention. After all, they are on the front line with customers every day, so if your goal is to provide great customer service, you have to realize that this is not possible without your employees. They also interact with vendors and suppliers, and they are the face to the community and shareholders. Employees are a critically important component of your brand. Everything they do and say is a direct reflection on the quality of your brand.
Invest in employees by providing them with education and training so they can learn new ways to create even more value for your company. Create a cross-functional training program so people will understand the business holistically. Some of your best ideas will come from people after you do these things.
Celebrate successes often. Reward and recognize employees for the things they do to make your company better. When times are tough, engage them in the problem-solving process. This fosters loyalty in the toughest of times when folks are overworked, and it will help you retain your best employees in the best of times when other businesses try to win them over. You will be surprised at the lengths people go to support a mission they believe in and associates they call their friends.
Give your employees respect, live by the Golden Rule, and give them lots of love. Yes, I said love. Think about it: Most people spend far more time with coworkers than they do with their own family, so you should love them like family. You’ll be amazed at what you get in return. Remember, you get what you give.
7. Feedback Is the Breakfast of Champions
What do you suppose is the number-one reason for poor performance? It’s probably not what you think. The answer is poor or insufficient performance feedback.
A study by The Conference Board reveals that poor or insufficient performance feedback is a surprising 60 percent of the reason for low performance. This fact is substantiated by other studies as well. Companies that give employees ongoing feedback experience higher revenue growth. In fact, businesses scoring high in this area experience above 50 percent revenue growth per year. Companies that performed well in feedback and engagement saw revenue growth jump from 18.6 percent to 113.1 percent.5
When Jack Welch was CEO of GE, he consistently drilled the value of performance feedback into executives and managers. Performance reviews are not a once- or twice-a-year event. He rightly contends that if someone is not performing well and needs to be fired, it should never come as a surprise. Employees value ongoing feedback, and when leaders get into the habit of giving regular feedback, they find that employees will actively seek feedback and be more engaged. Not only does it make more sense to develop employees, it’s every leader’s responsibility. If you want a great culture, make this principle a central part of your plan.
8. Relentless Communication
If 95 percent of a company’s strategy is not executed, what is one of the primary reasons for this abysmal statistic? The best way to answer this question is to ask another question: How well do people understand what the strategy is? Think about it: If people don’t understand the strategy, how can they possibly be expected to execute it?
The most common mistake companies make is insufficient communication. Businesses must learn to share the plan and encourage people across the organization to ask questions so they really understand it. Sharing is not a presentation of the company’s highlights in an all-hands meeting once a quarter. People need to hear about the strategy all the time. They need to understand where the company is going and why. They need feedback about the specific results of programs they have already executed. If results fail to achieve the expected goals, communicate why. Engage them in resolving issues and developing new ideas. Don’t be afraid to confront the facts and realities. It’s what people don’t know that makes them fearful.
Most importantly, remember that communication is a two-way street. It doesn’t happen through a monologue, but through the opportunity to interact and ask questions. Improved execution is the result of people understanding what the strategy is and what their role is in making it happen. This sounds like commonsense wisdom but statistics prove otherwise. Perhaps if more companies knew that increased communication drives increased financial performance, they would build a strong communication plan into their business plan.
Success Profiles found another benefit of communication. Companies that have strong communication programs that educate, inform, and engage employees see a drastic reduction in employee turnover. Businesses that do not score well in this category see a direct correlation in employee turnover and company performance. They had 25.8 percent employee turnover versus only 10.2 percent in companies that score high in this area. As you can see, companies with poor communication had nearly twice the employee turnover, so even slight improvements in the frequency and clarity of communication have a profound impact on employee turnover.
Here’s a simple rule of thumb: It’s simply impossible to “over communicate” your company direction and strategy.
9. Link Planning to Operations
You now know that the best way for a company to grow its business is to have a plan. How often should the plan be updated? The answer is all the time. When a plan is completed, it must be evaluated, measured, and adjusted based on what was learned. Throughout this process, you have learned several processes for real-time planning. The mechanism to update strategy and the plan is two meetings that link planning and operations. This is the most simple and effective way to accomplish this important task:
1. Monthly Strategy Meeting: Do you know that 85 percent of executives typically spend less than one hour per month discussing strategy? It’s not enough. Set aside two to four hours for a strategic discussion once per month. Discuss and analyze critical issues affecting the business. Select only one or two topics so that the discussion is focused and progress is made. You will learn that another important outcome of this meeting is greater alignment across teams.
2. Quarterly Operations Meeting: Set aside one or two days once a quarter, preferably offsite. The agenda should include a review of results against the objectives, an analysis of the cause, and adjustments to the plan. Look ahead to the short- and long-term strategy and objectives and what must be accomplished. Review elements of the plan such as trends, customers, and competitors making adjustments as necessary.
It’s imperative that research and reports are distributed in advance of both meetings. People need to come prepared to actively participate and discuss issues. Encourage a creative dialogue that focuses on problem solving and innovation.
10. Marketing Is Not a Department: It’s a State of Mind
Yes, of course, marketing is a department, but it’s much more than that. It’s a perspective. Do you recall Peter Drucker’s wisdom? He said the most important components of a business are marketing and innovation. If you create a culture where everyone thinks like a marketer, this stimulates innovation to solve more customer needs.
Marketing is a state of mind, a perspective that needs to be learned and shared by everyone in the company so it is integrated into the culture. This is how companies win. When you get everyone thinking about customers, your company has to become more innovative and competitive. In fact, you won’t be able to stop it.
How do you get everyone to be more customer-focused? Give them education, training, and a process for closed-loop feedback. Encourage people to spend time observing customers using your products and services. Make sure there are mechanisms and processes in place so people can share what they learn.
One of the most powerful things you can do to stimulate a marketing mindset companywide is get customers engaged in the business. Ask customers to join all-hands meetings to share their opinion about what they like and listen to their suggestions for areas that can be improved. You won’t believe what this does for your employees—and for your customers, who will feel like they are a real partner, a valuable part of your team and your company’s success.
Evaluate and Execute
P • R • A • I • S • E™ Marketing Process
Summary: Section VI
Define the key performance measures for your business, including specific marketing measures.
Evaluate the major components and decisions made throughout the planning process. Use the evaluation components in the P•R•A•I•S•E Marketing Process model outlined in this section to guide you.
Use the ROI Optimizer to link all the elements of your demand chain—products and services, sales teams, channels, target markets, and marketing programs.
Check for top-down and bottom-up alignment.
Consider using the Balanced Scorecard as a tool to drive alignment across the organization. Evaluate how it will help you communicate strategic direction and track priorities and key measures.
Use the Real-Time Planning Process to identify the most critical areas of the plan to update and define the process to do so.
Use the 10 principles in “Culture Rules!” as a guide to develop a culture plan and internal branding campaign with senior leadership and develop the cultural mechanisms that will drive accountability, execution, and financial performance.
Define a process to review, communicate, and update your plan.