Tuesday, February 24, 2015

CORPORATE CULTURE: WHAT’S THE ROI?

moneyCo-sponsored by Crawford International and HR.com, a 9-year study of 94 large companies revealed that organizations that have responsive, flexible cultures and strong leaders outperform those that don’t by an astonishing 900 to 1, as measured by long-term net income and stock price growth.  

Moreover, according to research undertaken by the Great Place to Work Institute, companies with a great corporate culture experience happier clients, significantly lower staff turnover and better financial performance than their industry peers.

The Origins of Corporate Culture

In many corporations, culture is established very early on, by the founder; but as culture becomes deeply institutionalized, it also becomes an institutional habit that newcomers acquire.  Tom Peters and Robert H. Waterman, Jr., the co-authors of In Search of Excellenceone of the best-selling business books ever — advise leaders to “figure out your value system:  what your company stands for.  What gives people pride?”  

The answer is often deceptively simple.  Really good companies with strong culture take pride in their family-like atmosphere; showcase their transparency, sharing information widely; and insist upon informality in communications between workers. There are more open doors and open communications.

Let’s take a brief look at the impact of corporate culture on one major company, Google. Obviously, this is a success story.

Fling Open the Windows

One day, about 13 years ago, co-founder Larry Page was chagrined at the randomness and irrelevance of the ads served up alongside many Google searches.  (As you probably know, search engines like Google want quality ads, because they improve the experience of the people who click on paid advertising links.  Happy users click on ads more frequently, thus increasing revenues for the search engine.)  So, Page printed out a sampling of “bad” ads, scrawled “THESE ADS SUCK!” across the top page, and pinned the pages to a bulletin board in the company kitchen.  Then he took off for the weekend.

Five Google engineers — totally unrelated to the ad division at Google —saw the posting, worked on the problem over the weekend … and fixed it!  What’s more, the solution they developed was subsequently monetized, ultimately adding billions to Google’s coffers. According to The New Yorker, Google is currently worth about $380 billion.  The company posts revenues in excess of $50 billion a year … about a quarter of which is pure profit.

 

According to Eric Schmidt and Jonathan Rosenberg (the former C.E.O. of Google and its former head of product development):  “It wasn’t Google’s culture that turned those five engineers into problem-solving ninjas who changed the course of the company over the weekend.  Rather, it was the culture that attracted the ninjas to the company in the first place.”

So what is the Google culture based on? Early in the company’s history, Google executives developed these tenets:

  • Focus on the user and all else will follow.
  • It’s best to do one thing really, really well.
  • Fast is better than slow.
  • Democracy on the web works.
  • You don’t need to be at your desk to need an answer.
  • You can make money without doing evil.
  • There’s always more information out there.
  • The need for information crosses all boarders.
  • You can be serious without a suit.
  • Great just isn’t good enough.

Look to the Leaders

The Google culture undoubtedly has produced some significant leaders. The goal of leaders isn’t to create followers; it’s to create other leaders.  That’s because strong corporate culture requires strong leadership … at every level of the company.

Edgar Schein, a professor at MIT Sloan School of Management, has said that “the only thing of real importance that leaders do is to create and manage culture.  If you do not manage culture, it manages you, and you may not even be aware of the extent to which this is happening.”

In other words, if employees are only doing things correctly because their supervisors have carefully spelled out every little thing, as important as that is, they haven’t created a culture.  In fact, they haven’t even created an approach that’s sustainable.