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High performance and organizational cultures

  1. 1. 1 High-Performance Cultures: How Values Can Drive Business Results Jeff Rosenthal and Mary Ann Masarech Tom Murphy, CIO of Royal Caribbean Cruises Ltd. (RCCL), likes to tell the story of his department’s dramatic turnaround in the last few years. The IT group, once described as a “nameless, faceless, toothless, bureaucratic organization with no vision or identity” is now a strategic business driver within RCCL, and it has captured a spot two years in a row on Computerworld’s list of best places to work in IT. Murphy, a self-proclaimed cynic of “touchy-feely management,” peppered a recent speech about the IT department’s success with references to values and culture. Culture? Not long ago, biologists were the only ones “creating” it — in petri dishes. There were a few maverick business people who espoused culture as the secret to their organization’s success, but many more in the business world, like Murphy, dismissed it as merely “soft.” Today, culture is earning a reputation as a business tool for driving high performance. It is on leaders’ agendas for several reasons: • Companies are searching for true competitive advantage — something unique and nearly impossible to replicate that will keep them a step ahead in their markets. • As uncertainty pervades global politics and markets — and as people spend more hours than ever making a living — the workforce is searching for employment that offers more than just a paycheck (purpose, meaning, camaraderie, and other intangibles). • Organizations are turning the microscope on their internal workings to uncover and address signs of trouble, and to find reassurance that the embarrassing corporate scandals of 2002 are not growing unchecked in their cultures like mold on leftovers in the back of a refrigerator. • Despite a looser labor market, leaner organizations need to attract and retain star performers with talent and “fit” to get the work done. • Organizations depend on innovation for growth and high performance, which in turn depend on employee initiative, risk taking, and trust — all qualities that are either squelched or nurtured by an organization’s climate. • Evidence indicates that culture can be shaped — even if the organization was not founded by a shrewd, offbeat business person like Southwest Airlines’ Herb Kelleher. This article will discuss: • The elements of high-performance cultures — in particular, the core driver: organizational values.
  2. 2. 2 Jeff Rosenthal and Mary Ann MasarechJeff Rosenthal and Mary Ann Masarech • Experiences of a diverse selection of organizations in creating and sustaining high-performance cultures. • Pitfalls to avoid in using organizational values as a business driver. WHAT DO WE MEAN BY A HIGH-PERFORMANCE CULTURE? Corporate culture at its most basic level is the “sum of an organization’s behaviors and practices.” When we talk about culture that drives business performance, we do not mean a great place to work (although that is often part of the picture). Great places to work have certainly been linked to strong business results (check out www.contentedcows.com for data), but HR-driven employer-of-choice efforts that are disconnected from “the business” can fall prey to budget cuts as profits fall or the balance of power in the job market shifts. A high-performance culture that supports your organization’s success — even in hard times — needs to be deliberately shaped around these components: • A clear, compelling corporate mission or purpose that informs business decisions, generates customer loyalty, ignites employee passion, and inspires discretionary effort. It answers the question of why the company exists or, as Jim Collins and Jerry Porras, authors of Built to Last: Successful Habits of Visionary Companies (HarperBusiness, 1994) say, “What’s your reason for being?” • Shared organizational values that guide employee behavior and influence business practices as your organization delivers on its promises to customers, employees, and other stakeholders. They answer the question: What are your company’s guiding principles, its authentic, enduring “rules of the road”? Business strategies will shift; core values do not. • An environment that encourages individual employee ownership of both the organization’s bottom-line results and its cultural foundation. WHY BOTHER WITH CULTURE? We believe a values-driven culture contributes to business performance because it can: • Attract and retain star performers who not only have the skills required to achieve ambitious business goals but also are so invigorated by the company’s core beliefs that they give “110 percent.” • Guide and inspire employee decisions and contribution in a flatter, fast-paced, decentralized workplace that is void of day-to-day management direction. • Provide fixed points of reference and stability during periods of great change or crisis (much like a lighthouse with its beacon of light during fog and rough seas). • Create a more personal connection between employees and the organization, a type of emotional contract to replace the agreements implicit in our parents’ world of work.
  3. 3. 3 High-Performance Cultures: How Values Can Drive Business ResultsHigh-Performance Cultures: How Values Can Drive Business Results • Align employees with diverse interests around shared goals to create a sense of community and encourage teamwork. • Export what the organization stands for so that customers and other outsiders can sense and describe what the organization is about, and help employees develop an emotional bond that transcends mere satisfaction — in other words, loyalty to the company. Perhaps one of the most compelling benefits of a high-performance culture is increased employee commitment. In a workplace rampant with cynicism and echoes of “what’s in it for me?”, commitment remains a key competitive advantage. BlessingWhite’s experience over the last three years indicates that organizations with a solid sense of purpose and a history of well-articulated values enjoy this advantage. As Exhibit 1 illustrates, employees in these more “established” values-driven organizations appear to be more committed than employees in organizations that are just starting to intentionally manage their cultures around core values. In fact, the data shown in Exhibit 2 indicates that the more established cultures have less than half as many potentially disgruntled or disillusioned employees.
  4. 4. 4 Jeff Rosenthal and Mary Ann MasarechJeff Rosenthal and Mary Ann Masarech Several research studies in the last twenty-five years have provided solid evidence that links the bottom-line to culture. Kotter and Heskett’s 1992 landmark study, described in Corporate Culture and Performance, revealed that, over a ten-year period, companies that intentionally “managed their cultures well” outperformed similar organizations that did not. • Revenue increased 682% versus 166% • Stock price increased 901% versus 74% • Net income increased 756% versus 1% • Job growth increased 282% versus 36%
  5. 5. 5 High-Performance Cultures: How Values Can Drive Business ResultsHigh-Performance Cultures: How Values Can Drive Business Results Research that shaped Jim Collins and Jerry Porras’ book, Built to Last, was reported in Harvard Business Review, and it indicates that “visionary” companies — those with timeless ideology (core purpose and values) and adaptive business tactics — outperformed the general stock market and comparable companies in their industries. To illustrate, a $1 investment in 1926 would have the following value in 1990 if it had been invested in: • The general market stock fund: $415 • One of the comparison groups: $955 • One of these visionary companies (with core ideology and adaptive tactics): $6,356 However, their research also reveals that while culture is necessary for such success, it is not the only factor. THE GOAL: BRAND INTEGRITY (THE “4th QUADRANT”) What happens when an intentionally managed culture is paired with laser-like execution of sound business strategies? Brand integrity. Brand integrity exists when an organization’s walk equals its talk — inside and outside the organization — so that it consistently delivers on promises to customers, employees, and all other stakeholders. The payoff is emotional bonds, credibility in the marketplace, and stakeholder loyalty. The secret is successfully integrating focus on business performance and culture. The degree to which an organization uses business performance and culture as drivers greatly influences the company’s long-term viability and success. For example, companies in Quadrant 1 of Exhibit 3 have a weak focus on both performance and culture. If you think your organization resides there, read quickly — you may not be employed there tomorrow. Levi-Strauss is often described as an example of a company in Quadrant 3 of Exhibit 3: it was so focused on its internal workings in the 1990s that it lost its focus on making jeans profitably. Companies in Quadrant 2 may be riding the momentum of a “big idea,” a short-term focus on profits, a churn-and-burn work environment, or some other condition whose long-term strength is uncertain or inherently difficult to sustain. Quadrant 4 is the desired spot — solid business performance generated by a motivated workforce — but it is not easy to get there or stay there. At the time of this writing, Southwest Airlines resides in Quadrant 4, with an acclaimed work environment, strong culture, and modest profits at a time when its industry is hemorrhaging. Nordstrom might also be considered a “4th Quadrant” organization. Hewlett-Packard had been in Quadrant 4 for a long time, but where is it now and where will it be a year or two after its merger with Compaq?
  6. 6. 6 Jeff Rosenthal and Mary Ann MasarechJeff Rosenthal and Mary Ann Masarech We will assume in the following discussion that your organization has a clear strategic vision and is sufficiently focused on the business performance side of the matrix in Exhibit 3. Our purpose here is to provide concrete guidelines for improving your company’s position on the culture side of the matrix, and also to share some real-world examples of companies that committed themselves to such improvement. HIGH-PERFORMANCE CULTURES COME IN ALL SHAPES AND SIZES Our intent is to demonstrate that although managing your culture requires a lot of hard work (Kotter and Heskett estimate that it can take five to ten years to actually change a culture, depending on the organization’s size), there are few restrictions on who can and should try to create a high- performance culture. The organizations we highlight in the rest of this article provide evidence that: • Whether your organization has a tradition of core values or is looking to values clarification and alignment to build on past successes, you need to actively shape culture.
  7. 7. 7 High-Performance Cultures: How Values Can Drive Business ResultsHigh-Performance Cultures: How Values Can Drive Business Results • Whether you represent an individual department or a business unit with hundreds of employees or a large, publicly traded multinational with a workforce in the tens of thousands, you can reap the benefits. These are the organizations you will hear more about in the pages to follow: • Computer Associates (CA), a software enterprise with 15,000 employees around the world, which began its values initiative just over a year ago. • The Charles Schwab Corporation (Schwab), a financial services firm founded in the early 1970s and often held up as a model of a values-driven business, with approximately 17,000 employees worldwide. • Xilinx, a Silicon Valley semiconductor manufacturer founded in 1984, with approximately 2,600 employees worldwide. Known from the start for a culture based on respect, Xilinx formalized its core values in 1996 after current CEO Wim Roelandts joined. • The Corporate Banking Group of Allied Irish Bank (AIB), based in Dublin, Ireland, with more than 350 employees in Europe and the United States. It began its culture initiative in 1999. • The IT Department of Royal Caribbean Cruises Ltd. (RCCL), which had more than 400 employees and contractors at the start of its culture and leadership work in 2000 (now about 240 after the industry downturn in the wake of the September 11 tragedies). • Our firm, BlessingWhite, an international training and consulting firm founded thirty years ago, which revisited its values and culture on its journey to becoming employee-owned in June 2001. BEST PRACTICES FOR BUILDING AND SUSTAINING A HIGH-PERFORMANCE CULTURE Each organization must follow a unique path to shape and sustain a high-performance culture. In light of this, the following recommendations should not be considered a process in sequential, lockstep order. What must underpin any approach, however, is the understanding that shaping culture is a continuous cycle of the five processes shown in Exhibit 4 — none of which you can ever consider completely done. We will discuss each of these processes in detail. An overarching theme of the work done by the organizations we cite is to continuously monitor results and return to these processes in order to reinforce a high-performance culture.
  8. 8. 8 Jeff Rosenthal and Mary Ann Masarech Clarify your mission and values — and your starting point. Just how close your organization is to the goal of fully integrating core values into the way the organization functions will determine how much work remains to be done. If your company has never explicitly addressed the issue of values, then its position on the values gauge shown in Exhibit 5 is readily apparent. If, on the other hand, it has had some form of values or culture initiative, it may still take more than a cursory review to determine just how much the organization has absorbed — and is driven by — the values it espouses. Jeff Rosenthal and Mary Ann Masarech
  9. 9. 9 High-Performance Cultures: How Values Can Drive Business Results If you do not have a published mission or values, identify and define them. You will not actually be starting with a blank slate. Having no espoused values is not the same as having no values at all. Your organization has rules of the road even if they are unspoken. Kevin Long, senior vice president, Core Values Office at Computer Associates, explains it this way: “Defining our mission and core values was a natural step in CA’s evolution. When we were small, everyone knew what we were about. But as we have grown to more than 15,000 employees, we felt it was important to step back and formally write down the core principles that guide our behavior. They are not foreign to anyone. We just want to be crystal clear how these values contribute to future success and ensure they remain on everyone’s radar screen.” Individual leaders may be tempted to shortcut a values-clarification process of seemingly endless drafts and revisions (see page 20 for sample mission and values statements) to get to a concise statement of purpose and three to eight core values. The organizations we spoke to, however, offered good reasons to invest the time and effort to include managers in the process and, in some cases, employees. Clarifying your mission and values requires looking inward, not outward. You cannot benchmark them. They cannot be bought off the shelf. You need more than a passionate senior leader to distill and give definition to the guiding principles that are authentic for your organization. You cannot bypass the debate. CA, for example, established a cross-functional Core Values Team to ensure broad representation. Other organizations actively solicited input from managers and employees through focus groups and online surveys.
  10. 10. 10 Jeff Rosenthal and Mary Ann Masarech The process is critical for another reason, as Schwab co-CEO and President David S. Pottruck describes in Clicks and Mortar™: Passion-Driven Growth in an Internet-Driven World, the book he co-authored with Terry Pearce: “The challenge was not document creation, it was commitment generation. To achieve that objective, a process of much broader inclusion was essential (p. 14). Despite the firm having a founder and chairman (Charles ”Chuck” Schwab) who had a very clear vision of the organization’s values, it took ten months and the input of eighty executives for Schwab to revisit its purpose and formally document its values in the mid-1990s. (See the results of this process in the sample mission statements and core values shown on page 20.) RCCL corporate HR consultant Jay Rombach echoes the benefits of inclusion. Although the IT leadership team identified a set of departmental values in an expedited series of conversations and a one-day leadership team meeting in 2000, the team chose to take another look at the values about eighteen months later — with lower-level managers. Rombach explains: “The original values work set the IT department in the right direction, but we wanted to revisit them to ensure they were current and relevant. We involved managers in reviewing the values, revising definitions, identifying examples and stories. In the end, the words didn’t change much but we achieved greater buy-in.” If you already have a published mission and values, know where you are. Take the plaque down from the wall, revisit the words, and, most importantly, assess whether these tenets actually guide the practices and behaviors of your organization. Whatever method you use — internal focus groups to gather stories of values in action or behaviors in conflict, random employee conversations and “check-ins,” or a more formal employee survey — this “reality check” will bring to light any gaps between espoused values and day-to-day operations as well as any aligned business practices you can leverage for advantage (see the checklist in Exhibit 6). Jeff Rosenthal and Mary Ann Masarech Organizational Mechanics ❑ Budget process ❑ Strategic planning process ❑ Organizational structure ❑ Decision-making/authority levels ❑ Performance targets ❑ Purchasing ❑ Other Employee Experience ❑ Recruiting ❑ Orientation ❑ Development ❑ Pay and incentives ❑ Performance appraisals ❑ Employee/mgmt. relations ❑ Internal communications ❑ Office layout ❑ Other Other Stakeholder Experience ❑ Supplier contracts and procedures ❑ Field site or distributor relations ❑ Other strategic partnerships ❑ Shareholders ❑ Community presence ❑ Other Customer Experience ❑ Service delivery ❑ Fulfillment ❑ Complaint response ❑ Marketing ❑ Contracts ❑ “Bricks” presence and design ❑ “Clicks” (web) presence and design ❑ Other EXHIBIT 6. Checklist for Aligning Business Practices with Values
  11. 11. 11 High-Performance Cultures: How Values Can Drive Business Results Xilinx, for example, had clarified its core values in 1996 through a worldwide initiative in which every employee had the chance to provide input. When its senior team assessed the culture after four years of rapid growth, it realized that the values were known but not always shaping practices and behaviors to the extent desired. As a result, the senior team implemented several new initiatives, including the addition of culture-building tools and content to their manager “boot camp.” Their goal was to renew a focus on values and ensure that managers could fulfill their role as custodians of the strong culture of shared values that historically had set Xilinx apart from its competitors. Communicate — but don’t stop with laminated cards. To simply post a mission and core values on a bulletin board, hand out laminated cards, and wait for change to occur will sound the death knell of any culture initiative. Communication is a critical step for organizations just beginning to shape their cultures, and it remains key as organizations strengthen and sustain their cultures. Communicate, communicate, communicate. CA faced the challenge of reaching 15,000 employees on six continents. Their strategy, according to SVP Kevin Long, was to “roll out our values the way we launch products, with a month-by-month marketing communications plan.” Long and the Core Values Team marshaled CA’s marketing resources to introduce everyone to the organization’s values in a concerted effort. Teasers from CEO Sanjay Kumar about “something big” preceded the launch. On the designated day, all employees coming to work found a values “kit” at their workstation, with a well-designed brochure and a t-shirt. The company’s intranet hosted a video clip of Kumar, banners were draped from the ceilings, and the atrium floor of CA’s corporate headquarters even sported bold stencils of the values. Communications from functional leaders followed a week later. Long continues to spearhead the communications process through monthly communications and guest columns in the various division newsletters. Encourage two-way dialogue. CA did not stop with corporate communications, as many other organizations may have. Long understood the importance of two-way dialogue. Managers received guidelines on how to not only engage employees in the business rationale for core values but also encourage them to think through what the values meant to them personally. “It wasn’t enough to explain how our values initiative was good for shareholders; we wanted every employee to be able to ask the question, ‘What about me?’ and to voice concerns.” Translate abstract concepts into tangible examples. For employees to align their behavior and decisions with core values, they need to be able to do more than recite pithy statements. They need to understand, see, and feel the meaning implicit in the words. Pottruck and Pearce describe the challenge: “We do not learn someone’s principles when we hear their concepts, we learn them by listening to their experience, their story.… Stories are the living proof of culture” (p. 39). Leaders at Schwab routinely begin meetings or dinners with storytelling about the mission and core values in action. CA, less than a year into its culture initiative, posts stories of “culture keepers” on its intranet not only to celebrate successes but also to offer tangible examples of what living CA’s values actually looks like. The power of storytelling originates in the emotional bonds that can be created with listeners — connections greater than any forged by data. To be most effective, stories need to be first-person accounts that contain specific, “sensory-rich” details — so that the listeners can actually feel a part of the scene — and cover both feelings and facts.
  12. 12. 12 Jeff Rosenthal and Mary Ann Masarech Modeling: Actions Speak Louder than Words. Defining values and painting vivid pictures are not enough. Core values need to be lived. It is crucial that an organization’s leaders visibly demonstrate espoused values. If they do not, the values will not take hold — or worse, the posters and laminated cards will fuel cynicism and be seen merely as a meaningless “flavor of the month” change initiative or CEO pet project that will fizzle out when the leader departs. Values need to be modeled at several levels: • At the very top — by individual senior leaders. • Within the senior leadership team — as a unified group that holds its members individually accountable for living the values. • Through the middle management ranks. At the Top. Employees, customers, shareholders, and the media are watching, and some leaders fare better than others in this fishbowl of visibility. In BlessingWhite’s experience, senior leaders of organizations that have established values-driven cultures stand out for walking their talk. When asked how consistent senior executives’ behavior was with the organization’s values, more than three quarters of the employees in established values-driven cultures said “very” or “mostly” consistent, in contrast to about half the employees in organizations in the early stages of building a values-driven culture (see Exhibit 7 for the quantitative results). Jeff Rosenthal and Mary Ann Masarech
  13. 13. 13 High-Performance Cultures: How Values Can Drive Business Results Do those results prove that senior leaders in established cultures are better? Not necessarily. In an established culture, leaders who live the values are more likely to reach top spots as their organizations promote and reward desired behavior. These leaders may also have had more time in which to prove themselves, whereas senior executives in emerging values-driven cultures are likely to need a lot more time to win over the cynics. Modeling in either environment requires great discipline, according to the three senior leaders with whom we spoke. It is about being purposeful — and visible — so that you explicitly link your behavior to the values. Tom Barry, managing director of AIB’s Corporate Banking group explains: “I try to be proactive in referring to the values as a top priority. When I communicate to employees about results, strategy, and other key decisions, I always refer to our values as a critical success factor. We need people to see and feel the priority we give the values on a sustained basis.” BlessingWhite President and CEO Christopher Rice underscores the need to remain conscious of your actions as a leader: “I have the values in my office in a prominent place where I can see them from my desk, and I try to use them as a guidepost for my decisions. I have a group of employees who know them cold, and they tell me every time I violate one. (This is good behavior!).” RCCL’s Murphy sums up the challenge: “As leaders we accept responsibility for being agents of change — change of the organization, change of our teams. Don’t forget that the leader needs to change also.” A Consistent Team. It is not enough for the head of the organization — like Barry, Rice, and Murphy — to visibly live the values. Employees also take note of whether the leadership team holds its members accountable for behavior consistent with the values. One technique used successfully by some leadership teams is the practice of “discussing the undiscussables” — pointing out and dealing with the proverbial “nine-hundred-pound gorilla” that everyone sees but doesn’t mention — especially when it comes to team members not living the values. RCCL’s Rombach and Murphy believe this practice has raised the standard of candid conversation and trust within the IT leadership team. BlessingWhite, Schwab enterprise teams, and Xilinx have all used similar processes to hold one another accountable, stay on course as a team, and minimize the competitiveness that commonly exists among team members. AIB’s Barry underscores the importance of immediately addressing any situations where there are serious discrepancies between behavior and values. “I continue to seek feedback in conversations and monitor the impact of team actions through regular culture surveys.” Middle Managers — The Weakest Link. As Exhibit 7 illustrates, even in organizations with strong values- driven cultures, employees perceive that managers in the middle behave less consistently than senior leaders. The lower marks may be the result of a number of factors. Managers’ day-to-day behavior is more visible to the rank and file than that of senior executives. Managers are constantly squeezed between the demands to deliver results and model the organization’s core values. In organizations where values are relatively new, managers may be watching to see if “this too will pass.” In fact, many may still be rewarded for the results they achieve but not the manner in which they achieve them. Another possibility is that managers may not feel they own the culture. Schwab, RCCL’s IT department, Xilinx, and AIB Corporate Banking have all rolled out some type of development
  14. 14. 14 Jeff Rosenthal and Mary Ann Masarech program in the last few years to equip managers with the tools they need to be successful stewards of culture. Attention at this level of the organization is critical to achieving the momentum Kotter and Heskett describe in Corporate Culture and Performance: the organization must “motivate an increasingly large group of people to help with this leadership effort. These people must find hundreds or thousands of opportunities to influence behavior” (p. 99). The authors point out that somewhere in between the executive suites and the front lines, many an organization has slid backward. Alignment of Business Practices: Where the Rubber Meets the Road. Culture initiatives often hit major obstacles when aligning the organization’s day-to-day operations, listed in Exhibit 6, with espoused values. Perhaps this is not surprising since many organizations still struggle to more tightly link daily practices to their core business strategies. Yet Pottruck and Pearce point out that alignment can be likened to “tuning the engine” so that everything in the organization runs more smoothly. As an example, they describe in their book, Clicks and Mortar™, how Schwab aligned its budgeting process more closely with its value of teamwork. CA actually identified forty change programs for better aligning systems and processes with values; they are being implemented as we write this article. Two of the most common areas that can have immediate impact on culture are: • Performance management — measuring and holding individuals accountable for not only results but also the behaviors that achieved them. • Decision making — to not only drive business results but also inspire employee commitment and reinforce what the organization stands for. CA began to revise its performance management system almost before the ink was dry on its values statements. Long explains: “Weaving our values into the fabric of our organization through performance management and compensation sends a strong signal that this is not a program du jour.” As part of its efforts, the organization identified specific competencies for employees and leaders. RCCL’s IT department made competencies part of its strategy as well. BlessingWhite tries to make what Rice calls “fourth quadrant decisions — actions that will achieve desired business results and also be true to — even strengthen — our culture.” He explains how the practice worked in the fall of 2001: “As the summer wound down, we realized we needed to make some significant changes to react to the downturn in business. Our senior team was actually meeting on September 11 to discuss cost-cutting measures, and the events of the day strengthened our determination not to forsake the meaning of our work and culture for short-term gain. As a result, the senior team chose to take a pay-cut. We solicited employee input in the weeks that followed and implemented a number of short-term solutions (such as a four-day workweek) that actually did meet our financial goals without damaging employee commitment. Many employees, in fact, voiced a renewed sense of loyalty.” Employee Engagement: Capturing Hearts and Minds. Although individual accountability and alignment of practices are key, RCCL’s Rombach bluntly reminds us, “You can’t be passionate about something that is mandated.” Culture change and high performance need to be actively nurtured. Inspiring Leaders. Leaders need to do more than relentlessly communicate and visibly model their organization’s espoused values. They need to be able to inspire employees to actively own the firm’s Jeff Rosenthal and Mary Ann Masarech
  15. 15. 15 High-Performance Cultures: How Values Can Drive Business Results culture and business goals. For countless successful business leaders, that task is easier said than done, as AIB’s Barry describes: “A large percentage of us are left-brained, myself included. We tend to start with logic, move on to logic, and finish with logic. It’s a struggle for us, even though we understand that logic doesn’t inspire.” BlessingWhite’s review of leadership-assessment data from our clients supports Barry’s view. From our preliminary analyses, shown in Exhibits 8 and 9, we found that senior executives scored highest on characteristics associated with traditional business competence, such as job expertise, clarity of communications, and focus on results. Yet the characteristics most predictive of such high performance as successfully leading innovation and change, building loyal teams, and demonstrating credibility are associated with people skills, or what many might label as “soft” traits, such as trustworthiness and empathy. The findings do not suggest that leaders replace their business savvy with interpersonal skills. Rather, they suggest a goal similar to the one described earlier for organizations, that of integrating business competence with personal connection, as illustrated in Exhibit 10. This integration is the hallmark of “4th Quadrant” leaders — those who demonstrate leadership integrity.
  16. 16. 16 Jeff Rosenthal and Mary Ann Masarech
  17. 17. 17 High-Performance Cultures: How Values Can Drive Business Results What does leadership integrity take? In addition to applying the strong business skills they already have, leaders need to: • Personally connect with their organization’s values. • Be clear — and lead from — their own personal convictions. (Pearce points out that you cannot inspire others if you do not know your own sources of inspiration.) • Stay tuned to the needs of all stakeholders. • Make an effort to infuse meaning and empathy into their messages. Nearly a decade ago, Collins and Porras spoke to this challenge in Built to Last: “Some managers are uncomfortable with expressing emotion about their dreams, but it’s the passion and emotion that will attract and motivate others” (p. 234). Self-Motivation. More inspiring leadership goes a long way in creating a passionate community of employees, and regular coaching can help adjust employee behaviors to better align with values and business goals. Yet employee motivation remains largely in the hands — actually, the hearts and minds — of employees. Barry Posner and Warren Schmidt’s often-quoted 1993 study on values congruence indicated that employees who “had the greatest clarity about both personal and organizational values had the highest degree of commitment to the organization” (p. 174). This implies that as clear as you may be in communicating the organization’s values, if employees aren’t tuned in to their personal motivators, they won’t necessarily be able or willing to engage fully and contribute toward the organization’s goals. As Posner points out (with James Kouzes) in The Leadership Challenge: “Those individuals with the clearest personal values are better prepared to make choices based on principle — including deciding whether the principles of the organization fit with their own personal principles” (p. 51). You may be thinking, “What? Now I need to worry about individuals’ values?” The secret is not in making “values clones” but in encouraging reflection and connection. AIB Corporate Banking tackled this challenge head on. During its values rollout, every employee and manager attended a workshop that helped them clarify their own values. They also had the opportunity to consider how their jobs fit into the organization’s definition of success. Thus, by identifying the “sweet spot” where their convictions and career goals intersected with the organization’s values and goals, they were more likely to achieve satisfaction — and AIB Corporate Banking was more likely to obtain a high level of contribution. It’s Never Over: Monitor Results, Reinforce Ownership. All the organizations identified in this article monitor their culture. All have used culture or employee surveys to stay in touch with what is working and what is not. Ownership is also a critical issue, and it cannot reside with the human resource function alone. Long of CA comments: “A key success factor for starting out is identifying one executive accountable for driving change, someone to eat, sleep, and drink the stuff and be held accountable.” RCCL’s Murphy and Rombach model the type of strategic line-HR partnership that can facilitate change and sustain momentum.
  18. 18. 18 PITFALLS TO AVOID To ensure the success of your company’s efforts to build and sustain a values-based culture, take care to plan, implement, and monitor your initiative to avoid these common errors: • Thinking your culture initiative has an “end date.” • Not building support and capability in middle management ranks. • Undercommunicating. • Not aligning business practices with values. • Treating culture as a fad or “HR initiative” rather than a core business driver that must be owned by business leaders at all levels. • Letting long-term business performance take a back seat to culture. • Assuming employees can translate abstract values into relevant job behaviors without help. • Thinking senior leadership’s failures to model the values will go undetected. • Copying some other company’s values (they need to be yours, relevant to your business). THE RESULTS As we write, the published business results of organizations with heralded cultures — like Southwest Airlines, GE, and Johnson & Johnson — are strong. In a struggling economy, most organizations with high-performance cultures seem to be ahead of the pack, or at least staying steady. As for the organizations highlighted in this article: • AIB Corporate Banking has more than doubled profits. Significant improvements have been made in key employee survey items, such as “I understand why my job exists and how it contributes to AIB Corporate Banking success” (95 percent agreement in 2002, up from 77 percent in 2000) and “Staff are treated with respect regardless of their job” (74 percent agreement in 2002, up from 47 percent in 2000). Barry says he is “100 percent convinced” the culture initiative is key to these results. • Xilinx earned the sixth spot in Fortune’s 2001 list, “100 Best Companies to Work For,” (up from fourteenth in 2000). One employee was quoted in the local press as saying, “It would take dynamite to get me out of here.” The firm avoided layoffs despite the difficult economy, significantly increased market share, and introduced new programmable system solutions in 2002. Its stock continues to outperform many other Silicon Valley firms. • RCCL’s IT department survived the impact September 11, 2001 had on the hospitality and travel industry, and Murphy reports increased productivity and employee satisfaction: “I cannot underscore enough the importance of the alignment of our management team’s understanding of authenticity, genuineness, core values, and clarity of purpose with the success we experienced, even as our responsibilities and projects became more complex and challenging.” Jeff Rosenthal and Mary Ann Masarech
  19. 19. 19 High-Performance Cultures: How Values Can Drive Business Results • CA’s Long qualifies his comments, noting that although some change programs have produced results (e.g., a 25 percent reduction in turnaround times for customer contracts), it is really too soon to observe major change. “We’ve done a good job so far in raising awareness. But rolling out change programs isn’t enough. We’re focusing on outcomes. Everyone knows the metrics we’re using. We’re also going to continue to focus on winning hearts and minds.” • Schwab conducted another round of layoffs in the fall of 2002 as individual investors stayed away from the stock market. Yet the organization’s actions continue to withstand media scrutiny. Laid-off employees receive generous benefits and assistance — including a sign-on bonus should they be rehired when business picks up. • Our firm, BlessingWhite, expects to end 2002 stronger than we were a year ago — and profitable. Recent employee satisfaction scores also indicate, in Rice’s words, that “despite the economic challenges, uncertain business climate, and the precarious nature of our business, BlessingWhite’s employee-owned culture is taking hold. Top-scoring items indicate that we have a clear understanding of what we need to do, we care about each other, we have a voice, and we believe the work we do is important.” What else keeps these champions of high-performance cultures motivated? CA’s Long paints the future of brand integrity: “I see a customer able to describe CA’s values just through his personal experiences with us. That’s proof of the values being woven into our fabric.” RCCL’s Murphy describes an enduring legacy: “The most fascinating aspect of this to me is that the organization has learned to draw strength, passion, and energy from within itself. It is no longer necessary to our very survival that I be available to offer my passion and energy. Not only has it dispersed itself among my leadership team, many leaders have emerged at all levels of the organization, with a newfound confidence and self-awareness of what we stand for and what we are capable of.”
  20. 20. 20 Jeff Rosenthal and Mary Ann Masarech Examples of Mission Statements BlessingWhite: Reinventing leadership and the meaning of work. The Charles Schwab Corporation: Provide customers with the most useful and ethical financial services in the world. Examples of Core Organizational Values Xilinx: • Customer Focus: We exist only because our customers are satisfied and want to do business with us… and we never forget it. • Respect: We value all people, treating them with dignity at all times. • Excellence: We strive for “Best in Class” in everything we do. • Accountability: We do what we say we will do and expect the same from others. • Teamwork: We believe that cooperative action produces superior results. • Integrity: We are honest with ourselves, each other, our customers, our partners, and our shareholders. • Very Open Communication: We share information, ask for feedback, acknowledge good work, and encourage diverse ideas. • Enjoying our Work: We work hard, are rewarded for it, and maintain a good sense of perspective, humor, and enthusiasm. The Charles Schwab Corporation: • Be fair, empathetic, and responsive in serving our clients. • Respect and reinforce our fellow employees and the power of teamwork. • Strive relentlessly to innovate what we do and how we do it. • Always earn and be worthy of our clients’ trust. ADDITIONAL INFORMATION
  21. 21. 21 High-Performance Cultures: How Values Can Drive Business Results ADDITIONAL RESOURCES Collins, J.C., & Porras, J.I. (1994). Built to Last: Successful Habits of Visionary Companies. New York: HarperCollins. Kotter, J.P., & Heskett J.L. (1992). Corporate Culture and Performance. New York: Maxwell Macmillan International. Kouzes, J.M., & Posner, B.Z. (2002). The Leadership Challenge: How to Keep Getting Extraordinary Things Done in Organizations, 3rd. ed. San Francisco: Jossey-Bass. Posner, B.Z., & Schmidt, W. (1993). Values Congruence and Differences Between the Interplay of Personal and Organizational Values Systems. Journal of Business Ethics, 12, 171–177. Pottruck, D.S., & Pearce, T. (2000). Clicks and Mortar™: Passion-Driven Growth in an Internet-Driven World. San Francisco: Jossey-Bass. AUTHOR BIOGRAPHIES Jeff Rosenthal is vice president of BlessingWhite’s western region and a visiting professor at the Haas School of Business at Berkeley. Mary Ann Masarech is product manager of BlessingWhite’s leadership and culture programs and services. They can be reached at 1-800-222-1349 and by e-mail at jrosenthal@bwinc.com and maryannm@bwinc.com. This is a preprint of an article published in Journal of Organizational Excellence © Spring 2003. http://www.intersciences.wiley.com