You company culture is a powerful competitive advantage. Learn from Stanford professor, Charles O'Reilly, and Pomello co-founder, Catherine Spence, how to create a culture strategy, and use technology to manage culture effectively.
2. Culture as Competitive Advantage
Dr. Charles O’Reilly, Professor, Stanford Graduate School of Business
Charles is a leading expert on Organizational Behavior and Management and
Professor at the Stanford Graduate School of Business. His research includes
studies of leadership, organizational culture and demography, the management
of human resources, and the impact of change and innovation on firms. He has
authored more than 100 papers and published several books. Professor
O’Reilly has consulted for a variety of public and private firms in the U.S.,
Europe, Africa, and Asia. He also has developed, directed, and taught in
executive programs for senior managers in innovation, technology, leadership,
change, and human resources.
Catherine Spence, Co-Founder, Pomello
Before founding Pomello Catherine built and managed investment strategies for
BlackRock. Inspired by her own experience as a job seeker as well as going
through a large corporate merger, she grew to value the role of culture in
creating fulfilling workplaces that drive performance. Catherine holds a BA in
Political Science from Columbia University and an MBA from Stanford’s
Graduate School of Business.
4. 94% of executives and 86% of employees believe that a strong
culture is important to business success
5. 5
If you’re really going to
transform an enterprise,
you’ve got to understand
culture…It took me to age
55 to figure that out.
Culture is everything.
~ Lou Gerstner
CEO, IBM, 1993-2002
culture as competitive
(dis)advantage
8. What is “culture” and why should
managers care about it?
• Culture is a social control system that already
operates within your organizations.
• If you don’t manage it, this control system
can undermine your ability to effectively
execute your strategy.
• You can diagnose and manage the culture in
your units.
The Bottom Line
9. Culture as Social Control
Culture is the pattern
of behavior that is
reinforced by people
and systems over time.
10. 10
I hate the word
‘culture’. Culture
is really just how
we all behave.
~ Mary Barra
CEO GM
September 30, 2014
culture
11. 11
You can’t over-
emphasize enough
the importance of
culture—and what
we mean by that is
behavior.
~ Doug McMillon
CEO Walmart
February 24, 2015
culture
12. Values
• Beliefs about what is
worthwhile or important
• The principles or standards
that are seen as important
by a person or group
Norms
• Expectations about what are
appropriate or inappropriate
attitudes and behaviors
• Socially created standards
that help us interpret and
evaluate behavior
13. IBMers are defined by what they value.
IBMers value:
Dedication to every
client’s success.
Innovation that matters –
for our company and for the world.
Trust and personal responsibility
in all relationships.
14. Our Core Values
CUSTOMERS
We put the customer at the center of everything we do. We listen intently to
our customers’ needs. Each interaction matters. Safety and quality are
foundational commitments, never compromised.
RELATIONSHIPS
Our success depends on our relationships inside and outside the company.
We encourage diverse thinking and collaboration from the world to create
great customer experiences.
EXCELLENCE
We act with integrity. We are driven by ingenuity and innovation. We have
the courage to do and say what’s difficult. Each of us takes accountability
for results and has the tenacity to win.
15. Our Core Values
CUSTOMERS
We put the customer at the center of everything we do. We listen intently
to our customers’ needs. Each interaction matters. Safety and quality are
foundational commitments, never compromised.
RELATIONSHIPS
Our success depends on our relationships inside and outside the
company. We encourage diverse thinking and collaboration from the
world to create great customer experiences.
EXCELLENCE
We act with integrity. We are driven by ingenuity and innovation. We
have the courage to do and say what’s difficult. Each of us takes
accountability for results and has the tenacity to win.
As a new GM employee, how
should I behave?
What is really important?
16. 16
Values are a misused
word. Values are
behaviors…the
behaviors you want
to achieve the
mission. Then you
measure and reward
those behaviors, with
the soul or the wallet.
~ Jack Welch
2005
culture is about behavior
17. What is organizational culture?
SOCIAL CONTROL
Values
Beliefs about what is
important or worthwhile
The principles or
standards seen as
important by a person or
group
Norms
Expectations about
appropriate behaviors
Socially created
standards that help
interpret and evaluate
behavior
Behaviors
The specific attitudes
and behaviors that are
needed to successfully
accomplish important
goals and objectives
19. “Even contextually or strategically
appropriate cultures will not promote
excellent performance over long
periods unless they contain norms
and values that promote innovation
and change.”
John Kotter and James Heskett
Corporate Culture and Performance
Harvard Business School Press, 1992
The Cultural Challenge
20. WEAK CULTURE
Research corroborates the financial importance of
a strategically aligned and innovation-based culture
Revenues rise 166%
Workforce expands 36%
Stock price increases 74%
Net income boosts 1%
Revenues rise 682%
Workforce expands 282%
Stock price increases 901%
Net income boosts 756%
STRONG CULTUREVS
Culture and Performance
WEAK CULTURE STRONG CULTURE
21. Silicon Valley Study
FY 2012:
• 87% are Fortune 1000 firms
• Generated $1.26 trillion in
revenue
• 74% of Fortune 1000 hi-tech
revenue
• Collective market cap: $2.8
trillion
22. Between 2009-2012, firms with more ADAPTIVE
cultures (i.e., quicker to opportunities, willingness
to experiment, more innovative, more risk taking,
faster) also had:
• Higher revenue growth
• Higher Tobin’s Q (Market-to-book ratio)
• Higher employee ratings (Glassdoor ratings)
• Ranked by Fortune as More innovative
• More analyst “buy” ratings
Silicon Valley Study - Results
23. Study of 44 Irish Companies
1. Culture (adaptability and collaboration)
predicts revenue growth (2010-2014).
2. The correlation between current and
needed culture also predicts revenue
growth (i.e., alignment matters).
3. Culture change efforts also strongly and
positively predict revenue growth.
24. Culture change efforts are associated
with higher revenue growth
%RevenueGrowth
1 2 3
-
20
40
60
80
100
120
Change Efforts
Change Efforts
(1 = no explicit efforts, 2 = some attempts, 3 = explicit efforts)
Firms that
made more
explicit
culture-
change
efforts*
averaged
111% revenue
growth over
several
years--2X the
average.
* Note: Culture-change efforts were likely informed by the culture feedback reports indicating where gaps between the current and
needed (per strategy) culture existed. R = .37 (p<.03)
25. Culture impacts firm performance and
employee turnover
100
0.65 0.7 0.75 0.8 0.85 0.9 0.95
Performance
Rating
Predictive Compatibility
Score
High
Low
Time Since Hiring
%ofNewHiresStillatCompany
Top Score
Quartile
Bottom Score
Quartile
Difference in
turnover = 50%
Culture Fit and Performance
Predict long term performance -- YES
Employee Attrition Curves
Stronger fit leads to lower turnover -- YES
Meta-analysis of 84 empirical studies
30. 1. Recruiting and selecting people who fit the culture
you’re trying to create
2. Training and developing people initially and through
their careers.
3. Rewarding and recognizing people to create a vivid
picture of what success looks like
4. Leading intentionally and visibly to help people
learn to make strategically relevant, tough tradeoffs
How is culture managed?
31. Aligning Organizational Culture
Identify Your Strategy - Why should any
customer prefer your product/service?
List the Key Success Factors - What
actions must occur to execute your strategy?
Current Culture - What are the norms that
exist today in your organization?
Needed Culture What are the norms you
need to execute that currently don’t exist?
Culture Gaps - Norms that are needed but
don’t exist; norms that exist to be changed
Design Actions/Programs for Change
1.
2.
3.
4.
5.
6.
32. How can you do a quick culture
diagnosis in your own business?
Focus Groups This approach involves forming a set of focus groups and
asking them to assess the current culture (see Chapter 5 in Winning
Through Innovation, 2002) for a description of this approach. This works
best for within business unit diagnoses.
Organizational Culture Profile This approach uses a web-based tool
and is most useful for getting a large sample to do corporate level cultural
diagnoses.
Surveys, Interviews Consulting firms offer a variety of survey and
interview techniques to do culture diagnoses.
Culture Diagnosis
33. What is the role of HR
technology in managing
culture?
34. 1. Consistency – Organizations require a consistent
framework for understanding, communicating and
measuring culture in order to manage it effectively.
2. Scaling – While culture can be managed person-to-
person at smaller companies, larger companies
require a mechanism that collects and distributes
culture data efficiently especially during periods of
rapid growth.
3. Evolution – Company strategy is not static over time,
and so culture cannot be static over time. Technology
enables evolution of culture over time.
Why does culture need technology?
35. Consistency: Know Your Culture
Culture is not monolithic, and different groups within an organiza=on
can have significant differences in cultural cohesion or strength
36. Consistency: Know Your Culture
Culture is not monolithic, and different groups within an organiza=on
can have significant differences in cultural norms and behaviors
Comparative View – Values Analysis
There is a very high degree of
alignment across many of the
values within these 2 teams,
indicating elements of a
common culture core …
… Yet signs of sub-cultural
differences were also observed, the
largest gap occurring around the
value placed on Results.
37. Scaling: Hiring for High
Performance Requires Culture
0.65 0.7 0.75 0.8 0.85 0.9 0.95
Performance
Rating
Predictive Compatibility
Score
High
Low
Time Since Hiring
%ofNewHiresStillatCompany
Top Score
Quartile
Bottom Score
Quartile
Hiring to optimize for culture alignment leads to higher
performance and lower turnover
Compatibility vs. Performance
Predict long term performance --
YES
Employee Attrition Curves
Stronger fit leads to lower turnover --
YES
38. Evolution: Managing Culture
Change with Technology
One Fortune 500 company compared their current leadership culture to
their aspira=onal (or future) leadership culture in order to iden=fy what
behaviors they need to emphasize to meet future strategic ini=a=ves
Adaptability emerged as
the largest gap to the
desired future state … by a
wide margin
While not requiring a
tradeoff across most other
values…
FUTURE
CULTURE
… except Precision, which
emerged as the lowest
value in the future state
Leadership Team Current vs. Future Culture
Gap Analysis
CURRENT
CULTURE
39. How to Integrate Culture Technology into
Existing HR Workflows
Culture analy=cs technology will integrate with your exis=ng
HR workflows and soQware throughout the employee life cycle
ASrac=on
Ensure that you are
accurately adver=sing your
authen=c workplace culture
in all job pos=ngs
SoQware Integra=ons:
• Applicant tracking system
Selec=on
Bring consistency to your
selec=on process by capturing
data about candidates
preferred norms and
behaviors.
SoQware Integra=ons:
• Applicant tracking system
Reten=on/
Development
Understand how culture is
impac=ng performance and
reten=on by tracking culture
analy=cs throughout the
employee life cycle.
SoQware Integra=ons:
• Performance Management
System
• HRIS System