What is the big deal with Culture?

by Michael Watkins, MBA/JD, EBITDA Growth Systems

“Culture eats strategy for breakfast is a phrase originated by Peter Drucker and made famous by Mark Fields, President at Ford.  But if culture is such a big deal, it would help if someone were to define it for the masses.

We define culture as “the experience that your customers have with your company’s value proposition”.  In other words, if you want to know what kind of culture your company has, survey your customers.  You could also survey all your suppliers and your outside processing partners.  If they say that your people are harsh, angry, aggressive, dismissive, and generally unfriendly, the odds are pretty good that your culture may be described in the same way. It means that your workforce is disengaged.

If your customers, suppliers, and outside processing partners say that your people are warm, happy, cooperative, and collaborative, then the odds are that you have a pretty good culture.  It means that your workforce is engaged.  Note that employee engagement does not mean employee happiness. Someone might be happy at work, but that does not necessarily mean they are working hard, productively on behalf of the organization. Note that employee engagement also does not mean employee satisfaction. Many companies have “employee satisfaction” surveys and executives talk about “employee satisfaction”, but the bar is set too low. A satisfied employee might show up for her daily 9-to-5 without complaint. But that same “satisfied” employee might not go the extra effort on her own.

An engaged employee is an employee that has an emotional commitment to the organization and its goals.  This emotional commitment means engaged employees actually care about their work and their company. They do not work just for a paycheck, or just for the next promotion, but work on behalf of the organization’s goals.  This is huge.  If your organizational culture is typified by engaged employees, then your culture acts as an exponent – a multiplier.  In this environment, decisions are made at the lowest possible levels and everyone on the team are “their brother’s keeper”.

Imagine how frictionless the environment would be when the organizational culture is typified by engaged employees.  Everyone is freed up to be the best that they can be, and your customers and suppliers want more of what they are experiencing from your company.

What is the big deal with culture?  The answer – profits.  There is a reason why Fortune 100 companies invest so heavily in engaging their employees.  Companies with a thriving, engaged culture achieve over 4x higher revenue growth, and a 21% increase in profitability.  If you are wondering how that could be, consider three data points:

* Productivity – An employee who feels engaged and inspired is 125% more productive than the satisfied staffer. (Bain & Company) Companies with the highest levels of engagement are 21% more productive than those with low levels of engagement. (Gallup)

* Retention – Highly engaged business units experience 59% less employee turnover.  The link between employee engagement and retention is well established. Employees who are highly engaged are 87% less likely to leave an employer.

* Absenteeism – Engaged employees show up to work and do more of it.  The Gallup organization found a 41% reduction in absenteeism among engaged employees, and a 17% increase in productivity.

In our next submission, we will unpack why it is that far and away, the number one correlation to an engaged employee is a good manager.  Good managers create engaged employees that are invested in your vision and committed to turning it into a reality. They create employees who work productively and with purpose.

That is what the big deal is with Culture!