photo by floodllama
A lot has been written in the last few days about culture, strategy and which eats which for lunch. The frustrating answer everyone comes back to is that having both is ideal. Of course it is. But the latest riffs miss the point entirely.
The quote by Dick Clark, the former CEO of Merck, “culture eats strategy for lunch,” (a paraphrase of Peter Drucker, who was apparently more of a breakfast man) wasn’t meant to take sides so much as it was to highlight that the amount of time business executives pay to each is way out of proportion based on the contribution of each to an organizations success.
This is still the case.
And thus these recent articles do more harm than good. Particularly the Fast Company post. Posing weak strawmen to ‘prove’ that it’s possible to be great without having a good culture while completely misunderstanding the causal effects between the two sets the importance of culture back several steps.
The trappings these types of articles fall into are:
- Not understanding where ‘good strategy’ comes from. Good strategy isn’t the result of an executive team going on a retreat and having a flash of collective brilliance. It’s an iterative process that involves highly engaged employees thinking about how to win the future while still trying to get all the shit that’s piled up on their desk accomplished today. Being engaged is having ‘good morale’ which matters because…
- Misunderstanding the causal relationship between culture and strategy. Those engaged employees are largely engaged because they are well-aligned with the culture. Simply, the things they value are the things that motivate them which also happens to be the things the company rewards. That creates that virtuous feedback cycle that begets more time and effort from each of your employees. It’s during those extra hours where the clear-headed thinking often arises. If the culture is bad (defined as misaligned) what is the likelihood a great strategy is created when the employees don’t care and loath coming into work?
- Assuming there is a ‘right’ culture. Books by ‘colorful’ CEOs are enjoyable to read and they all tout the quirky things they do to treat employees with kid gloves. Because of this there is a tendency to lump culture into one of some squishy, feel-good buckets. This only serves to reinforce its lack of importance in the eyes of ‘hard-nosed business executives’ who aren’t naturally inclined to focus on aligning their culture. But a good culture isn’t one that provides quirky benefits, but one that is well-aligned and everyone knows what is expected, what is rewarded and fits how they are wired.
- Failing to differentiate between business models. The strawman created by viewing the cultures of WalMart, McDonald’s and FoxConn (let’s just call this manufacturing company X and acknowledge that human rights abuses aren’t a respectable part of any culture) as bad fails to account for how well aligned their cultures are to the demands of the business. These are companies that require precision and a vast majority of the workforce performs routinized tasks. For the line employee at each they provide value by consistently and reliably performing the same tasks. Having ‘good morale’ is less important (corporate employees notwithstanding) because they are being rewarded for performing quickly and not making mistakes. These workers are not rewarded for creating great strategy.
These authors do a giant disservice to the corporate world by writing pithy blog posts simply to attract attention to sell their misguided books.
It doesn’t matter what kind of culture you have, but you want everyone swimming in the same direction so your company can eat those competitive fish.
So rather than focusing on culture vs. strategy lets focus on how we can put solid metrics around your culture so your employees engage more frequently in order to think up and deliver upon that great strategy that is floating around out there somewhere. It’s not either/or, but culture deserves more attention than it receives.
Culture fit is on fire. If asked, most of us who’ve ever held a job would agree that fitting in with a company’s culture goes a long way toward predicting whether we stay – and thrive – within that organization.
And yet the business world has historically paid very little attention to culture intelligence and culture fit.
Until now.
After decades of quiet on the culture front, people are talking about culture fit, writing about it, speaking about it, studying it, and measuring it. In just the past few days alone, ERE – a leading international talent management organization – has published articles on both measuring and hiring for culture fit, a Forbes article considered the ramifications of not “fitting in” at the office, the Financial Post weighed in on the impact of office culture clash, and the Enviable Work Place examined Zappos’ commitment to a culture focused on happiness.
And the list goes on.
As individual knowledge workers, most of us have felt the impact of culture fit, for better or worse – and companies measure that same impact at the bottom line every single day.
Culture fit matters – and it is on fire.
Photo by geo3pea
photo by Images_of_Money
Last week P&G’s culture cost them $16.5 BILLION over the next four years if the price target of the UBS analyst is to be believed. According to the analyst, “Procter & Gamble’s culture has limited the company’s ability to meaningfully change how it does business…”
What’s interesting here isn’t whether P&G has the ‘right’ culture to succeed. Their existing culture has created the 10th to 16th (depending on the day) most valuable company in the world based on market cap, meaning they are doing a lot of things right. This is merely a small bump in their century-long road.
The interesting part is that Wall Street, the epicenter of emotionless objectivity is now extolling that company culture, that pesky, human-driven intangible, makes a significant difference to the bottom line (by approximately 10.4782%).
In 1984, brand valuations started calculating how much a company is worth in the hearts of consumers. And today we’re all starting to wake up to the importance of calculating the value of a brand in the hearts of the employees. Wall Street needs to find ways to identify value before other investors and what is more logical than understanding how aligned the people who actually do the work are to the organization’s goals?
Next up? We will start seeing more and more efforts to crack the value of a culture in pricing and performance beyond the simple feel-good platitudes after a significant merger.
So if you’re running a company or responsible for carrying out the culture values etched on your lobby wall it’s time to start quantifying your company culture as a means to stay ahead of (or catch) your competitors. Wall Street is watching.
photo by pasukaru76
“We only hire ‘A’ players.”
“Past performance predicts future performance.”
We use all sorts of shortcuts when hiring people. They sound good and make us feel like we’re being very discerning.
But are we really doing a great job?
Before launching into why we need to update our thinking on past performance, let’s start by acknowledging that if someone has been successful in the past that’s a great indicator that they can be again. By all means, a positive sign.
But we shouldn’t exclude people who haven’t been ‘A’ players, ‘rockstars‘ or ’1-percenters.’
Here are some fallacies behind the ‘past performance’ mindset:
1. Situational performance
2. Team effects
3. Opportunity
Performance is situational.
Most of us have worked with people we couldn’t stand. If they were our boss then it made coming in to work and doing great work incredibly difficult. We had to shift how we thought, how we operated and how we spoke just to make sure that we sort of ‘fit in.’
All that takes energy that could be better applied to completing our projects. And it does little to motivate us to think about our job outside of the office. We become less engaged and while we’ll still capable of doing a good job on our projects we’re not going to shine like the person who goes the extra mile and dedicates ‘off-hours’ thinking to solving problems out of their realm.
When we aren’t ideally suited for the environment, success will be far more difficult to attain.
Imagine asking Tom Brady (the not so swift-footed quarterback for the New England Patriots) to run a new style of offense that requires him to run the option (less throwing, more running). He may do alright but he’s not going to be the top-caliber performer he is today. How well someone fits ‘the system’ is a leading predictor of success.
Team effects.
Work today is highly interconnected. Everyone of us has to rely on colleagues in order to get things accomplished. It takes a village. Rare is the project that gets hammered out without the contributions, feedback and improvements from others.
Which brings us back to the question of how much success should we attribute to a single person?
Using the Tom Brady analogy again, how much of his success should be attributed to his offensive line? An extra second to throw the ball is an eternity and can turn an average quarterback into a star. How much to his wide receivers who know how to read the defense to break off a route sooner? To the coach who designed the system? You get the idea…
Opportunity.
On the macro level, most people change jobs every 3.5 years which means that unless one is 20 years into their career it’s very possible a candidate hasn’t found the right situation where they can be most successful.
It’s like saying someone who has had three or four relationships in their life will never get married because they haven’t been successful in a relationship before.
On the micro level, politics often play a large role in who gets the plum assignments. Being successful in the professional world requires we have the opportunity to do something impactful that is in our ability wheelhouse. Capable people are often passed over for people who are more adept at playing the political game. Are those the ones you really want to hire?
So don’t ignore past performance, but don’t put all your eggs in that basket either. Ignoring whether someone is a strong fit to your culture is the first step to making a bad hire. Even if all of your hires have been overwhelmingly successful in the past, if they don’t like how you operate and what your company rewards they aren’t going to want to put their best foot forward.
photo by WetSun
[Disclosure: Zynga is a RoundPegg customer.]
At RoundPegg, we quantify the impact of culture in a number of ways.
There is the hard cost of turnover (RoundPegg has saved companies well into the 7-figures by aligning culture and reducing turnover), the decrease in performance by having to conform to the values of others and the long-term benefits of having everyone pulling in the same direction (Jim Collins’ research showed companies with ‘strong, well-aligned cultures were 6x more successful’).
Opportunity cost is ever-present, but we never lean on it because it’s so squishy.
Yesterdays’s article in the NY Times about Zynga’s hard-diving culture however starts to put some real figures to the opportunity cost. At least two deals, totaling over $3Bn, were never consummated because, according to the article, the would-be acquiree had reservations about working within the Zynga culture. In fairness, there’s likely more to the story, but it is a telling that it was a big enough a factor for them to share with the New York Times.
The folks at Zynga are super sharp so they wouldn’t make an acquisition if they weren’t expecting to make money on the deal. Assuming they were expecting a 20% return, their cultural misalignment with the acquired companies cost them $640 million.
The article unfairly paints the Zynga culture as a less than desirable one. What they don’t account for is that there IS NO ONE ‘RIGHT’ CULTURE. People are not all the same. Some thrive on that sort of internal competition and others find it suffocating.
Would you love working in that type of environment? Maybe not, but that doesn’t mean it’s wrong. It just means that it’s not the right employer for you or for these companies about to be purchased.
The goal is to align the culture around similar values so that everyone understands the expectations and are motivated by the actions being rewarded. If that means cultivating a work first, hard-driving, metric-centric mentality then so be it. Plenty of employees are as happy as a FarmVille pig in mud, but that would have made for a less interesting article.
Ultimately, those failed acquisitions were probably a good thing because they recognized beforehand that integrating the cultures of the companies would have been a challenge. But leaving $640M on the table is never easy.
