Posted By Jeff Moad, July 29, 2013 at 12:44 PM, in Category: Next-Generation Leadership and the Changing Workforce
In his recent book, Harvard Professor Emeritus James Heskett claims that a vibrant company culture “can account for 20-30% of the differential in corporate performance when compared with ‘culturally unremarkable’ competitors.”
If true, those are some pretty surprising numbers. It means that culture is every bit as important a determinant of overall success as, say, labor costs or supply chain efficiency. Heskett claims the impact of culture on performance is something that can be isolated and measured.
I think there’s something to what Heskett says. Consistently, members of the Manufacturing Leadership Council tell us that having a strong company culture is the foundation for a wide range of organizational behaviors and attributes that they see as essential, from agility to an engaged workforce. Companies with strong cultures tend to have less unwanted employee turnover, better employee referrals, and they tend to have stronger relationships with their customers, Heskett says.
Anecdotal experience also reinforces this idea that there is a clear connection between company culture and performance. Many companies that have been successful for years—think IBM, Apple, General Electric—are just about as well-known for their cultures as they are for their products or their financial success. Apple’s advertising campaigns—including its most recent and controversial “Designed by Apple in California” ads—have always been as much about the company’s culture and values as about its products.
Of course, many of the elements of a successful culture are well-known. Companies with strong cultures tend to have a common vision and a core set of values that are clearly stated. They also enforce consistent practices and processes that support those core values and vision.
But organizations with vibrant cultures usually have something more, something that is often overlooked: They have a compelling narrative, a story that defines the organization’s origins and captures its values in a way that connects with listeners much more powerfully than a mission statement ever could.
Quite often, these narratives center on an organization’s founder and his or her motivation and vision for starting the organization and guiding it to success. The narrative of how William Hewlett and David Packard founded their company in a Palo Alto, CA, garage where they embraced engineering curiosity was a core element of HP’s successful culture for many years. And, of course, the story of how Steve Jobs co-founded Apple under similar circumstances, and returned from exile to reinvigorate his company around an unwavering commitment to consumer-focused design remains a defining element of Apple’s culture.
Like the Apple narrative, these stories often revolve around a crisis as a defining moment during which an organization’s values are established . In terms of our own national culture, think Valley Forge or Iwo Jima.
In the case of manufacturing companies, defining moments often result from a sudden market shift that threatens the business until all is saved. Ford’s ability to navigate the automotive market meltdown of the last decade while its main competitors faltered is already part of that company’s cultural narrative.
Similarly, in a recent featured article in the Manufacturing Leadership Journal, Cisco’s Angel Mendez and Ron Ricci note that Cisco CEO John Chambers says the company’s “culture that accepts change,” is a source of its competitive advantage. That culture, the authors say, was tested and defined in part by the dot.com bust more than a decade ago that shook the foundations of many technology suppliers, including Cisco.
These stories are effective at breathing life into organization cultures simply because they have the power to touch people and to remain in their minds and hearts. As author and speaker Geoffrey Moore says, “Stories are strange and wonderful things. We give them permission to take over our minds, much the way that software takes over a computer, to construct imagined experiences out of our personal data and feelings. It is hard to imagine a more intimate engagement. You would be very cautious about letting a person get this close, but you are quite willing to allow a song or a film or a story to do so.”
But, in order for these stories to work their magic, experts say, it is important that they be told often and told by organizational leaders. Fashioning and communicating these narratives, both inside and outside the organization, should be thought of as a CEO’s core responsibility. Because, let’s face it, no one else can tell your story as well as you.
Written by Jeff Moad
Jeff Moad is Research Director and Executive Editor with the Manufacturing Leadership Community. He also directs the Manufacturing Leadership Awards Program. Follow our LinkedIn Groups: Manufacturing Leadership Council and Manufacturing Leadership Summit
Thanks for that observation. Yes, I believe innovation is one of the outcomes of a vibrant corporate culture, and that it is one of the factors that accounts for the performance advantage of companies with strong cultures. Of course, other outcomes are enhanced also, such as accountability, execution, and customer service.