Organizational Culture-by-Default is Costing 4-17% of Available Profits!

Culture U winning gold

As the strategic planning consultant to the National Wrestling Hall of Fame I get some inside looks at the high performance culture of the sports world.  A couple years ago I was sitting next to a very sweaty and happy Chris Perry, who minutes earlier had won an NCAA championship title.  I asked Chris when he started wrestling and he said in 4th grade.  It takes that kind of proactive plan to become a NCAA Champion.  His dad was sitting behind us weeping tears of joy and relief having invested heavily in the sustainable approach to success over the past 12-15 years.

I think Rich Bender (head of USA Olympic wrestling) is weeping tears of another kind.  The sport has been mostly reactive over the years.  They thought by default they would always be in the Olympics until the IOC voted them out.  The sport was fortunately reinstated after frantic action by FILA to “revamp the organization and reshape the sport to save its Olympic status.”  The default/reactive approach resulted in the unthinkable, whereas Perry’s proactive approach has resulted in the mostly unachievable.

Are you winning?
I ask organizations all the time “are you winning?”  Most of the time, when being honest, they answer they are doing fine, but less than a triumphant “YES, WE ARE WINNING!”  In fact, many show evidence that they have more problems than wins on the horizon.  With the coming talent shortage as baby boomers exit, with the technology challenge, with the ever-growing global marketplace all squeezing in…we find more and more are losing.

With Human Capital historically getting blamed by CEO’s as being an area where initiatives come in “over budget, after deadline, and we still don’t know if it workswe have failed to effectively maximize our greatest asset.

The TEN PERCENTERS
Often leaders have felt the Human Capital side was the “soft” side and you can’t measure it, so it was put in reactive mode.  But what if your CEO could get 4%-17% more profit without investing any significant money, no new equipment or technology, just by proactively measuring and working on something already existing within the organization (HCI Research Study Data)…wouldn’t the board demand they get right on it?  What CEO would not get moving on that?

The answer is shocking.  Our work with organizations on Accountable Culture Management tells us that only about 10% of leadership teams really will work on organizational culture proactively.  We call them TEN PERCENTERS.  Most organizations are taking a “Culture By Default” approach and leaving massive productivity and profit gains on the table for their competitors.  Similar to the world of Olympic wrestling, they don’t believe there is anything more they need to do regarding organizational culture in order to continue to “win” in their industry.

Culture by Design
The day of reconciliation for this is coming.  More and more organizations are attacking proactively with a “Culture by Design!” approach.  Companies like Nike are already doing it, as VP Joann Russell told us, “At Nike, a specific imperative we use is framing culture as an offense…We want to build strategic engagement, and we use culture as a driver and generator for that kind of growth.”  Even small companies like Area Ambulance with 68 employees have used Organizational Culture as the foundation for tripling revenue according to CEO Keith Rippy.

As Kent Thiry, CEO of DaVita said, “If you track productivity and new product development and sales, why would you NOT bring this same management process rigor to your culture?”  quoteBut of course this is only if you want to make more money, achieve higher performance.  If you are already rich and happy then your organization can rest while your competitors get their culture advantage figured out.  However, if you are interested in 17% higher net margins, better Mondays, and want to become a TEN PERCENTER then take the CEO Culture Quiz.

The CEO Culture Quiz

  1. How is your culture impacting financial performance?
  2. What’s your culture advantage you have or must create in order to differentiate your brand promise?
  3. What’s the sustainable approach, process, and measurement you will use to leverage that advantage?

If you are uncomfortable with your answers above then there are proven actions you can take to have a better answer this time next year. We know culture can be taken from the red zone to solid gold performance because we’ve done it many times. If you want to take action to get your culture onto the medal podium then focus on these 4 steps:

  • Define the Culture Vision:  Leadership teams don’t do well working on culture for culture’s sake.  The Culture Vision needs to be linked to a business impact.  The executive leadership needs to set this direction right up front so the tail is not wagging the dog.  Culture Improvement Principle: Leaders DEFINE the culture.
  • Establish a Culture Team:  Having a cross-demographic representation on a team that digs into the scope and magnitude of constraints within the culture is key to identifying action plans that will actually improve the weak spots and leverage the existing cultural strengths.  Beware, you do NOT want to put people on this team who simply volunteer or who are “people- people” but rather create a criteria for selection which includes “limited resource mentality and objective critique mindset”.
  • Align:  Use the leadership driven culture vision to set the goal and then align the constraints identification and eventual action plans so the culture team and leadership team are working on the same culture priorities.  You can’t BOIL THE OCEAN so the teams need to start with a top focus and then work broader as they get more mature in their culture work.  It makes no sense to work on a premium branding approach or growth strategy when you can’t even get your people to meetings on time.  Do some Culture Measurement and Assessment and start with the priority and work out from there.
  • Manage:  Once the priority constraints are identified, then place it back into the hands of leadership for budget allocations if needed and ensure everybody in the entire organization has some of the “Culture Work” on their performance review.  Culture Improvement Principle: Everybody Owns the Culture because Everybody CREATES the Culture!

Once you work through the first round of improvement, you circle from Manage back to Define and KEEP MOVING FORWARD. It’s an iterative process, just like anything else.  Getting to a National Championship or Olympic Gold doesn’t happen with one initiative.  Creating a World Class Performance Culture is a PROCESS, not an EVENT!

Did you take the CEO Culture Quiz? Are you on target to becoming a TEN PERCENTER? How about the clients you coach…can you help them get to the medal podium using these 4 steps? I support you in this process and would appreciate learning about your progress. Please share your experience and comments below.

Obtain the HCI Research Study documenting the 4%-17% improved profit margin “Connecting Organizational Culture to Performance” at this link.

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Ted Garnett is president of PS Culture Matters, an organizational development consultancy and the co-author of the book Build the Culture Advantage and the producer of the video No Excuses. He developed the culture measurement software GAPM in 2006 and has been working to “Make Mondays Better” since 1999. He lives in the United States and has worked with all sizes of organizations in strategic planning, leadership development, high performance culture and executive coaching.

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