The CEO of the one of the most respected Indian companies recently shared with me that they were struggling with a problem that was having a direct adverse impact on their performance: The senior executives were not taking initiative and showing enough agility to respond to the fast changing market conditions. In other words, these executives were being sluggish and playing safe.
His company has a well-crafted mission, a set of value statements and also a clear strategy. Then what is preventing people from performing the way they should?
Two pillars of organizational performance: Strategy and culture
If an organization falls short of its desired performance objectives, usually there are two suspect candidates: strategy and culture. If you get your strategy right, then culture largely determines the final outcome.
Leaders know culture matters, but often ignore it because it is a seemingly soft, intangible issue. The truth is that culture largely determines the performance and is absolutely the key ingredient for high performance.
Zappos and culture-driven performance
Zappos.com, an online shoe and clothing company, epitomizes the true power of culture. Dealing with relatively low-tech products, this company has followed a simple but profound strategy: To align the entire organization around one core mission, which is “to provide the best customer service possible.”
And from this mission follows a set of 10 “Zappos Family Core Values.” The number 1 value is “Deliver WOW Through Service,” which they describe as:
“WOW is such a short, simple word, but it really encompasses a lot of things. To WOW, you must differentiate yourself, which means doing something a little unconventional and innovative. You must do something that's above and beyond what's expected.”
Zappos is a company where values are not just for display but they live by them with values driving all decisions, from hiring to employee well-being to customer service.
If one dissects Zappos’ strategy, it is having a clear mission, aligning values with mission and finally putting it all into action in the form of their unique culture. And this move has differentiated it from others in a highly competitive e-commerce market and paid off handsomely. The company’s turnover has been growing at a phenomenal rate, almost doubling between 2008 and 2011.
How does one achieve culture-driven performance like Zappos?
Creating new culture
Either an organization makes a deliberate choice to create a unique culture or its culture will be created in default mode by whatever dominant forces influence its decisions and the behavior of its people. Creating a new culture involves a process.
Step 1: Cultural audit
First, an organization needs to conduct a cultural audit to understand the existing culture. This audit should involve not only its employees but also other stakeholders, such as customers, suppliers and investors.
If such a diagnostic cultural audit is conducted at my CEO friend’s organization, it might reveal the chinks in their culture, which is causing the senior executives to play safe and be sluggish.
Step 2: Define values, cultural attributes and actionable behavior
Once you have a good understanding of your existing culture, there should be a vigorous debate at all levels within the organization to arrive at a set of values and cultural attributes that would drive the organizational performance to the desired level. At this stage, one needs to get three things right:
Values show what an organization values—as simple as that. These are the basic tenets, a framework of principles to conduct business without which an organization would go adrift.
Values are especially useful when organizations are confronted with tough choices around complex issues. For example, if sustainability is a key value then unsustainable products get excluded from the portfolio even though they may have great profit potential.
Organizations often go astray when they spend all the effort to choose values and craft value statements, but conclude their “cultural journey” pre-maturely there only. The power of right values can only be leveraged when an organization makes a determined effort to live up to its cherished values and that’s where comes the culture.
Culture is the real behavior within the broad framework of values in a day- to- day business sense. Culture is where the rubber meets the road. It directly affects customers, employees and other stakeholders, and determines the final outcome that the business is trying to achieve.
How does one connect culture, something fuzzy, with values, which are well defined? That’s where comes in “actionable behavior.”
Actionable behavior: Culture in action
Actionable behavior is culture in action. It is values and culture described in a manner that is actionable. Most companies assume that employees would understand the company culture by reading the value statements or by attending a short training session at the time of induction, but that’s far from enough. And as a result, you can find clear variance between the value statements of so many businesses and their actual culture.
Defining actionable behavior means taking a specific value and explaining it terms of day-to-day actions. For example, Zappos.com explain its no. 2 value, “Embrace and Drive Change” as follows:
“For some people, especially those who come from bigger companies, the constant change can be somewhat unsettling at first. If you are not prepared to deal with constant change, then you probably are not a good fit for the company.
We must all learn not only to not fear change, but to also embrace it enthusiastically, and perhaps even more importantly, to encourage and drive it. We must always plan for and be prepared for constant change.
Although change can and will come from all directions, it's important that most of the changes in the company are driven from the bottom up -- from the people who are on the front lines and closest to the customers and/or issues.
Never accept or be too comfortable with the status quo because, historically, the companies that get into trouble are the ones that aren't able to respond quickly enough and adapt to change.
We are ever evolving. If we want to continue to stay ahead of our competition, we must continually change and keep them guessing. They can copy our images, our shipping, and the overall look of our web site, but they cannot copy our people, our culture, or our service. As long as embracing constant change is a part of our culture, they will not be able to evolve as fast as we can.”
Most companies don’t define their values and culture in such actionable details and that’s what separates Zappos.com from the rest.
Step 3: Live the culture—top down
Having defined values, culture and actionable behavior, the leadership--CEO and the top managers--should demonstrate by example that they’re truly living the new values and culture.
People understand an idea best by seeing it in action. For instance, a project that might be of strategic importance but was stuck in endless analysis could be given green light, indicating a desire to chart out a new path. Once people observe the new values and culture in day-to-day working, “the new ways” start taking roots.
In conclusion, my CEO friend would immensely benefit by examining their existing culture and taking steps towards creating a new culture. New culture could infuse a whole lot of new energy into their business, ultimately translating into new actions and superior performance.