C-Suite Take Note: Culture Matters (and What to Do if Yours Sucks)

“Businesses often forget about the culture, and ultimately, they suffer for it because you can’t deliver good service from unhappy employees.”

—Tony Hsieh, founder of Zappos

Does culture really matter?

Can retaining and engaging employees through your culture really have an impact on the bottom line? According to a major study of Fortune 500 companies cosponsored by Crawford International and HR.com, companies with an adaptive culture in line with business objectives financially outperform their competitors by as much as 200%. A 2009 Bloomberg Businessweek article titled “Employee Engagement: What It Is and Why You Need It” also pointed out that engagement can have a tangible impact on profit, reporting that “companies with engaged employees boosted operating income by 19% compared to companies with the lowest percentage of engaged employees, which saw operating income fall 33%.”

One well-known case study illustrates the power of employee engagement: the decline of Starbucks a few years ago, followed by its recent resurgence. Howard Shultz stepped down from the helm of Starbucks in 2000 but returned as CEO in 2008 to revive the faltering company; during his absence, revenues and stock prices fell precipitously. In his 2011 book, Onward: How Starbucks Fought for Its Life Without Losing Its Soul, he writes that after his departure, the company strayed from its original values and mission by adopting a business strategy that emphasized expansion at all costs. Upon his return, he led a massive turnaround effort that put the focus back on people—customers and (notably) employees—and in 2013 yielded a 30% climb in earnings and a stock price up nearly 46%. He offered this explanation for the company’s new success: “Treating people with respect and valuing them is a universal language. Culture trumps strategy.”

What is “company culture”?

Creating a great company culture is just as challenging as defining what “company culture” means. In short, it’s the “personality” of the company—the values, beliefs, and behaviors that are exhibited and shared by the majority of the company’s employees. Note that it’s not a fancy motto plastered on the wall or an inspirational quote handed to employees on a laminated card. Company culture is essentially about the beliefs employees share regarding their worth to the company, how things “really” get accomplished, and what the company values when awarding promotions and other advancement opportunities.

Where do we start?

“You have to be a place that’s more than a paycheck for people.”

— Richard Federico, chairman and CEO of P.F. Chang’s

Corporate culture starts at the senior-most levels of an organization. After all, how the C-suite values and rewards its direct reports trickles down to the remaining employees. So if your CEO exhibits “blame” or “finger-pointing” tendencies, chances are his or her direct reports will follow suit. This means that changing existing culture can be challenging if destructive personalities are at the helm or peppered throughout the C-suite.

CEOs and other senior leaders who want to capitalize on the benefits of having a positive culture should follow this three-step process for change:

1. Assess the current culture. (For example, is the company slow and methodical to make decisions?)
2. Determine the desired company culture. (Does the company want to become fast and nimble to market?)
3. Align rewards and behaviors with the new culture. (Don’t be afraid to take chances! Take a cue here from the design firm IDEO, whose philosophy is “Fail often to succeed sooner.”)

If you’re unsure of what your culture presently stands for, conduct an anonymous survey to gauge current challenges at the company and identify what employees value most. This information can help your company choose its next steps toward a more positive culture (or whatever culture you’re trying to achieve). Focus groups are another great way to assess employee priorities, though for these to be effective your environment must allow open and honest communication without the threat of retaliation.

How can culture help attract and retain employees?

With more companies relying on referrals for new hires, having a positive culture will help you not only retain employees, but also hire people more likely to succeed in your organization. So before turning your attention to attracting new talent, you must first recognize that establishing a cultural advantage starts from inside: with your current employees.

These practices help build company values that resonate with employees and can help create a positive culture:

• Make every job important at the company. Sales may be seen as the sexy side of the business. But if a customer walks into a trashed bathroom at your office, at that moment the janitor’s job is just as important as a salesperson’s (and perhaps even more so) in shaping perceptions of your company.
• Allow real two-way communication. To feel like they’re part of a company’s mission, employees need to have a voice in its success, not just listening skills.
• Make it okay to fail. Great companies encourage entrepreneurial exploration while learning lessons from what doesn’t work. Being afraid to fail limits possibilities.
• Quell office politics at the highest levels. Nothing screams “avoid this company” like politics run amok, especially when the nastiness is in the C-suite.
• Require managers to manage. Employees don’t leave companies—they leave bosses. Offer training or mentoring to managers who need improvement and get rid of those who don’t improve.
• Create an individual learning and development plan for each employee. A 2012 Deloitte Consulting study called “Talent 2020: Surveying the Talent Paradox from the Employee Perspective” examined several of the main reasons why employees move to new companies: 42% leave their old positions because of limited opportunities to develop their skills, 27% cite insufficient career progress in their old jobs, and 21% point to “lack of challenge.”

Make these strategies the baseline for your corporate culture doctrine. Without them, even fantastic perks or great pay will stale over time, because nothing will be keeping employees engaged. After you’ve established your foundation, then it’s time to have some fun with a few off-the-wall ideas for building a cool corporate culture:

• Offer a career coach to all employees. Help everyone figure out his or her passion in life!
• Have the CEO and his or her direct reports lead company-driven volunteer efforts themselves. Whether it’s serving in a soup kitchen or planting a tree, whatever the charitable contribution your company supports, nothing says “we value volunteering” more than having the CEO lead the way.
• Allow job shadowing at all levels. Encourage employees to “live a day in the life” to gain valuable insight into how they, too, can achieve success at your company.
• Have all managers conduct “stay interviews” with current staff. These help leadership ascertain why employees stay—and what will keep them around for the foreseeable future.
• Offer real transparency in company operations. Have the CFO or CEO conduct financial training that uses your company’s books as the model.
• Spread the perks around. Give tickets to company events or company-sponsored tables to employees who aren’t the usual suspects (e.g., sales and marketing) for this sort of benefit.
• Encourage engagement and curiosity. Create a contest that rewards employees who ask the C-suite the most challenging questions, then answer them at a town hall gathering or online.

Can we do this?

In a word: yes! Changing corporate culture is no easy task. This challenge requires long-term commitment and can’t be accomplished overnight. Although offering perks can yield positive results for the organization, these benefits are often short-lived because employees ultimately want to be challenged and—more importantly—treated as valued members of the team. Recruit your senior executives to lead the charge in transforming your culture and engaging the workforce. Who knows what great things you can accomplish!