CULTURE has become one of the most important business topic. CEOs and HR leaders now recognize that culture drives people’s behavior, innovation, and customer service: 82 percent of survey respondents believe that “culture is a potential competitive advantage.” Knowing that leadership behavior and reward systems directly impact organizational performance, customer service, employee engagement, and retention, leading companies are using data and behavioral information to manage and influence their culture.
Culture describes “the way things work around here.” Specifically, it includes the values, beliefs, behaviors, artifacts, and reward systems that influence people’s behavior on a day-to-day basis. It is driven by top leadership and becomes deeply embedded in the company through a myriad of processes, reward systems, and behaviors. Culture includes all the behaviors that may or may not improve business performance. Today, culture is a CEO-level issue and something that can be measured and improved to drive strategy.
Engagement, in contrast, describes “how people feel about the way things work around here.” It is a way of describing employees’ level of commitment to the company and to their work. According to our model, engagement encompasses five broad areas: meaningful work and jobs, management practices and behaviors, the work environment, opportunities for development and growth, and trust in leadership. When engagement is poor, employees feel uneasy or uncommitted, resulting in high turnover, low performance, and low levels of innovation and customer service. New tools are enabling companies to monitor engagement on a detailed, real-time basis, delivering specific, actionable information to continuously improve the work environment.
The two are connected. When a company’s culture is clearly aligned with business strategy, it attracts people who feel comfortable in it, which in turn should produce a high level of engagement. Conversely, programs to improve engagement often discover cultural issues, forcing the company and its leadership to question and change its values, incentives, programs, and structure. Both culture and engagement require CEO-level commitment and strong support from HR to understand, measure, and improve.
Culture brings together the implicit and explicit reward systems that define how an organization works in practice, no matter what an organizational chart, business strategy, or corporate mission statement may say. A staggering number of companies—over 50 percent in this year’s survey—are currently attempting to change their culture in response to shifting talent markets and increased competition.
In an era in which bad news travels instantaneously and an organization’s culture is both transparent and directly tied to its employment brand, great companies consciously cultivate and manage their culture, turning it into a competitive advantage in the marketplace. Have you ever wondered why certain companies hire great engineers, deliver seemingly endless innovations, and generate consistent growth, while others always seem to be reinventing themselves? A large part of the answer, in one word, is culture.
The importance of culture is readily apparent when things go wrong. When two large companies merged last year, for example, it became clear that one company had a culture of “low cost” while the other had a culture of “quality service.” Employees received mixed signals for months until the new management team took the time to carefully diagnose and redefine many business processes throughout the company.
Given the importance of culture and the consequences of cultural issues, many companies are proactively defining culture and issuing culture “manifestos.” The Netflix culture presentation, often used as an example, has been downloaded more than 12 million times since 2009. The presentation clearly describes a culture that combines high expectations with an engaging employee experience: Generous corporate perks such as unlimited vacation, flexible work schedules, and limited supervision balance a strong focus on results with freedom and appreciation for the expected achievement.
The financial services industry, still restoring its brand after the 2008 financial crisis, is sharply focused on culture. One organization is using a variety of initiatives to help employees understand “how the bank does business,” including offering speaker series on topics such as compensation packages, customer satisfaction, and maintaining regulatory standards. Citigroup has an entire committee focused on ethics and culture and has implemented a series of web-based videos detailing real workplace ethical dilemmas. Bank of America is focusing its corporate culture transformation on encouraging employees to report and escalate issues or concerns, as well as incorporating a risk “boot camp” into their current training. Wells Fargo is increasing its efforts to gather employee survey feedback to understand current trends and potential areas of weakness in its culture.
A new industry of culture assessment tools has emerged, enabling companies to diagnose their culture using a variety of well-established models. Yet despite the prevalence of these tools, fewer than 12 percent of companies believe they truly understand their culture. That’s where HR can help. As businesses try to understand and improve their culture, HR’s role is to improve the ability to curate and shape culture actively. An organization’s capabilities to understand and pull the levers of culture change can be refined and strengthened. HR has a natural role to play in both efforts.
As operations become more distributed and move to a structure of “networks of teams,” culture serves to bind people together and helps people communicate and collaborate. When managed well, culture can drive execution and ensure business consistency around the world. HR has an opportunity to assume the role of champion, monitor, and communicator of culture across, and even outside, the organization. Once culture is clearly described, it defines who the company hires, who gets promoted, and what behaviors will be rewarded with compensation or promotion.