The culture of a company can make or break its fortunes, and it comes from the top down, writes Gareth Naughton in the SBP 20th January 2013
Though it was once an abstract concept that bore little relation to how a company operated, corporate culture is becoming increasingly important as organisations work their employees harder and deal with the growing dominance of Generation Y. Minds have been focused in this area by the experience of the last few years. When push came to shove, the corporate cultures of many institutions – particularly those in the banking arena – were found seriously wanting, according to Michael McDonnell, managing director of CIPD Ireland.
‘‘There is a realisation that small groups of executives – and the banks are a really good example of this – can effectively hijack an organisation for their own personal gain and greed, and destroy it. That is something that we have seen in Ireland and Britain,’’ said McDonnell.
This tendency could also lead to the emergence of what McDonnell called a ‘‘toxic brand’’ – such as FAS in the public sector.
‘‘That brand became so toxic that it effectively had to be eliminated. We are seeing it now in the BBC with the Jimmy Savile scandal. In all those cases, people are asking, ‘How did this happen? How were we so stupid?’ ’’ he said. The problem is that there was a gap between the rhetoric and the reality. You can define a corporate culture by writing value and mission statements but, unless you follow through, they are essentially useless. McDonnell said that organisations needed people, particularly in HR, to stand up and challenge the corporate culture when they saw something going awry.
‘‘The rhetoric says that ‘We don’t want yes-people in our organisation, we want people with the courage to challenge’. The reality in most organisations is that people who challenge are dismissed as oddballs, cranks and not team players,’’ he said.
‘‘The part of business that is probably in the best position to do that challenging is HR, but it has often been uncertain in its role so it has gone along with it. It didn’t want to be seen as a soft, fluffy part of the business. It tended to stay quiet.’’
The organisations which establish successful corporate cultures tend to feature chief executives and heads of HR who have a good relationship, where they are able to discuss issues arising without the latter feeling like a lone voice. HR should act as a guardian of corporate culture, and continually demonstrate why it is a good idea for companies to take an active interest in its development.
‘‘One of our difficulties in HR is that, to a large degree, ours is a qualitative profession in a quantitative environment,’’ said McDonnell. ‘‘By that, I mean we look at things like training. It is very hard to say, in total terms, that if you invest in a management development programme, it will create the following amount of wealth for you. ‘‘Business is measured by bottom-line results, so what we need to do is develop more analytical frameworks and quantitative evidence of the effectiveness of HR.’’
Lead by example
The culture of every organisation is defined by its people, but it’s the man or woman at the top who exerts the most influence. If your chief executive is a tyrant, that is going to filter down through the rest of the organisation and have a detrimental effect on the working environment, with consequences in terms of employee engagement, attraction and retention. How the business leaders in your organisation interact with the rest of the employees has a significant impact, according to Adrienne Davitt, senior corporate psychologist and managing director of Davitt Corporate Partners.
‘‘A lot of business leaders forget how visible they are because they are busy thinking of things at a higher level – but when they walk through an organisation, the energy they put out, the way they connect to people and whether they communicate at all are very important,’’ she said.
Davitt believes that, from the moment you walk into a place, you can sense its culture. This can be ingrained, which is why it is important that leaders are conscious of it.
‘‘Culture is developed by people at the top of an organisation, and those people can change over time, but what often doesn’t change is the culture. Any group of leaders has a responsibility to make sure that the culture of the organisation they are leading is the best place for people to work in and be as productive as they can be,’’ she said.
The economic difficulties of the last few years have had a transformative effect on the Irish
workplace, with companies leaner than ever before. This presents both an opportunity and a challenge, according to Davitt. Companies now have the chance to redefine their culture having survived the downturn; the challenge is to recognise how important it is to do that, rather than bury their heads in the sand.
‘‘It is the future of work,’’ said Davitt. ‘‘Organisations have changed because they had to – but now, in order to grow, develop and be successful, they need to take control over that change process so it is not imposed on them. The culture that you want to have in five years’ time is the one that you are putting in place now.
‘‘It doesn’t happen by osmosis or default. It only takes about 10 per cent of a leader’s time and energy to constantly focus on this, but the return on that is 30 to 40 per cent.’’ Davitt cited clothing retailer H&M as an example of a company that has reaped the benefits of focusing on corporate culture.
‘‘They are bigger than people realise, and they have an amazing culture,’’ she said. ‘‘They have it because they created it, and they sustained it regardless of what happens in the world markets.
‘‘Typically, people start with them on the shop floor and they move up. When you connect with people like that who have very strong fundamental values, and share those throughout the group and really live those values, then you have a very successful business,’’ she said.
The bottom line
This doesn’t just make sense from an employee’s perspective. There was solid evidence that companies who built high trust corporate cultures did better than those who failed to make any headway in this area, said John Ryan, chief executive of Great Place to Work.
‘‘There was a ten-year study done in the US where they did a comparison of the Standard and Poor’s 500 and Russell 3000 against the Fortune 100 list of best companies, and the Fortune 100 had three times the performance level,’’ said Ryan.
‘‘This is research-based – it is not just nice to have. That is why organisations are saying, ‘Hang on a second – maybe we should look at this stuff, it seems to be essential’. It is about building a competitive advantage, and there are certain organisations that have realised that culture can be that advantage for them.’’
The critical change has been in the demographics, according to Ryan, with workplaces in Ireland currently featuring five generations for the first time.
Diversity is no longer about integrating different nationalities. It is about working out how to get the baby boomers working with Generation Y to maximise potential. The impact of Generation Y cannot be underestimated. To some extent, it is this group that is really driving the move towards a more open and collaborative corporate culture.
‘‘Generation Y is the type of people who absolutely demand transparency. They are not interested
in being told what to do, like the people of the past who would have kept their head down and done the job, taking the lead from above and doing what they were told,’’ said Ryan.
‘‘The new people coming into the workplace – and these are critically important, talented people that organisations need to bring on board and keep – are not willing to accept that.
‘‘They want full information about what the organisation is about. They want to be included in devising the strategy of the organisation so they are not simply listening to the senior team; they want their say in how to create it.
‘‘They constantly want to be able to put their views forward, and they need them to be listened to.
‘‘They are not interested in staying around organisations that don’t have really strong corporate social responsibility, and they are also committed to sustainability so organisations have had to change dramatically,’’ he said.
Ryan said that organisations were increasingly finding that the new generation of workers were less attracted by money than company culture. Where the culture is not right, it is costing money.
‘‘If you are in a really competitive area, like the IT sector, where one new innovation can make or break a company, you know that you have to attract the brightest and the best,’’ he said. ‘‘If you think that it is all about money, you are making a mistake. Some companies are paying higher levels because they had to. Their culture is not strong, and they are trying to make up for it by paying more money, but the individual s are making lifestyle choices in terms of how and where they can work.
‘‘Can they take sabbaticals? What is the culture like? Is it a fun place to work, or is it dreary? “They want this place to be inspiring for them, and they are willing to take less money for a better culture.’’