“Culture Eats Strategy for Breakfast” – Peter Drucker, Part 2

 

We have many years of experience working with companies and leading the effort to change corporate cultures.

Over the years, we have learned that there is a direct correlation between the culture of a company and its operating performance and related profitability.

Our experience confirms the well known theory that positive corporate cultures are an integral part of improving performance of a company.

In fact, a Deloitte research study, reveals that 94% of executives and 88% of employees believe a distinct corporate culture is important to a business’ success.

Deloitte’s survey also found that there is a strong correlation between employees who claim to feel happy and valued at work and those who say their company has a strong culture.

 

SOME IMPRESSIVE METRICS …

Research conducted by Queen’s University in Ontario, Canada, shows that companies with an engaged culture experience a number of positive attributes including: a 65% increase in share-price, 26% less employee turnover, 100% more unsolicited employment applications, 20% less absenteeism, 15% greater employee productivity and 30% greater customer satisfaction levels.

While the research confirms our experience, it’s helpful to review several real-world cases where we have managed a change in corporate culture.

 

REAL WORLD CASES …

In one situation, we were asked to step into the CEO role of a company that lacked leadership. The former CEO was a very inexperienced leader and managed by committee.

The strongest personality of the group made most of the decisions solely based on what was good for that individual.

The individual had a dominant personality and demanded that the company’s personnel spend time on his projects, regardless of the impact on managers in other areas of the company.

He browbeat any employee that did not meet his ever-changing demands. A culture of fear was dominant throughout the company.

Given that the dominant individual produced a significant portion of the company’s revenue, there was fear of confronting the individual as he might leave the company and as a result, revenue would decline.

 

OUR TASK WAS TO …

Our task was to address the issues and make the necessary changes to improve culture and the profitability of the company.

As part of this process, we addressed the culture issue head on, outlined our expectations and created a culture of accountability with the management team and the company.

During the first few months of our tenure, we worked with the management team and employees to set objectives, reinforce positive behavior and continued to address situations where negative behavior was observed.

As part of that process, the dominant individual was terminated based on continued negative behavior.

This event was the confirmation that employees needed to really understand that the culture had changed.

The company is now running much more smoothly, is on the way to improved profitability, and has attracted a number of highly qualified new employees that are integral to its growth strategy.

 

A DIFFERENT SITUATION …

In a different situation, we were asked to step into the CEO role of a large international company that had experienced several years of profit decline.

The company was managed by a group of individuals with no designated leader. The group was responsible for making day to day operating decisions, however they were only made by committee.

In other words, if the group could not reach a consensus, a decision was kicked down the road. As a result, it was difficult to makes changes to the business, since no one could completely agree on what needed to be done.

The decisions that were made, were driven by individuals that lacked perspective of what impact they might have on the entire company.

The end result of this process was that important changes were never made, and the company’s fragmented management approach was driven down to all levels of the company.

 

AGAIN, OUR TASK WAS TO …

Again, our task was to change the culture of the company in a manner that would bring unity and improve profitability.

Upon taking the leadership role, we quickly assessed the strengths and weaknesses of the company, outlined and communicated a clear set of objectives and timeline throughout the company.

A new compensation program was established to reward managers in every area of the company, if the company as a whole achieved its objectives. During the process we met frequently with each area of the company reinforcing the objectives and assessing progress.

A major cultural change was working with managers below the executive ranks and reinforcing the fact that we wanted the company to work together to change the culture and to accomplish its objectives.

The final result was that the objectives were accomplished earlier than was expected, the company significantly improved profitability and the management team, for the first time, received bonuses for their contribution to the effort.

 

CRITICAL STEPS …

Changing the culture of a company is hard work. In many cases a disruptive culture had been in place for a long time.

Clearly communicating the changes that must be made, involving the entire company as part of the process, and rewarding the group when objectives are accomplished, are critical parts of the process.

There are many examples where corporate cultures have been changed, however, there are many more examples where companies have not successfully addressed these issues.

In those situations, the company puts their existence at risk, not only for the employees, but also for the shareholders and/or family members who have a significant share of their wealth invested in the company.

 

Revitalization Partners specializes in improving the operational and financial results of companies and providing hands-on expertise in virtually every circumstance, with a focus on small and mid-market organizations. Whether your requirement is Interim Management, a Business Assessment, Revitalization and Reengineering or Receivership/Bankruptcy Support, we focus on giving you the best resolution in the fastest time with the highest possible return.