The Smell of the Place: How Culture Drives Performance

“Culture eats strategy for breakfast.”

Peter Drucker

People-focused companies are no longer idealistic. Why? Because they are certainly no compromise. In fact, happy employees outperform the competition by 20 percent. We are waking up from the dictatorial business and management theories of the late 20th century to embrace long-term company health that spans profit margins, innovation, workplace positivity and employee satisfaction. And it is paying off. Companies who create a healthy context and an authentic culture in which employees are encouraged to participate and thrive are more than often the leading performers. Google, Starbucks and CostCo to name a few.

Employers are realising culture’s potential with regards to performance and talent management. Job-seekers are considering it when searching for the right fit, with brands such as Comparably rating and scoring potential employers based on diversity, inclusion and company culture. Culture is mainstream and integral. But what is it?

It is not perks. Culture is not a pool table and an open bar on Fridays. Like performance, it can be intangible, elusive and messy. It is never one thing, but an ever-changing reality informed by the thoughts, emotions and attitudes of people. It demands time, empathy and a balance of listening and spontaneous response. It is no wonder leadership is drawn to the predictable, concrete world of strategy.

Culture is substantial, complex and multi-layered, inclusive of company philosophy, mission, vision, work environment, ethics, values and behaviour. It, inevitably, starts from the top and it must be codified, like strategy, by design.

The Smell of the Place

In an enduring speech at the World Economic Forum Sumantra Goshal, the late scholar, educator and thought-leader, described corporate environment and culture with a simple metaphor.

My home town is the city of Kolkata. So, every year I go to Kolkata, in the month of July …. Now Kolkata is a wonderful town in winter, autumn, spring, but summer, well the temperature is 102/103. The humidity is about 99% and I feel very tired. Most of my vacation I am tired, I am indoors.

I used to live in Fontainebleau, thus I genuinely challenge you: go to the forest of Fontainebleau in spring. Go with a firm desire to have a leisurely walk and you can’t. The moment you enter the forest there is something about the crispness of the air. There is something about the smell of the trees in the spring. You want to jump, you want to jog, and you’d want to catch a branch, you’d want to run, do something.  And that I believe is the essence of the problem. 

Most companies, particularly large companies, have created downtown Kolkata in summer inside themselves. And then they complain and say that you are lazy and don’t take initiative and you don’t co-operate, you are not changing the company. The issue is not about changing me. I have a lot of energy in spring in Fontainebleau and I am a bit tired, in summer in Kolkata, and that’s the issue. To change, ultimately be it on all these abstractions, of strategy, of organisation, of processes. At the end, the issue is, how do we change the context, how do we create Fontainebleau forest inside companies?

Goshal gets to the heart of it. How do you want people to feel? How do you want people to walk into work every morning, and how do you want them to feel walking out at the end of a day? Traditional management creates an environment of constraint, compliance, control and contract, only to blame everyone and everything but the domineering and oppressive context. Not conducive to anyone doing their best work.

Goshal suggests that there is an alternative to what traditional management practices has created. He invites us to revitalise our organisations by introducing an alternative context. One of:

Stretch > Constraint

Encourage individuals to do more, rather than less, working within an intriguing set of values that make sense.

Discipline > Compliance

Treat individuals as full-formed adults, responsible for their own self-discipline.

Support > Control

Decentralise the leadership, and rely on teamwork, resources and guidance rather than hierarchy.

Trust > Contract

Inspire work fuelled by purpose, loyalty and a feeling of safety, instead of obligation.

What happens when leaders create an alternative context that facilitates employees’ autonomy and creativity? Take Bob Chapman, who worked for a company called Barry Wehmiller. After losing 30% of their orders due to the recession, the company needed to save $10 million. Layoffs were discussed. But Bob refused; no one was going to be laid off. Instead, the company implemented a furlough programme; each employee was required to take four weeks of unpaid leave.

While even the mention of layoffs would have created a climate of fear, suspicion, and rivalry, Bob declared the furlough strategy in the interests of the group as a whole, replacing threat with trust and cooperation. The results were remarkable. The company saved $20 million, and those who could afford to take more leave traded with those who could not. Employees chose to look after each other; just as leadership had looked after them.

The bottom line is, if you take care of your employees, your employees will take care of your customers and your customers will take care of the numbers your shareholders want to see. Allowing your employees to shape your brand means you have that many more people who are as interested in building your business as you are, and not because they’re getting paid to, but because it makes sense and feels good. If honest, aspiring and understood, culture will build a company bigger than you could ever hope it to be.

A positive: Culture is not confined to industry. While every business is unique it all begins with framing a compelling why. Whether you are a youthful sunglass brand or a megalith banking institution the remarkable will manifest when people understand their purpose and their contribution, driven to freely pursue their desires to create, progress and nurture one another. You start to create that Fontainebleau smell, that exuberant buoyancy to propels customers, employees and leaders to be exceptional together.

Your company culture already exists. It is not something you choose to have. Does it smell like Kolkata in summer? Or Fontainebleau in spring? A culture left to chance is a wasted opportunity to harness a powerful performance differentiator and to offer your people the chance to transform the lives around them. The possibility of a healthy culture is limited only by an inspiring vision and your belief in creating a better workplace, for better performance with better possibilities.

By TPA
November 28, 2018

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