Recently a colleague sent me a copy of “The HOW Report: A Global, Empirical Analysis of How Governance, Culture, and Leadership Impact Performance,” by the LRN Corporation. As I read through the report I was delighted to see that their findings business culture were highly correlated with similar research I’ve been doing for the last 10 years, and also dismayed to see that so few companies were embracing these critical ideas.
Although I still do a fair amount of Fortune 500 work, for the last five years or so I have focused intensely on bringing the best ideas, tools and strategies to small and medium-size businesses in an effort to help them build and sustain success. What I have learned in working with literally thousands of businesses around the world is that: Culture = Cash. Organizations that can find, grow and keep top talent and then engage that talent to go out and take fantastic care of their customers will be the winners in the future. Here’s how they stated it in the report…
“CEOs increasingly are coming to believe that the traditional ingredients of success, such as a supportive board of directors, a strong executive team, clearly articulated corporate strategies, thoughtful resource allocations, differentiated product or service portfolios, elaborate control processes, and highly refined incentive structures, are no longer sufficient.
Of particular importance is the role of trust, company purpose, and core values as they harmonize with leadership and governance systems to help define unique corporate cultures.
In short, culture as a conscious, deliberate, long-term strategy can be the key to sustainable differentiation and success for companies in the 21st century. Companies and leaders who pioneer and forge ahead on a genuine journey of governance, culture, and leadership are the ones who will be around in the 22nd century.”
This research report postulates that an organization builds the foundation for sustainable success on a system of governance, culture, and leadership based on a clear set of fundamental values, fostering trust both inside and outside the organization, and embracing and pursuing a corporate mission that is rooted in a higher, enduring purpose, not simply here-and-now success.
The researchers labeled the management style of companies that met the above criteria as high in “Self-Governance.” These were businesses where the employees were proactive, with high levels of both personal and mutual accountability and were engaged and satisfied…exactly what I have been focused on when working with my clients. However the number of companies that actually met these criteria in this research study were shockingly low, which unfortunately mirrors what I see in the marketplace all too often.
Directly from the report…
Sample size = 36,280 employees / 18 countries
Blind Obedience = 43% of respondents
Organizations characterized by command and control, top-down leadership, and coercion. Blind Obedience organizations rely on rules and policing, are transactional, and focus on short-term objectives — there is little focus on building enduring relationships in the workplace, the marketplace, or society.
Informed Acquiescence = 54% of respondents
Organizations that reflect 20th century good management practices like hierarchy, structure, and control processes. Employees follow the rules, policies, and procedures established by what they believe to be a skilled management team. Managers rely on performance-based rewards and punishments to motivate people. Long-term goals are important but often give way to considerations of short-term success.
Self-Governance = only 3% of respondents
Organizations that are primarily values-based. The organization’s purpose and values inform decision making and guide all employee and company behavior. In short, people act on the basis of a set of core principles and values that inspires everyone to align around a company’s mission, purpose, and definition of significance. Employees at all levels strive to be leaders, and the company is focused on its long-term legacy and endurance.
On the other hand, highly engaged employees deliver…
There were four major findings from the study that rose to the top:
1. Self-Governance is rare across the world. Only 3% of the 36,280 employees in this study observe high levels of self-governing behavior within their organizations — the extremely low rate of Self-Governance is consistent across every demographic category, including country, industry, economic environment, language, and ethnic culture.
2. Self-governing organizations in all 18 countries in this study outperform other types of organizations across every important performance outcome, including: higher levels of innovation, employee loyalty, and customer satisfaction; lower levels of misconduct; and superior overall financial performance.
3. There is a marked disconnect between the C-suite and the employees they lead. On average, the C-suite is three times — and in some countries up to eight times — more likely to observe their organizations as self-governing, more inspiring, and less coercive as compared to the overall employee population.
4. Trust, shared values, and a deep understanding of and commitment to a purpose-inspired mission are the three fundamental enablers of the self-governing behaviors that produce competitive advantage and superior business performance.
So why is this important to your organization? Here is what I’ve been jumping up and down about for years in trying to help organizations understand that there is a ton of money on the table around creating a winning culture…
“Statistically, our research shows that employees who experience a high trust environment are 22 times more likely to be willing to take risks that could benefit the company. Employees functioning in an organization of high trust are 8 times more likely to report higher levels of innovation relative to their competition. And finally, employees functioning in a culture of high trust, risk-taking, and innovation are 6 times more likely to report elevated levels of financial performance compared to the competition.”
For more than a decade I have been deploying my “Organizational Effectiveness Audit,” a 28-question survey I use to assess the health of an organization and here is what I can tell you with 100% confidence:
Most businesses, as reflected in HOW Report, have a massive opportunity to improve the culture of their organization and thereby significantly impact their financial success.
Here is a quick checklist of what I have developed as the key elements of winning culture, take a minute to score your organization on a scale of 1 to 10 – with 10 being “this describes our company perfectly.”
Elements of a Winning Culture
1. People enjoy the work they do and the people they work with.
2. People take pride in the work they do and the company they work for.
3. There are high levels of engagement, connection, camaraderie and a community of caring.
4. There is a culture of fairness, respect, trust, inclusiveness and teamwork.
5. The leaders live the values and communicate a clear vision and strategy for growth.
6. Lots of open, honest, robust and transparent communication across the entire organization.
7. The company invests back in employees; there is a commitment to learning & development.
8. There is a bias for action, employees have an ownership mentality and strive to give their personal best.
9. There is high accountability and a strong focus on delivering the desired results.
10. There is ample recognition and rewards and mediocrity is not tolerated.
** It would be my advice that anyplace you score a 7 or below would be an area to focus on for improvement, any score below a five should be considered an area of concern, and where you score a 3 or below should be considered an emergency.
If you were not particularly happy with scores you just got on my winning culture audit, let me recommend a few superb books that are the best I have ever read on how to build a great culture.
Here is a link to where you can download the HOW Report: http://pages.lrn.com/how-report
Although it is about 50 pages long it does have some truly interesting and important findings and is definitely worth taking a few minutes to read. Also, if you know of any organization that might need some assistance in improving their culture please do not hesitate to send them my name and contact information, this is an area that my firm is strongly focused on and we are dedicated to helping businesses of every size become great places to work with highly engaged employees that deliver strong financial returns.
I hope you found this information helpful, I wish you every possible happiness and success.
Take good care – John