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Cultural Revolution

Cultural Revolution

Dennis Erdle lies stiffly in the red dirt. Sweat trickles across the furrows in his mud-streaked brow as the vice president of global services and vertical markets at Great Plains, a software company based in Fargo, North Dakota, braces his weight against the struggling calf. He holds its legs down while Tim Eichorst, vice president of global sales, rolls a glowing iron in the nearby blaze. As Vice President of Human Resources Mike Slette practices the proper way to hold a syringe, Lynne Stockstad, director of global marketing, swings a rope menacingly at other animals trotting by. Chairman and CEO Doug Burgum, who knows his way around a ranch, holds forth on the nuances of cattle branding, clearly relishing his role as urban cowboy.

Cattle branding might not figure prominently on the agendas of most executive offsite strategy meetings, but for senior managers from Great Plains, participating in ranch activities at The Rivery in Linton, North Dakota, did more than provide a welcome escape from stuffy conference room discussions. It also reinforced a corporate culture that is heavily influenced by the geography of the company's North Dakota home and the pioneering spirit of the region's early settlers. The company bills its annual strategy session with its business partners as a stampede and puts its employees through team-building events such as rodeos, ropes courses and fence mending. The management at Great Plains believes that participating in such activities strengthens working relationships and fosters camaraderie among employees. Erdle characterises the cattle branding exercise as a learning experience. Since very few of the executives have backgrounds as ranch hands, they are finding out about the process and each other at the same time. "You learn how to work together without judging," says Erdle.

Great Plains and companies like The Home Depot Inc. and Wal-Mart Stores Inc. represent an elite class of corporations that place a premium on the behaviours, feelings, experiences and working environment of their employees.

Though it's not unique for a company to want satisfied and engaged workers, these companies believe that their corporate culture yields tangible bottom-line results. Indeed, at Great Plains, focusing attention on the culture has paid off by helping to keep employee turnover to just 6.2 percent in 1997 compared with about 20 percent in the software industry at large. This saves money on recruitment and training and also helps preserve the company's valuable intellectual capital. "One of the biggest costs to an employer is recruitment and development," says Jodi Uecker-Rust, executive vice president at Great Plains. "We are gaining more knowledge because we are retaining more people."Being known as one of the best companies to work for is a great public relations and human resources tool. But attention-grabbing top 100 lists aside, intense efforts go into making these cultures work. The question for companies considering culture-building initiatives is whether their benefits justify the resources required to support them.

The Loyalty Factor

Like a tax cut in an election year, improving the work environment scores lots of popularity points. Take-home meals, onsite childcare and elaborate fitness centres are just a few of the perks companies offer to foster an employee-friendly culture. Benefits should not be confused with culture, however, and many companies wrongly assume that better benefits automatically lead to employee satisfaction. Frederick F. Reichheld, a director of Boston-based management consultancy Bain & Co. and leader of its worldwide loyalty practice, decries as "culture vultures" companies that throw great benefits at employees with no eye toward a business return. "You can get a very profitable, successful company that decides tospoil its employees. [Such a company is] just eating up the balance sheet," says Reichheld. When smart organisations implement culture-enhancing programs, they do so with the goal of improving specific aspects of the working environment.

The telltale sign of an effective culture, says Reichheld, is loyalty-the percentage of employees and customers who stay with the company. Although few would dispute the benefits of hanging on to customers, many companies don't fully appreciate the value of employee retention. "Reducing net turnover by 3 percent [in a company with 40,000 employees] translates into 1,000 employees per year who do not have to be recruited, hired and trained-which adds up to a savings of US$36 million in overall costs," says Curt Coffman, senior vice president with The Gallup Organisation in Princeton, New Jersey. Companies ignore the importance of culture at their peril, says Hal F. Rosenbluth, president and CEO of Rosenbluth International Inc., a travel management company headquartered in Philadelphia, and co-author of Good Company: Caring as Fiercely as You Compete (Addison-Wesley, 1998). "Retention is at the end of the day what differentiates one company from another," he says. "Where many companies have gone wrong is that they don't realise that environment and culture are the strongest reasons why people stay with a company."Culture's Bottom-Line ImpactResearch recently released by Gallup supports the theory that appropriately targeted culture initiatives can and do improve the bottom line. After analysing years of data it had collected from employee surveys, Gallup recognised that high-performing workgroups tend to satisfy a core group of employee needs. Based on that observation, Gallup designed the Q12, a 12-question survey that measures key satisfaction indicators to determine whether these core needs are being met within a workgroup. The new survey focuses on employee perceptions linked directly to retention, productivity and performance. Gallup's research showed that workgroups with high Q12 employee satisfaction scores are more likely than those with low scores to produce satisfied customers and generate above-average profits. Workgroups with satisfaction scores in the top quartile of all employees surveyed achieved an average of 24 percent higher profitability, 29 percent higher revenue and 10 percent lower employee turnover than workgroups scoring in the bottom quartile.

To help companies improve overall performance, Gallup breaks out its survey data by workgroup to make clear which workgroups aren't living up to their potential. Gallup then follows individual workgroups over time, giving them the same survey every six months, to see how changes within the group-such as team meetings to improve communication or the formation of specific employee goals-affect performance. "We have companies that are on their fourth or fifth test," says Coffman, "and we are seeing dramatic differences and improvements on not only the scaled [Q12] items but on business outcomes like profit and loss, sales, employee turnover and customer satisfaction."Best Buy Co. Inc., a large consumer electronics chain based in Eden Prairie, Minnesota, recently completed its second round of Gallup Q12 testing and found that its business units with the highest scores did indeed have higher sales, profits and customer satisfaction. Best Buy managers like the survey because it provides tangible action points for effecting positive change within individual workgroup cultures. The company is also using the survey to predict the financial performance for its units. "Financial scores are about history-what happened yesterday. They're a trailing indicator," says Laura Morgan Wood, director of consumer research at Best Buy. "Our Gallup scores, on the other hand, are a leading indicator. The numbers support that the stores with strong employee scores last year had more productive outcomes this year."The Quick-Fix MythOne of the biggest misconceptions about corporate culture is that good cultures just happen-that some companies luck out. While this may provide a convenient excuse for those not inclined to put effort into culture-building, it also masks the hard work and serious planning that go into tailoring a culture to the business. Many senior executives who perceive a performance problem are disappointed when training and culture-building activities don't yield the quick fix they expected. They shuttle their employees to the nearest ropes course or to customer service training and can't understand why it doesn't make a difference. The problem, according to Rick Auman, senior consultant with Corporate Management Developers in Reston, Virginia, is that companies are just giving their employees "smile training." Executives send workers off to learn new behaviours, but the employees return to an office culture that doesn't support those new behaviours. "First the culture has to change," says Auman.

"Then you can teach the behaviours that will fit in with that culture."The Right Cultural FitCorporate cultures are not one size fits all; the effectiveness of a given culture depends on the company's business goals. "There is no right culture," says Robert Goffee, co-author of The Character of a Corporation: How Your Company's Culture Can Make or Break Your Business (Harper Business, 1998).

"Culture is appropriate only in terms of what you are trying to do in the business. You must think carefully about the kind of culture that you want and need." The process of finding the culture that best fits a business is long and difficult, and often that culture can be developed only through trial and error.

At the start of the decade, Acxiom Corp., based in Conway, Arkansas, was in high-growth mode. Though the company was benefiting from a surge of interest in data management products and services and was posting record profits, management saw that without some fundamental changes to the company's culture, growth would not be sustainable. An unwieldy corporate structure had developed because every time an employee wanted a raise, the practice had been to create a new title to justify it. By 1990 the company had roughly one manager for every 2.7 employees; some departments had up to 13 levels of management. This structure had created a culture in which decision making was long and laborious, and nobody felt empowered to take initiative. As a result, customer satisfaction, associate satisfaction and process efficiency were all suffering.

"We literally slashed the organisational structure, flattened it substantially and created teams," says Cindy Childers, leader of Acxiom's organisational development group. As part of the flattening process, the company decided to abolish titles and rename all employees "associates." Trendy as this move might seem, Acxiom's former midlevel managers did not receive it warmly. Titles had been the means of identifying an employee's level of experience; doing away with them left no immediate way of recognising those who had earned their stripes. To address this concern, Acxiom developed a five-level rating system differentiating employees by experience level. Once the kinks were worked out of the system, the team structure helped Acxiom significantly shorten decision-making time by allowing the employees closest to each situation to make decisions. Childers maintains that associates now focus on business issues rather than organisational charts. "No longer do people sit in a room with this hierarchy; they sit down to solve a problem," she explains. "In the past, people tended to defer to whoever had the most senior title in the room, and you don't see as much of that anymore."Though she classifies Acxiom's cultural initiatives to date as successful, Childers stresses that an element of uncertainty remains. "We're not quite sure where we are going," she admits.

In the beginning, Acxiom executives referred to cultural reform as "the race for excellence." But they ultimately dropped the name when it became clear that there is no finish line; reshaping the culture is an ongoing process.

Building Business Knowledge

Although determining the right culture can be a difficult task, many companies have built successful cultures around the simple concept of encouraging employees to develop a deep knowledge of and enthusiasm for the business. At Atlanta-based Home Depot, for example, keeping all employees interested in the business is a top priority. All new employees, even executives, spend two weeks working on the sales floor, learning what customers want and need, and receiving a ground-zero view of the company's core business. In the stores, employees also rub shoulders with Home Depot's customer base of do-it-yourselfers, whose entrepreneurial spirit the company has deliberately tried to build into its corporate culture.

One way executives mine this entrepreneurialism is by encouraging employees to get involved in their communities. The IS department, for example, has taken part in seven Habitat for Humanity house-building projects and has helped repair a run-down school. "We go out and have our teams work together, and they can see how the products are being used," says CIO Ron Griffin. Griffin believes that working in the stores and out in the community is rewarding for the employee and the company because it broadens employees' sphere of influence. "You look at people and all you see is the surface, but most people are way more capable than they are given credit for," he explains. "Our challenge is to tap into that." The employees are learning skills that may not seem central to their work as IS specialists, but getting more closely acquainted with Home Depot's business improves their ability to provide better quality solutions.

Following Through

Once senior managers have a clear vision of what the company's culture should be, they must be prepared to commit the resources required to nurture and sustain it. It's easy to say that your company values initiative, creativity and teamwork, but when those attributes are exhibited, do you reward them? Rosenbluth, the CEO of Rosenbluth International, compares companies with the family farm. He explains that many companies sow the seeds for a good culture but then fail to tend the crop and are surprised when nothing grows. Diane McFerrin Peters, former top communications officer at Rosenbluth and co-author of Good Company, agrees that companies have to be sincere about taking care of employees and sustaining an employee-friendly culture. "Sincerity is huge," she says. "Without sincerity, it's a self-serving marketing campaign. It would be better to stand up and say, 'We are a jerky company,' than fake it."Investing in corporate culture is more complicated than putting more money into R&D or purchasing a new ERP system. It requires an infusion of time, energy and commitment-resources that can be far more scarce that money. Sure, plenty of companies achieve excellent business results without consciously cultivating employee satisfaction. But for companies that sense they may be standing in the way of their own success, scrutinising the corporate culture can provide some answers that won't be found in the pages of the annual report.

(Staff Writer Daintry Duffy can be reached at dduffy@cio.com.)SIDEBAR: Are Your Employees Happy?The Gallup Q12 survey links employee satisfaction to bottom-line resultsThe Gallup organisation of Princeton, New Jersey, surveyed more than 105,000 employees in workgroups in 24 organisations representing 12 different industries and found that employee perceptions have a distinct impact on a group's fiscal performance. Perhaps more significant, the research showed that the workgroup-level culture-rather than the enterprisewide culture-has a greater effect on a company's bottom-line performance. Here's the survey Gallup uses to rate employee satisfaction.

Overall Satisfaction.

How satisfied are you with (Name of the Company) as a place to work? StronglyAgree Strongly Disagree I know what is expected of me at work.

I have the materials and equipment I need to do my work right.

At work, I have the opportunity to do what I do best every day.

In the last seven days, I have received recognition or praise for doing good work.

My supervisor, or someone at work, seems to care about me as a person.

There is someone at work who encourages my development.

At work, my opinions seem to count.

The mission/purpose of my company makes me feel my job is important.

My associates (fellow employees) are committed to doing quality work.

I have a best friend at work.

In the last six months, someone at work has talked to me about my progress.

This last year, I have had opportunities at work to learn and grow.

SOURCE: The Gallup Organisation. (These statements are proprietary and copyrighted by The Gallup Organisation and cannot be reprinted or reproduced in any manner without its written consent.)Give Me a W!Years ago, Wal-mart stores inc. founder Sam Walton visited a tennis ball factory in South Korea where workers kicked off each day with group callisthenics and a company cheer. Impressed by what he called the "whistle while you work philosophy," Walton instituted the Wal-Mart corporate cheer, which now begins every morning meeting at Wal-Mart stores across the country.

This none-too-subtle form of cultural reinforcement encourages enthusiasm for the company and reminds sales associates of the need to focus on customer satisfaction.

Egg Head

At an annual meeting, Doug Burgum, CEO of Great Plains, smashed three eggs on his head in front of employees and industry partners after releasing a product with performance problems. Burgum made it clear that he took a large part of the responsibility for the egg on the company's face.

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