”Customers will never love a company until the employees love it firstSimon Sinek
While unfortunately still thought of as a soft skill by some, savvy leaders realize it is culture that differentiates a team or organization and drives real business results.
A number of compelling studies have shown that a positive culture is a key driver of performance. Exhibit A is a study done in the mid-1990s by Harvard Business School professors John Kotter and James Heskett. They followed two hundred companies to learn if a positive culture—one that facilitated adaptation to a changing world and that highly valued employees—affected a firm’s long-term economic performance. They found strong cultures, “encourage leadership from everyone in the firm. So if customer needs change, a firm’s culture almost forces people to change their practices to meet the new needs. And anyone, not just a few people, is empowered to do just that.” Over the eleven-year period studied by the professors, revenue growth in the companies with “positive” cultures grew an average of 682 percent compared with 166 percent in the firms with “weak” cultures, and the difference in stock appreciation was 901 percent to 74 percent.
Exhibit B is another piece of powerful research, which global research and professional services firm Willis Towers Watson conducted for our book “All In.” Together we communicate the results of a major new study that showed how the most profitable companies worked during the worst recession in our recent history—from early 2008 to mid-2009. Our researchers identified 25 companies with 303,000 employees that enjoyed the highest-performance business results during that downturn, outperforming their competitors in financial measures by as much as two and three times. Companies were from around the world and in every industry: health care, financial services, manufacturing, high tech, services, transportation, and so on.
The task was to determine what levers managers of these organizations pulled to bring about such dramatically better financial results than their peers and how they did it during the abysmal market conditions experienced during the last recession. The core finding was that leaders not only created high levels of engagement—manifest in strong employee attachment to the company and a willingness to give extra effort—but they also created environments that supported productivity and performance, in which employees feel enabled. And finally, they helped employees feel a greater sense of well-being and drive at work; in other words, people felt energized.
To grasp the substantial impact of this on business results, the engaged, enabled, and energized cultures saw average annual operating margins of 27.4 percent during the period that included a recession/economic downturn—twice as high as organizations with just high employee engagement and three times higher than those with low engagement scores.
What To Do, What To Do…
As compelling as this data on E + E + E is, it may be difficult for an individual manager to understand how to utilize the information. The challenge is to know just what makes a culture great but the steps one must take to get there—to bond people to a cause and make a culture really work in the hardest of times. How do managers build cultures where people buy enthusiastically into goals and visions, where they deliver top-shelf service and ingenuity, despite distractions.
Based on the data, what follows—in capsule form—is an overview of the steps found to have the most powerful effect during a downturn to engage, enable, and energize a workforce:
Define your burning platform.
Employees typically don’t buy into a way of doing business without clear and compelling reasons, and yet most leaders provide little or no justification as they introduce their strategies and ask their people for extra effort. Even when in triage mode, the best leaders connect their day-to-day work back to the bigger mission (or why) of the organization and instill a sense of urgency.
Create a customer focus.
We found in the highest-performing cultures during the last downturn, managers conveyed that employees must focus like lasers on customers, and they mandated a vigorous pro-customer orientation. This may seem intuitive, but tough times often bring out the worst in our customer policies. Every interaction or missive to customers communicates so much more than before, and will also provide moment-to-moment direction for all employees in making the right decisions and taking initiative on their own.
In a world of increasingly rapid change and uncertainty, our research showed that the top-performing companies were seen by both their employees and their customers as much more able to deal with change. Employees felt that their managers saw into the future and did a decent job of addressing the coming challenges and capitalizing on new opportunities. Thus, are you listening to your people right now—especially your rule breakers? Are you cutting out red tape?
The best cultures in crisis are those of truth, constant communication, and marked transparency. Managers in these cultures share even the hard truths with their employees as soon as they can, and they encourage debate and new idea generation even if it rattles harmony. Employees know that their managers will be truthful and direct, and that builds trust and a larger culture of openness. One of the best recent examples in this crisis has been that of Arne Sorenson, President and CEO of Marriott, was one of the first to record a video message to his almost 200,000 associates. He was blunt about the devasting impact to their business, and sincere in his concern for his people.
Partner with your talent.
Great managers think differently about their employees in a crisis. They believe their success is a direct result of their peoples’ unique ingenuity and talent, not their own brilliance. As a result, they treat people like true partners and have a sincere desire to use these times as an opportunity for people to grow and develop—connecting their work to core motivators. When we are all doing more with less, it’s a terrific chance for creative leaders to find new assignments for people that may be most motivating.
Root for each other.
In the most innovative companies during a downturn, “there is a significantly higher volume of thank-yous than in companies of low innovation,” says Rosabeth Moss Kanter of Harvard Business School. We found higher levels of gratitude in not only the innovative places we studied, but in cultures of higher customer service, operational excellence, compassion, and ownership. Teammates had much higher levels of goodwill and they spent much more time thanking each other peer-to-peer. These seemingly warm and fuzzy skills created tangible esprit de corps and a single-mindedness about living the right behaviors during a crisis.
Establish clear accountability.
As a capstone to this process, managers must learn how to hold employees accountable—and yet in times of already heightened stress, they must turn this idea from a negative into a positive. Employees want to be held accountable for hitting their goals, but with all the distractions they are facing now they must be given the responsibility and tools to ensure their success, and then rewarded when they see a goal through to completion.
Each of these components builds upon the others, and each is a necessary element of a successful culture during a downturn. The leaders we found who were most successful during the last recession provided the why, kept their ears close to those they served, were more agile and open, treats their people with respect and valued their input, and created places where every step forward was noted and appreciated.
Small adjustments in cultural direction now can lead to big improvements in the months and years to come.