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Creating a High Performance Organizational Culture – Getting Started

The leader of any organization either believes that culture is a significant contributing dimension to achieving business and financial objectives or they don’t.  High performance organizations are built, driven and nurtured by the top executive.   As a result they reflect the CEO’s commitment to a business strategy, core values and will.  The leader of the company or team is the most important person in creating and sustaining a performance culture.  Having the right executives below the CEO that are 100% committed to the culture, values and team success are the second most important group of people.  For more on this see high performance executives – 12 competencies.

Research by Harvard professors John P. Kotter and James L. Heskett found that “The single most visible factor that distinguishes major cultural changes that succeed from the ones that fail is competent leadership at the top.” The durability of the organizational culture will be continuously tested, so the CEO’s commitment must be unwavering in driving, nurturing and enforcing the core values, business strategy and operational objectives.  There can be no exceptions!

Getting the various functions, teams and individuals of an organization to operate as one does not happen by accident, nor does it happen optimally in most organizations.  It only happens when the leadership team fully commits itself to building a cultural framework that rewards sustained high performance characterized by institutionalized coordination, collaboration and execution. Learn more about this in Building a High Performance Team – Where Do You Start? Organizations with low performance/political cultures waste huge amounts of time and energy on internal conflict, dysfunctional behavior and low trust relationships.  A high performance organization culture as we define it affects and touches every function, dimension and level of an organization.

What Is Organizational Culture And Why Is It Important?

What do we mean when we talk about organizational culture?  Culture is the soul of an organization.  It is embedded in what people and organizations produce and how they produce it.  It is a body of knowledge, values, attitudes and experiences of the organization. It guides the way people think, communicate, and act toward issues like: collaboration, teamwork, accountability, risk taking, professional development, decision-making and results. It deals with the role and relationship of stakeholders and how those stakeholders interact.  In short, organizational culture affects every dimension of business and business performance.

Organizational Culture and The Bottom Line

Until organizational culture can be linked to financial performance it seems an unlikely leverage point for many business leaders.  Let’s compare and contrast the financial metrics between high performance and low performance cultures. In their book “Corporate Culture And Performance” Harvard professors John P. Kotter and James L. Heskett established a direct link between culture and a broad range of financial metrics.  Specifically, they found that following cultural enhancements, companies did significantly better over a 10-year period than companies without performance enhancing cultures (page 78). The results are depicted in the following table:

THE ECONOMICS AND SOCIAL COSTS OF LOW PERFORMANCE CULTURES

Financial Metrics Average for 12 Firms with Performance Enhancing Cultures (%) Average for 12 Firms without Performance Enhancing Cultures (%)
Revenue Growth 682 166
Employment Growth 282 36
Stock Price Growth 901 74
Tax Base (Net Income) Growth 756 1

As performance cultures mature, financial, employee and customer metrics improve and generally track together.   We believe these improvements build momentum, complement each other and are part of a self-reinforcing system.  The same can be said for low performance cultures going in the opposite direction.

High Performance Organization Culture: The Importance And The Potential Barriers

In a 2007 Bain and Company study, 90 percent of executives believed that organizational culture is as important as strategy for business success.  The report goes on to say that fewer than 10 percent of companies will succeed at building a high performance organization culture.  One of the main reasons was that they were not sure how to go about creating one. For many leaders the topic of culture is often seen as being too “warm and fuzzy” or “touchy feely” to deal with and in some cases they just don’t see value in pursuing it. If a culture is recognized at all within an organization, it is usually not well thought out, poorly aligned, inconsistently applied and lacking discipline.

Why is this the case?

It’s much easier to focus on sales, revenue, margins, expenses, signed contracts, and ratios. While these metrics are a critical dimension to managing a business, they are at best rear view indicators that provide little or no insight as to what is really going on inside the organization.  These metrics say nothing about how the various functions and/or individuals within the organization operate to produce those results, and furthermore how to more effectively operate in the future to improve results.
Every organization has the following two fixed competitive variables:

1.    They recruit from the same talent pool as their competitors

2.    They sell/service similar clients with largely identical products/services

The question is, given those fixed competitive variables, how does an organization predictably and consistently outperform its competitors in a broad spectrum of market and financial metrics? What separates them from others?

We believe organizational culture is critical to sustained business performance and professional satisfaction.  Some people will argue that strategy, brand and/or some other variable is the most important factor in determining business performance.  Without a culture that is designed for high performance, the best strategy will not be optimized or consistently executed and the best brand will be diminished or ruined by poor quality, delivery or customer service issues.  In short, culture as we  define it, influences and affects every part of your organization’s operations and performance.

Fill out the form on the top right of this page to get a copy of our white paper, Building High Performance Teams.

To talk more getting starting on creating a high performance organization, please contact Tim Allard at 434-984-0425 or email tim@odysseyhps.com

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