If you want to create an engaging conversation, start one about company culture. Even if most people agree that company culture exists and plays a vital role in our organisations’ abilities to become and remain competitive, there’s no absolute consensus on its importance. Let’s start by looking at the data – how can the right company culture impact organisational performance? More importantly, how do you create the right company culture in your organisation? 

Our last Employer Branding Talk, was a deep-dive into adaptive cultures and the definition of the right company culture – if there even is one. 

Watch Employer Branding Talks – Creating the right company culture

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The relationship between company culture and organisational performance

In 1992, Harvard Business School researchers John Kotter and James Heskett confirmed the strong relationship between company culture and organisational performance. By researching over 200 companies in various industries such as Hewlett-Packard, Nissan and Xerox, they saw how certain company cultures (a.k.a, the way we behave around here) had a distinct impact on long-term financial performance. The results were staggering – organisations with performance-enhancing cultures saw average revenue growths of 682 % over an elven year period vs 166 % in those without such company cultures. Kotter and Heskett published their research in Corporate Culture and Performance, and you can read John Kotter’s own words about the study right here in Forbes.   

Any strong culture doesn’t cut it

In contradiction to general perception, they saw no correlation between any given strong company culture and long-term financial performance. The non-existing relationship is an important finding, so let’s repeat that: They saw no correlation between any given strong company culture and long-term financial performance.  

What if the culture is wrong? What if it leads us in the wrong direction? There are many deterrent examples where we’ve seen strong corporate cultures, but where the companies in question have been led astray by it, no longer exist or have been substantially diminished. Here are some examples:

  • Once having 9 000 rental movie stores in the US and now having only one, Blockbuster didn’t manage to adapt to video streaming. 
  • Nokia didn’t manage to adapt from flip phones to smartphones.  
  • Kodak didn’t manage to adapt from paper photos to digital.  
  • Lehman Brothers, founded in 1850, was for many years famous for its high-minded culture that put clients and value creation above profit and growth. 

The New York Times article Inside Uber’s Aggressive, Unrestrained Workplace Culture shed clear light on Uber’s downwards spiralling culture. In their IPO filing, Uber themselves alerted their by-then recognised toxic company culture as a risk factor that investors should consider. They stated:

“Our workplace culture and forward-leaning approach created significant operational and cultural challenges that have in the past harmed, and may in the future continue to harm, our business results and financial condition. A failure to rehabilitate our brand and reputation will cause our business to suffer.”

Hence, merely having a strong company culture in itself will not necessarily make a successful organisation long-term.

The key to success: adaptive cultures

Instead, a company needs to have the right company culture to stay successful long-term. So, what is the right company culture? Kotter and Heskett show that thriving long-term organisations have what’s referred to as adaptive cultures. These cultures continuously evolve and adapt to reach their strategic goals, continually re-modelling to fit changing market conditions whilst valuing employees, customers and owners. When customers’ needs change in one way or the other, the culture is adaptive to the degree that it intrinsically has employees and leaders change their practices to face this new reality in the pursuit of delivering the best possible experiences and services. This adaptive practice allows the organisation to evolve with the market, not relying on ancient techniques and dangerous this-is-the-way-it-has-always-been-done principles.

Consequently, as an organisation, the question you must ask is: Do we have the right culture to reach our strategic goals?

How Netflix did it

A great example of a successfully adaptive culture is Netflix. Their culture sparked so much attention that INSEAD Business School professor and The Culture Map author Erin Meyer felt she had to dive deep into it with Netflix founder Reed Hastings, resulting in the newly released McKinsey Book of the Year No Rules Rules. What’s fascinating about Netflix is how they have managed to respond successfully to four major industry transitions in the entertainment industry in just the last fifteen years:

  1. From rental DVDs to streaming old movies and TV series online.
  2. From streaming old content to launching new, such as House of Cards, together with external partnering studios.
  3. From licensing external studio content to building an in-house studio, creating award-winning content such as Stranger Things, When They See Us and Mindhunter.
  4. From being USA-only to a global entertainment company in 190 countries.
The structures that made Netflix’s adaptive culture possible are:  
  • Going to great lengths to get the right people on the train (and getting the wrong people off). 
  • Creating a powerful feedback culture throughout the organisation 
  • Removing employee control. 

Find Netflix’s culture memo here.    

Netflix' company culture explained

Creating the right company culture in your organisation 

The above structures have been successful for Netflix, based on their industry, market conditions, and strategic goals. So, what is the right culture for your organisation and more importantly, how do you translate above learning into day-to-day actions? Dale Carnegie is one of the world’s leading organisational development companies, recognised by Warren Buffet for having been one of the main reasons he’s been so successful.  

Six day-to-day actions to implement in your culture

Nicklas Gustafsson is Partner and top worldwide Master Trainer at Dale Carnegie, and these are his six steps tip for leaders that want to create successful adaptive cultures:

1. Involve as many as possible, as often as possible, as much as possible 

Companies that have a tradition of doing things together are often innovative and positive during uncertain times. If we, on the other hand, leave important decisions to a small group of selected people, the rest will probably just look at the decisionmakers and wait for the plan to be served.  

2. Find reoccurring opportunities to talk about learnings (not mistakes) 

Talking about learning, instead of mistakes, will slowly create a psychologically safe environment where we can grow from mistakes and be better in the future. If we don’t dare to be fully transparent, we might end up with doing the same mistakes over and over again. Or worse, we never learn until it’s too late.  

3. Be a master of recognition!  

Take every opportunity to build self-confidence in your people by highlighting the good stuff – what we pay attention to will grow. A participant from our leadership training program decided to become a master of recognition and did so by having an open note on her smartphone where she wrote down small positive observations. When she collected three, her next move was to book a one-on-one meeting with that person, only to give appreciation. This is a simple and effective way to build confidence in others.

4. Reward and recognize effort – not only results 

We’re not automatically great at something. Often it comes from repeated effort over time. If we don’t highlight and recognise the effort of becoming better – what’s the point of trying? Greatness is a process, not a state.  

5. Develop yourself and your team

Research shows that offering career training and development would keep 86% of millennials from leaving current positions (Bridge, 2018) 

6. Implement the power of yet in your team 

There’s a big difference between ”I’m not good at that” and “I’m not good at that, yet”. The person behind Growth Mindset, Carol S. Dweck, talks about this in her TEDx talk from 2014. By doing so we create an atmosphere where team members engage more with difficult tasks and problems instead of avoiding them. 

About Nicklas

Nicklas Gustafsson is Partner and master trainer at Dale Carnegie. He’s both a business instructor and responsible for the everyday business at Dale Carnegie. On his way to Dale Carnegie, he’s had time to lead an organisation with over 240 employees and 25 leaders, been eliminated from the Swedish Badminton Association and are a sought after coach asked to coach all speakers of the world-famous TedX forum in Gothenburg.

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