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Culture as Competitive Advantage

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Why is it that many of the same companies appear repeatedly on lists of the best places to work, the best providers of customer service, and the most profitable in their industries? When we talk with leaders of these organisations – some of which have changed the rules for competing in entire industries – they point to culture as a primary reason for their success. Just as important, it’s an advantage that competitors find hard to duplicate. What do managers at the best places to work understand that others don’t? For one thing, they recognise that culture is anything but the soft, mushy set of platitudes some leaders think it is. 

These managers understand that the identification of organisation values is meaningless without a determination of the behaviors, measures and actions that reinforce the values. They know that strong cultures can lead to success or to failure – and that may be another reason culture gets a bad rap in some corporate circles. But people like Al Stubblefield, CEO of Pensacola, Fla.-based Baptist Health Care (BHC), understand that strong and adaptive cultures can foster innovation, productivity and a sense of ownership among employees and customers, all of which are important elements in leveraging value over costs.
 
This flexibility gives such companies a much higher probability than less adaptive organisations of producing extraordinary growth and earnings. Stubblefield knows that it’s possible to develop a strong and adaptive ownership-based culture where one hasn’t previously existed. Owners are employees who go the extra mile to recommend friends and others as potential colleagues. They suggest ways of improving products, services, processes and relationships. Our research into a group of worldclass companies that exemplify employee ownership reveals four practices that help explain how they got
there:
 
Create a strongly shared sense of purpose : 
 
Purpose is self-evident in the work some organisations do. Few would question that Baptist Health Care is in the business of saving and improving the quality of lives. Others, including Vanguard Financial Group, ING Direct and Southwest Airlines, are on a mission to save money for customers while delivering the highest levels of customer Satisfaction.
 
Constructing such a culture begins with the creation of a working environment that will attract the most talented employees, those who can establish extended, profitable relationships with targeted customers.   
 
Establish a clear set of values and behaviors that embody a shared purpose :
 
Stubblefield engaged the entire BHC organisation in establishing a new set of values and behaviour. The process began with a two-day meeting for the senior management team, who then spent four months enlisting everyone else to discuss the following three questions: Why do we exist? (What is our mission?) What are we striving to become? (What is our vision?) What guides our everyday behavior? (What are our values?) The discussions took place among focus groups throughout the organisation, with senior management involvement at several levels. During these meetings, leaders also posed the question, “What makes a great culture?” The employee responses helped outline critical core behaviours: open communication of such things as performance feedback and ideas for doing things better, a “no secrets” environment in which the bad news is shared along with the good, and a “no excuses” environment in which employees are held accountable for actions and results.
 
San Antonio-based Rackspace Hosting, a 10-year-old technology company, has shaped a culture that has helped it move far beyond customer loyalty to customer ownership – literally becoming an extension of its customers’ organisations by dedicating cross-discipline teams to specific groups of customers to deliver Fanatical Support, Rackspace’s trademarked name for its industry-setting customer service program. The result? A growth rate that doubles revenue every 18 months.
 
Implement constant communication of purpose and values through senior management behaviour, organisation-wide performance metrics and corrective actions when necessary: 
 
This practice doesn’t mean “meet, meet, meet.” In lieu of meetings, Cary, N.C.-based business intelligence software firm SAS fosters an environment in which managers and employees communicate constantly – not downward or upward, but in all directions. This communication takes place in the relatively open workspace. It consists of constant messages from top management concerning such things as new business, customer problems to be solved and competitive challenges. It’s part of the extensive educational programs offered by the company. And it extends to the thousands of pounds of M&M’S supplied to various informal gathering places throughout the company to encourage the kind of informal water-cooler communication so important to problem solving.
 
Communication can take unusual forms. For example, BHC “borrowed” what’s known as the “Daily Line Up” from the Ritz-Carlton, where employees participate in a daily practice at the start of their shifts. During each lineup, managers present one new service initiative or behavior, entertain suggestions, and recognise any employees who have demonstrated outstanding performance.
 
BHC’s practice works in the same way: every job team convenes for a few minutes a day to share a concept and suggest a training idea. Additionally, in BHC’s “Listening and Learning” program, managers lead discussions on subjects such as survey results and solicit ideas for ways to improve customer service. The resulting “customer snapshot reports” compile all of the employees’ observations and ideas for general Distribution.
 
Cultivate strong leadership that both reinforces the culture and preserves its adaptability: 
 
Cultures take shape with or without leadership. But rarely does a competitively superior culture emerge without it. Effective leaders set the tone for an organisation through their own behaviours. For example, at BHC, people at all levels are encouraged to engage in several “Baptist behaviours” that are peculiar to the organisation – and sometimes startling to customers – but have a functional purpose. One of these is the custom of picking up trash (something Bill Marriott also does at his company’s hotel properties).
 
Then there’s the “Baptist shuffle,” in which leaders take the time to erase scuffmarks left by shoes on polished floors. Another is walking people in need of direction to their destinations. Everyone, starting with Stubblefield, does these things all the time, in part because they foster a sense of being part of a culture that’s something special. Good leaders reinforce culture by demonstrating accountability for behaviours and results, and fostering the same attitude among employees.
 
The companies mentioned above show clearly how a strong culture creates the potential for high performance. We say “potential,” because some of our other research has suggested that strong cultures, by themselves, are not enough to drive long-term success. Leaders who foster a strong ownership culture must also preserve its ability to adapt to a changing environment. They do it by emphasising practices that help the organisation and its people grow: continuous improvement, innovation in products and services as well as management systems, education for personal development, and – again – communication, communication, communication.