pomello - culture as a competitive advantage
Post on 14-Apr-2017
355 Views
Preview:
TRANSCRIPT
Culture as Competitive Advantage
Presented By
Culture as Competitive Advantage
Dr. Charles O’Reilly, Professor, Stanford Graduate School of Business Charles is a leading expert on Organizational Behavior and Management and Professor at the Stanford Graduate School of Business. His research includes studies of leadership, organizational culture and demography, the management of human resources, and the impact of change and innovation on firms. He has authored more than 100 papers and published several books. Professor O’Reilly has consulted for a variety of public and private firms in the U.S., Europe, Africa, and Asia. He also has developed, directed, and taught in executive programs for senior managers in innovation, technology, leadership, change, and human resources.
Catherine Spence, Co-Founder, Pomello Before founding Pomello Catherine built and managed investment strategies for BlackRock. Inspired by her own experience as a job seeker as well as going through a large corporate merger, she grew to value the role of culture in creating fulfilling workplaces that drive performance. Catherine holds a BA in Political Science from Columbia University and an MBA from Stanford’s Graduate School of Business.
What leaders and employees say about
culture
94% of executives and 86% of employees believe that a strong culture is important to business success
5
If you’re really going to transform an enterprise, you’ve got to understand culture…It took me to age
55 to figure that out. Culture is everything.
~ Lou Gerstner CEO, IBM, 1993-2002
culture as competitive (dis)advantage
6
Culture eats strategy
for breakfast. ~ Peter Drucker
culture as competitive (dis)advantage
What is “culture” really...
What is “culture” and why should managers care about it?
• Culture is a social control system that already operates within your organizations. • If you don’t manage it, this control system can undermine your ability to effectively execute your strategy. • You can diagnose and manage the culture in your units.
The Bottom Line
Culture as Social Control
Culture is the pattern of behavior that is
reinforced by people and systems over time.
10
I hate the word ‘culture’. Culture is really just how
we all behave. ~ Mary Barra CEO GM
September 30, 2014
culture
11
You can’t over-emphasize enough the importance of culture—and what we mean by that is
behavior. ~ Doug McMillon CEO Walmart
February 24, 2015
culture
Values • Beliefs about what is worthwhile or important
• The principles or standards that are seen as important by a person or group
Norms • Expectations about what are appropriate or inappropriate attitudes and behaviors
• Socially created standards that help us interpret and evaluate behavior
IBMers are defined by what they value.
IBMers value:
Dedication to every client’s success.
Innovation that matters –
for our company and for the world.
Trust and personal responsibility in all relationships.
Our Core Values CUSTOMERS We put the customer at the center of everything we do. We listen intently to our customers’ needs. Each interaction matters. Safety and quality are foundational commitments, never compromised. RELATIONSHIPS Our success depends on our relationships inside and outside the company. We encourage diverse thinking and collaboration from the world to create great customer experiences. EXCELLENCE We act with integrity. We are driven by ingenuity and innovation. We have the courage to do and say what’s difficult. Each of us takes accountability for results and has the tenacity to win.
Our Core Values CUSTOMERS We put the customer at the center of everything we do. We listen intently to our customers’ needs. Each interaction matters. Safety and quality are foundational commitments, never compromised. RELATIONSHIPS Our success depends on our relationships inside and outside the company. We encourage diverse thinking and collaboration from the world to create great customer experiences. EXCELLENCE We act with integrity. We are driven by ingenuity and innovation. We have the courage to do and say what’s difficult. Each of us takes accountability for results and has the tenacity to win.
As a new GM employee, how should I behave?
What is really important?
16
Values are a misused word. Values are behaviors…the
behaviors you want to achieve the
mission. Then you measure and reward those behaviors, with the soul or the wallet.
~ Jack Welch 2005
culture is about behavior
What is organizational culture?
SOCIAL CONTROL
Values Beliefs about what is
important or worthwhile
The principles or standards seen as
important by a person or group
Norms Expectations about
appropriate behaviors
Socially created standards that help
interpret and evaluate behavior
Behaviors The specific attitudes and behaviors that are needed to successfully accomplish important goals and objectives
Why worry about it?
“Even contextually or strategically appropriate cultures will not promote excellent performance over long periods unless they contain norms and values that promote innovation and change.”
John Kotter and James Heskett Corporate Culture and Performance Harvard Business School Press, 1992
The Cultural Challenge
WEAK CULTURE
Research corroborates the financial importance of a strategically aligned and innovation-based culture
Revenues rise 166% Workforce expands 36% Stock price increases 74% Net income boosts 1%
Revenues rise 682% Workforce expands 282% Stock price increases 901% Net income boosts 756%
STRONG CULTURE VS
Culture and Performance
WEAK CULTURE STRONG CULTURE
SiliconValleyStudy
FY 2012: • 87% are Fortune 1000 firms • Generated $1.26 trillion in
revenue • 74% of Fortune 1000 hi-tech
revenue • Collective market cap: $2.8
trillion
Between 2009-2012, firms with more ADAPTIVE cultures (i.e., quicker to opportunities, willingness to experiment, more innovative, more risk taking, faster) also had:
• Higher revenue growth • Higher Tobin’s Q (Market-to-book ratio) • Higher employee ratings (Glassdoor ratings) • Ranked by Fortune as More innovative • More analyst “buy” ratings
SiliconValleyStudy-Results
Study of 44 Irish Companies
1. Culture (adaptability and collaboration) predicts revenue growth (2010-2014).
2. The correlation between current and needed culture also predicts revenue growth (i.e., alignment matters). 3. Culture change efforts also strongly and positively predict revenue growth.
Culture change efforts are associated with higher revenue growth
% R
even
ue G
row
th
1 2 3
-
20
40
60
80
100
120
ChangeEfforts
Change Efforts (1 = no explicit efforts, 2 = some attempts, 3 = explicit efforts)
Firms that made more
explicit culture-change efforts*
averaged 111% revenue growth over
several years--2X the
average.
* Note: Culture-change efforts were likely informed by the culture feedback reports indicating where gaps between the current and needed (per strategy) culture existed. R = .37 (p<.03)
Culture impacts firm performance and employee turnover
100
0.65 0.7 0.75 0.8 0.85 0.9 0.95
Perfo
rma
nce
Ra
ting
Predictive Compatibility Score
High
Low
Time Since Hiring
% o
f Ne
w H
ires
Still
at C
om
pa
ny
Top Score Quartile
Bottom Score Quartile
Difference in turnover = 50%
Culture Fit and Performance Predict long term performance -- YES
Employee Attrition Curves Stronger fit leads to lower turnover -- YES
Meta-analysis of 84 empirical studies
Culture is important in creating employee engagement…
Medallia © Copyright 2016.
Culture, Employee Engagement and Performance
5.0X less likely
Likely to recommend company
Likely to leave co. in next 6 months
Customer-centric Culture and Work Practices
Bottom 25% both
Top 25% both
5.1X more
Bottom 25% both
Top 25% both
1.3X
Employees
2.3X more likely to be engaged
(compared to baseline)
1 Baseline
engagement
2.0X
• Bottom 25% Top 25%
Top 25%
Cus
tom
er-c
entr
ic C
ultu
re
Customer-centric Work Practices
Customer-centric Engagement
5.0X less likely
Likely to recommend company
Likely to leave co. in next 6 months
Customer-centric Culture and Work Practices
Bottom 25% both
Top 25% both
5.1X more
Bottom 25% both
Top 25% both
How can you measure and manage culture?
How is culture managed?
1. Recruiting and selecting people who fit the culture you’re trying to create
2. Training and developing people initially and through
their careers. 3. Rewarding and recognizing people to create a vivid
picture of what success looks like 4. Leading intentionally and visibly to help people
learn to make strategically relevant, tough tradeoffs
How is culture managed?
Aligning Organizational Culture Identify Your Strategy - Why should any customer prefer your product/service?
List the Key Success Factors - What actions must occur to execute your strategy?
Current Culture - What are the norms that exist today in your organization?
Needed Culture What are the norms you need to execute that currently don’t exist?
Culture Gaps - Norms that are needed but don’t exist; norms that exist to be changed
Design Actions/Programs for Change
1.
2.
3.
4.
5.
6.
How can you do a quick culture diagnosis in your own business?
Focus Groups This approach involves forming a set of focus groups and asking them to assess the current culture (see Chapter 5 in Winning Through Innovation, 2002) for a description of this approach. This works best for within business unit diagnoses. Organizational Culture Profile This approach uses a web-based tool and is most useful for getting a large sample to do corporate level cultural diagnoses.
Surveys, Interviews Consulting firms offer a variety of survey and interview techniques to do culture diagnoses.
Culture Diagnosis
What is the role of HR technology in managing culture?
1. Consistency – Organizations require a consistent framework for understanding, communicating and measuring culture in order to manage it effectively.
2. Scaling – While culture can be managed person-to-
person at smaller companies, larger companies require a mechanism that collects and distributes culture data efficiently especially during periods of rapid growth.
3. Evolution – Company strategy is not static over time,
and so culture cannot be static over time. Technology enables evolution of culture over time.
Why does culture need technology?
Consistency: Know Your Culture Cultureisnotmonolithic,anddifferentgroupswithinanorganiza=oncanhavesignificantdifferencesinculturalcohesionorstrength
Consistency: Know Your Culture
Cultureisnotmonolithic,anddifferentgroupswithinanorganiza=oncanhavesignificantdifferencesinculturalnormsandbehaviors
Comparative View – Values Analysis
There is a very high degree of alignment across many of the values within these 2 teams, indicating elements of a common culture core …
… Yet signs of sub-cultural differences were also observed, the largest gap occurring around the value placed on Results.
Scaling: Hiring for High Performance Requires Culture
0.65 0.7 0.75 0.8 0.85 0.9 0.95
Perfo
rma
nce
Ra
ting
Predictive Compatibility Score
High
Low
Time Since Hiring
% o
f Ne
w H
ires
Still
at C
om
pa
ny
Top Score Quartile
Bottom Score Quartile
Hiring to optimize for culture alignment leads to higher performance and lower turnover
Compatibility vs. Performance Predict long term performance --
YES
Employee Attrition Curves Stronger fit leads to lower turnover --
YES
Evolution: Managing Culture Change with Technology OneFortune500companycomparedtheircurrentleadershipculturetotheiraspira=onal(orfuture)leadershipcultureinordertoiden=fywhatbehaviorstheyneedtoemphasizetomeetfuturestrategicini=a=ves
Adaptability emerged as the largest gap to the desired future state … by a wide margin
While not requiring a tradeoff across most other values…
FUTURE CULTURE
… except Precision, which emerged as the lowest value in the future state
Leadership Team Current vs. Future Culture Gap Analysis
CURRENT CULTURE
How to Integrate Culture Technology into Existing HR Workflows
Cultureanaly=cstechnologywillintegratewithyourexis=ngHRworkflowsandsoQwarethroughouttheemployeelifecycle
ASrac=onEnsurethatyouareaccuratelyadver=singyourauthen=cworkplacecultureinalljobpos=ngsSoQwareIntegra=ons:• Applicanttrackingsystem
Selec=onBringconsistencytoyourselec=onprocessbycapturingdataaboutcandidatespreferrednormsandbehaviors.SoQwareIntegra=ons:• Applicanttrackingsystem
Reten=on/DevelopmentUnderstandhowcultureisimpac=ngperformanceandreten=onbytrackingcultureanaly=csthroughouttheemployeelifecycle.SoQwareIntegra=ons:• PerformanceManagement
System• HRISSystem
Q & A
DataDrivenCultureMeasurement
Additional Questions or Inquiries:
catherine@pomello.com
+1-650-741-4348
top related