THE ELEPHANT IN THE ROOM - Composure

T H E E L E P H A N T I N T H E R O O M - W H Y C U LT U R E M AT T E R S

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Strategy. Culture. Leadership

© C o m p o s u r e G r o u p

THE ELEPHANT IN THE ROOMW H Y C U LT U R E M AT T E R S

Why are some organisations able to:

1) Attract great people and clients with seemingly little effort?

2) Create a sense of ownership and pride among their employees?

3) Consistently come up with innovative ideas and make a commercial success out of them?

4) Have highly accountable and disciplined people?5) Have great reputations in the community they serve?

As you may have guessed, the answer is culture.

The debate about whether culture matters is well and truly over. The difference now lies between those who understand culture and those who think they do.

Y E S , B U T W H Y T H E E L E P H A N T S ?

While ‘culture’ is the word on most business leaders’ minds, most leaders struggle to define, assess, manage and lead their organisation’s culture in an effective way. For example, a recent study found that 42% of people refer to ‘culture’ and ‘engagement’ interchangeably . Similarly, culture is often reduced to simply creating ‘a great place

to work’. As a result of this confusion, culture remains the elephant in the room; big, hard to overlook, impacts everyone, and yet people continue to ignore it and hope it will look after itself.

So what exactly is culture, what is the value of getting it right, and how can you get the ‘elephant’ working in your favour?

W H AT I S C U LT U R E ?It’s easy to recognise when a workplace has a great culture; there is a sense of purpose, a rhythm to the way work gets done, energy to go the extra mile and positive conversations about how good the organisation is to work for. We also know when a culture is weak or toxic; there is constant blame, lack of accountability, disengagement and lack of trust.

Culture is about patterns of behaviour or the ‘way things are done around here’. People soon work out from the various messages and signals they receive what behaviours are accepted or not accepted in their work environment. Over time these behaviours become the norm and people make choices about how they behave to fit in with these norms. This ultimately creates your culture.


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“Culture is about patterns of behaviour or the ‘way things are done around here’.” The best people to ask about your culture are new employees. Those who have spent a long time in your organisation are often unaware of just how powerful the prevailing culture is. When a new person joins your business, they will pick up on a range of signals, both subtle and explicit, that will give them an understanding of ‘how things are done around here’. As humans are tribal by nature, and our core driver is to become a part of the existing tribe, we will work hard to understand what it takes to be a part of the tribe. Certain behaviours are expected, some are celebrated and others are simply not tolerated. The new employee is given a limited grace period during which they choose to do one of four things:

1. Fit into the tribal norms

2. Ambitiously try and change things;

3. Move on; or

4. Get moved on.

The question for you as a leader is, does your organisation’s culture keep the right people and see the wrong people move on?

T H E T R U E C O S T O F C U LT U R E In 2004 Blockbuster was a household name. It employed over 60,000 people in 9,000 stores across the world. Its model was clear:

• Open retail stores in prime locations with impressively large rental collections

• Up-sell as much junk-food and paraphernalia as possible

• Collect exorbitant late-fees from tardy customers.

As former Blockbuster executive Jonathan Baskin stated: “The video rental business was hugely profitable from the get-go… once a tape had been rented a few dozen times, it yielded 100% profit thereafter. The business model was beautiful.”

But then traffic started to slow. People were only renting the movies that were successful at the cinemas and ignoring the enormous collections of older movies. As cinema attendance dropped, so did video rentals.

If customers were only going to Blockbuster to find movies they wished they had seen in the cinemas, no amount of overpriced candy and toys were going to keep Blockbuster’s profits up.

By 2010 Blockbuster had declared bankruptcy and in 2014 it closed the doors on its very last retail store in the US.

The problem was Blockbuster’s culture. According to Baskin, ‘The solution would have been to focus on consultative or advisory selling, and turn its store associates into de facto recommenders. It could have implemented true social networks to rate and catalogue movies, and used its customer data to develop a predictive engine that members could use to locate new titles. Store associates could have been encouraged (and incentivised) to establish ongoing customer relationships, and found ways to promote all those library titles (that had already been paid off, so they were pure profit). It could have owned the position of movie experts and migrated that brand to any new distribution platform.’

In 1997 a Blockbuster customer by the name of Reed Hastings was forced to pay $40 in overdue fines after returning a copy of Apollo 13 late to his local Blockbuster. A few months later he founded Netflix, a DVD-by-mail service where subscribers could choose their movies online and have them mailed directly to their door. In one bold move, Netflix abandoned the menacing late-fees that had long-plagued video-renters. By the year 2000 Netflix had solved the age-old problem of ‘what movie do I watch tonight?’ by developing a personalised movie recommendation system that uses members’ ratings to accurately predict what they will enjoy.

Fast-forward to 2016 and Netflix now has over 75 million subscribers globally and an annual revenue of over $7 billion. What more, Netflix’s creativity and innovation have seen it develop into a successful production house receiving 31 Emmy nominations for a number of original television series it has produced.Now here’s the kicker. In the year 2000, Blockbuster turned down a chance to purchase the still fledgling Netflix for $50 million.


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Blockbuster’s leaders refused to see the changes around them and adapt. They ignored what their customers wanted and refused to consider the vision identified by the young and upcoming Netflix. Instead, they relied on their recognisable brand and physical prominence to run their business.

Blockbuster’s culture was outdated and it cost them their existence.

The Blockbuster vs Netflix anecdote is not unique. There are countless examples of little upstarts usurping titans across a range of industries.

Two main studies that quantified Culture’s impact on commercial performance found that “Organisation culture is not a soft concept… Its impact on profit can be measured and quantified.” A study of 207 companies over an 11-year period, showed that companies who worked on changing their culture improved revenue by 516%, net income by 755% and stock prices by 827%.¹ This was backed by a 2011 Study by Harvard Business School Professor James L. Heskett which found that “as much as half of the difference in operating profit between organisations can be attributed to effective cultures”.²

To personalise these figures and assess the cost of culture to your own organisation, consider what it would mean to your commercial success if:

1. Employees consistently took ownership of business performance and didn’t cover-up problems?

2. Your customers became your greatest advocates and became your major referral network?

3. Employees regularly thought outside the box and found better ways to do things?

G E T T I N G I T R I G H TSo what does the value of culture look like in practice? Let’s look at the most obvious example. It is common knowledge that Google is a great place to work, consistently ranking number one globally. Google receives over 2-million job applicants every year making it ten times harder to get a job at Google than to get into Harvard.

Google has created a unique and immensely powerful people-centric culture around the idea of being “Googley”. As China Gorman, CEO of Great Place to Work Institute states “Google employees around the world, or ‘Googlers’ as they call themselves, understand that to be ‘Googley’ is to be unique, true to yourself, collaborative, and comfortable being around people that may be smarter than you.”³

This ‘Googley’ culture has become an immense competitive advantage and has assisted Google to attract and retain the cream of the crop in its industry. Need a figure to crystallise the commercial value of a ‘Googley’ culture? In 2015, the work produced by Google’s 61,814 employees result in annual revenues of $67.39 billion ($1.09m per employee). By comparison, Yahoo’s 12,500 employees produced annual revenue of $4.96 billion ($396k per employee), making each Googley three times as valuable as their colleagues over at Yahoo.

So if culture is so valuable, how can you harness your organisation’s culture so it becomes an asset and not a liability?

“A study of 207 companies over an 11-year period, showed that companies who worked on changing their culture improved revenue by 516%, net income by 755% and stock prices by 827%.¹”M I N I M I S E T H E G R E YThe culture we build is made up of endless messages we send and receive every day. Some are obvious, some a little less. As leaders, it is our responsibility to be intentional and clear about the messages we send. This includes:

1. The thought process we go through every time we make a decision;

¹ http://hbr.org/2003/07/what-really-works/ar/1² http://hbswk.hbs.edu/item/6818.html³ http://fortune.com/2013/11/29/what-makes-a-workplace-a- great-place/

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2. How we interact with others; and

3. How we spend our increasingly scarce time.

So what do we mean by ‘Minimise’ the ‘grey area’?

Culture is about setting clear expectations and enforcing those expectations. Make it clear what is expected, what is not tolerated, and help people understand what it looks like to ‘raise the bar’ on expectations. Importantly ensure your leaders ‘walk the talk’ and are clear and consistent about what is expected around here. Any behaviours that fall into the grey between what is expected and what is not tolerated, must either be defined as expected or not tolerated.

When a behavior is tolerated, like being late for meetings, not greeting each other, sending emails across the office for things that should be spoken about in person, not sharing knowledge across teams, or any other behaviour that is less than ideal, a pattern emerges. Over time, these patterns become the norm and dictate your culture. A good culture, starts with clear definition and enforcement of expectations.

S H A P I N G T H E M E SS AG EIf the messages we send are so critical to the culture we create, it follows that the role of leaders is to be purposeful and strategic about these messages. Aligning your culture to your strategic objectives is key. The culture that has made Google successful is different to the culture that has made Netflix successful. Transforming your organisation’s culture is about being clear on what your organisation is trying to achieve and tailoring your desired culture accordingly.

Weak Cultures‘Unclear Expectations’

Not Tolerated

Expected

grey area

Don’t just rely on describing what the future looks like and expect people to follow. In our experience many leaders are reasonably good at describing ‘what’ we need to achieve and ‘how’ we intend to achieve it. They are not good at sharing ‘why’ we need to change.

Making the case for change and engaging people in identifying what needs to change is key. This can be done in a compelling and engaging manner through a culture story that people can connect with and align to. Find language and descriptors that will resonate with your people. This culture story will form the foundation for your leaders’ communications around the ‘new’ ways of working. Clear and consistent messages over time, will change behaviours. It’s not rocket science, but it is challenging.

S H A R I N G T H E M E SS AG EDo not underestimate the importance of your leaders’ ability to share the story. Putting some inspirational words up on posters around the office may decorate your walls but it will not change your culture.

When Harvard professor and thought leader John Kotter studied change leaders, he found that leaders typically under-communicated their vision by a factor of ten. This means they communicated the messages 10 times less than their stakeholders needed to hear it. As Professor Adam Grant writes in his book ‘Originals’, “In one- three month period, employees might be exposed to 2.3 million words and numbers. On average during that period, the vision for change was expressed in only 13,400 words and numbers: 30-minutes speech, an hour-long meeting, a briefing, and a memo. Since more than 99 percent of the

Not Tolerated

Expected

Great Cultures‘Raise the Bar’


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communication that employees encounter during those three months does not concern the vision, how can they be expected to understand it, let alone internalise it?”

In our experience, too many organisations assume their leaders are good communicators and do not invest time and effort to ensure they truly can and do, communicate the message. This inevitably results in confusion and minimal change.

Find the natural leaders at different levels of your organisation who can drive the culture towards where it needs to be and empower them to lead the change. This means a clearly defined culture story and the training to be able to live and lead the desired culture. These culture leaders will need to ‘walk the talk’ and role model the desired behaviours while calling out behaviours that will no longer be tolerated. Routinely celebrating those who live the expected behaviours and using these interim-wins to create momentum. Remember, clear and consistent messages over time will change behaviour.

“Find the natural leaders at different levels of your organisation who can drive the culture towards where it needs to be and empower them to lead the change.”

A F I N A L WO R DCreating a positive culture in your organisation can be one of the most rewarding experiences of your working life. To create a great organisation that not only enriches lives but also achieves its vision and goals is a profound achievement. Seeing culture as your primary asset to achieve your vision will be the key to your success.

A B O U T C O M P O S U R EAt Composure we help, support and advise people in organisations to play at their best. We do this by developing clear strategies, great cultures and strong leadership.

The 3 important questions we ask are;

1. To what extent is your strategy clear, consistent and compelling?

2. To what extent do you have a well-designed and robust culture to successfully execute your strategy?

3. To what extent do your leadership teams have the capability to successfully lead the desired culture?

We partner with our clients to:• Create strategic stories that truly engage people

and customers• Define, assess and develop the organisational

culture needed to achieve their strategy• Develop the capability of team and individuals to

lead the desired culture and align people to the strategy.

For more information on Composure services please visit our website www.composuregroup.com.au or

call on 1300 680 878.


Alon Cassuto, ConsultantT: 0421 790 [email protected]

Jeremy Nichols, Managing DirectorT: 0419 548 [email protected]

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THE ELEPHANT IN THE ROOM - Composure