“Culture eats strategy for breakfast.” – Peter Drucker

We’re not going to lie. Improving workplace culture is hard. A healthy culture can’t be bought, and it can’t be mandated. Every company has a culture. Great ones are earned.

Whether your culture is toxic, or you just want to find ways to lift it up, this post is about why and how to transform what equates to the DNA of your organization.

The Rewards of a Fantastic Culture

Before we get into the details of how to transform your culture, it makes sense to have a look at why you should bother. What do companies with healthy cultures enjoy that others don’t?

Engagement

People spend a significant portion of their lives at work; they want a positive workplace culture. When people feel supported and comfortable in their organizations, they start to engage emotionally and commit discretionary effort. The last thing you want is employees who are working only hard enough not to get fired.

Financial Success

Company culture affects the bottom line. In fact, according to a Gallup meta-analysis of 1.4 million employees, companies in the top quarter of employee engagement are 22% more profitable than those in the bottom quarter. If that’s not convincing enough, the same study confirms that engagement can lead to improved customer interactions, meaning that your customers are also experiencing the benefits of your culture.

High levels of employee engagement can boost revenue 2.5x. That astonishing finding was part of a Hey Group study that also found that engaged and enabled employees are 50% more likely to outperform expectations.

Recruiting

These days, culture is a high priority for applicants, and they have lots of ways of learning about your organization’s culture before deciding to come on board. If you look at reviews on Glassdoor, you will see little to do with products or financial performance, but you’ll see a ton of remarks about culture. Job seekers are looking at company values and personal growth opportunities as much as they are looking at perks and benefits. When Netflix created its culture code, which has gone viral, they did it as a recruiting asset.

Retention

Employee turnover is expensive; $11 billion are lost annually to employee turnover. Gulp. Employee turnover is a quantifiable cost that is often directly related to unhealthy workplace cultures. One researcher found that too little feedback and coaching was the third most common reason that employees leave companies. When you invest in your company culture, you signal commitment and caring. People who feel valued in their work are likely to stay, even when times are tough.

How Leadership Influences Company Culture

Most leaders understand the connection between business culture and business performance and studies show that many CEOs consider it as crucial to success as strategy. But, if the results of employee engagement and satisfaction studies are to be believed, it is clear that not everyone is aware of how leadership influences company culture and how to bring about meaningful change. Understanding exactly how leadership influences company culture can help CEOs develop a plan to strengthen it.

Reflections in a Mirror

People who teach communications often advise students to mimic the pattern and mannerisms of the person they are speaking to. If the other person speaks softly and slowly, speak softly and slowly. This is an effective method of relaxing the other person and getting them to open up. Whether consciously or unconsciously, employees tend to mirror leadership. If leaders are lively and energetic, so too is the staff. If senior executives are serious and withdrawn, the team will reflect those traits. For this reason, it is very difficult to create a culture that is disconnected from the temperament of the C-suite.

Value Judgment

Employees look squarely at leaders when determining if a company’s values are more than just nice words on a slide. If, for example, a company says that it values quality, yet leaders insist on delivery time-frames or resource limitations that undermine quality, employees will reason that the value statement is meaningless and ignore it. If leaders want employees to make decisions based on the organization's core values, they must do the same.

Appetite for Innovation

Fear of failure is the number one killer of innovation. Innovative ideas are new and risky by definition. Leaders who demonstrate intolerance for failure kill innovation at its source and create a culture that values stability over creativity. In well-established companies with commoditized products, this might be fine. But, most modern businesses must innovate to compete.

Accountability Credibility

One of the most common reasons employees list for leaving their jobs is that management allows incompetent, disruptive or nonconstructive employees to stay. People want themselves and others to be held accountable. Leaders who shy away from the responsibility of removing under-performing staff create a culture of ambivalence. Strong players who expect more will simply leave.

Company culture is a deeply ingrained set of behaviors and attitudes. It is not an HR program. Assessing how leadership influences company culture is an excellent place to start if your organization wants to change or strengthen yours.

Signs of a Culture in Crisis

What do a lack of engagement and low expectations actually look like? There are some tell-tail signs that something within the culture is amiss. They include:

Lack of Communication

Communication is an important signal that goes both ways. If employees aren’t kept up to speed on what’s going on in the organization, they tend to check out mentally and do only the bare minimum. When leaders ask for feedback and hear nothing, that doesn’t mean that everything is fine. It means the people either don’t care enough to speak up, or they are afraid of the consequences.

High Levels of Turnover and Absenteeism

The bottom line is that when the culture sucks, people don’t want to be at work. They will minimize their time around negative energy one way or another. That’s why turnover and absenteeism are important performance indicators for those tracking the health of an organization.

Over-Reliance on Rules

If your policy manual is as thick as the dictionary, you might have a culture problem. Some organizations find themselves trying to legislate themselves out of poor morale and low standards. For example, if you find that you need to prohibit people from taking PTO on Mondays, or if it becomes necessary to put up a million signs about housekeeping in the break room, the problem is probably bigger than you think.

One note, this does not mean that you should not use Standard work. We’re talking about the need for rules to govern behavior, not the best practices that form the basis of process improvement.

Strict Observance of the Hierarchy

One of the things that high-reliability organizations know is that expertise trumps the org chart. When the culture is ailing, people tend to use the hierarchy as cover, and you’ll hear phrases like, “That’s above my pay grade.”

The Rumor Mill is Rampant

When effective communication and transparency are absent, folks will find a way to fill the information void. Talk at the water cooler heats up and disconnected, unhelpful misinformation spreads quickly.

Practical Steps to Begin a Culture Transformation

So, if you recognize any of these signs of trouble, what can you do to spark positive change? Here are some critical steps.

Don’t Confuse Culture and Perks

If you want to offer your employees unlimited vacation, gym memberships, gourmet cafeterias, pool tables, and the like, go ahead. But don’t think that these perks will overcome a work environment in which people don’t feel set up to do their best work. Perks are great, but they will not make up for lack of respect and caring about employee well-being and development.

Manage Culture Improvement Like Other Opportunities

Culture isn’t a process, but you can apply many of the tools you use to support continuous improvement to cultural transformation. Like other improvement projects, it needs an owner, and input from the people who do the work. Lean techniques like Catchball and the 5 Whys can be applied to making your organization a great place to work.

Create a Shared Sense of Purpose

The Towers Watson Global Workforce Study looked at how engaged and disengaged employees differ and uncovered some of the reasons employees become less engaged. Having a clear understanding and timely feedback about how the individual is impacting the company is a clear driver of engagement. In fact, 88% of engaged employees report that they understand how their contribution relates to business goals.

Recognize and Reward the Behaviors You Want

This seems simple, but when culture starts to fail, leaders tend to focus more on the behaviors that are causing problems than those that are what the organization needs. For example, if someone suggests an opportunity for improvement in a healthy culture they are rewarded with gratitude. In a toxic culture, they are called out of line.

Hire Carefully

Although leaders are the drivers of the culture, it is still the sum of its parts. It is essential to hire people who will reflect the values of your organization. Culture should be a part of every interview. Mistakes will be made; however, so strong culture leaders know that you shouldn’t put up with brilliant jerks. Negativity, defensiveness, finger pointing, and apathy are like weeds. Eliminate these attitudes before they kill your culture even if it means showing those who won’t get with the program the door.

Encourage People to Fail Forward

We said earlier that the fear of failure was one of the biggest barriers to innovation. But innovation requires experimentation, and most experiments fail, but in that failure comes learning. It is much better for your team to be frequently failing than never trying new things.

Increase Individual Market Value and Embrace Alumni

Of course, we’d all like to believe that our best employees will be with our companies forever, but this is just not the case. Sometimes employees will be promoted within your organization, and sometimes they will be promoted out of it. That’s ok. If you lift individual market value for your employees by providing ongoing education, big challenges and broad exposure you will create advocates both inside and outside of your organization. Even if an employee leaves, treat them as an alumnus, not a trader, so their advocacy lasts beyond their tenure. It’s a brilliant way to demonstrate to current employees and recruits that the company cares about them as people as well as team members.

Make Feedback Constant, Not an Annual Event

It’s no wonder that employees who are given feedback only as part of their annual performance review feel defensive and sometimes betrayed. Feedback should be a regular part of day-to-day work so that employees can evolve and ensure that they are meeting expectations. Withholding relevant information about employee performance is not useful to anyone.

Companies that are Nailing It

Hubspot

“We give people a lot of clear direction on our end goals. We tell them where we want them to end up, we give them the destination, but we don't prescribe Google Maps style or Waze style exactly how they should actually get there." - Katie Burke, HubSpot's chief people officer

Hubspot is a marketing automation software solution. (Full disclosure, we use it, and we love it.) Their “Culture Code” slide deck has been shared countless times. The themes of the code are autonomy and respect.

Here are the primary tenets of the Hubspot Culture Code (it's worth reviewing):

• Culture is to recruiting as product is to marketing
• Power is now gained by sharing knowledge, not hoarding it
• Sunlight is the best disinfectant
• You shouldn't penalize many for the mistakes of the few
• Whether you like it or not, you're going to have a culture. Why not make it one you love?
• Results should matter more than where or when they are produced
• We'd rather be frequently failing than never trying

Zappos

"At Zappos, we really view culture as our No. 1 priority. We decided that if we get the culture right, most of the stuff, like building a brand around delivering the very best customer service, will just take care of itself."- Tony Hsieh, CEO

Zappos is as famous for its culture as it is for the shoes that it sells online. What does that culture look like?

Half of the decision about whether to hire a candidate at Zappos rests on a cultural fit interview. New employees are offered $2,000 to quit after the first week of training if they decide the job isn’t for them. Think about it for a second. It’s so essential for Zappos to have employees who want to be there; they will take a significant hit to weed out those who don’t. Employee raises are given based on skills tests, rather than office politics. Finally, Zappos has a budget dedicated to culture improvement and team building.

REI

“Purpose drives everything we do at REI. It creates strategic alignment, it guides how we build relationships with our customers, and it’s core to how we attract and retain talent. Our belief that a life outdoors is a life well lived anchors everything.” Jerry Stritzke - CEO

REI is a company that puts its money where its mouth is when it comes for the love of the outdoors. REI’s mission is to equip both customers and employees for the outdoors, not just to have fun but also in promoting stewardship of the environment. Employees can win equipment by submitting a proposal for an outdoor adventure that would be challenging. Townhall-style meetings are a frequent event, and employee feedback is welcomed.

Improving workplace culture is tough work, but the rewards are boundless. We’re with Hubspot on this one. You’re going to have a culture anyway. Why not make it one you love?