How Company Culture Influences Business Performance
In today's business global landscape, one word has become a resounding chorus in executive strategy meetings.
It’s a word that holds the key to an organisation's success or downfall. And that word is "culture."
In a recent gathering of top executives from a Fortune-500 company, the term "culture" emerged 27 times in just 90 minutes, echoing the growing recognition among business leaders of the impact of a solid organisational culture.
However, despite its acknowledgment, culture often remains an enigmatic force, seemingly beyond the control of even the most seasoned leaders.
It is frequently managed based on instinct and gut feelings. But what if there was a way to demystify culture, making it more tangible, measurable, and manageable?
Fortunately, according to the co-authors of the bestseller “Primed to Perform”, Lindsay McGregor and Neel Doshi, understanding and harnessing the power of culture is a practicable task.
The authors have condensed their discoveries into the three following fundamental questions that can simplify the concept of culture:
Question 1: How does culture drive performance?
After extensive research involving surveys of over 20,000 workers worldwide and numerous experiments, the authors have reached a straightforward yet profound conclusion: the "why" behind our work significantly impacts our performance.
An illustrative study from 2013 helps to clarify this point. Researchers assigned nearly 2,500 workers the task of analysing medical images.
One group was informed that their work would be discarded, while the other group believed they were identifying "cancerous tumour cells."
The latter group, who believed to be identifying cancerous cells, were motivated by a sense of purpose that made them dedicate more time to analyse each image, even though they were earning 10% less on average. On top of that, the quality of their work was significantly higher!
After decades of academic research, the authors have identified six primary reasons why people work:
The first three motives enhance and drive professionals to high performance, while the latter three reasons act as impediments.
It was also observed that high-performing companies prioritise maximising play, purpose, and potential while minimising emotional pressure, economic pressure, and inertia.
Question 2: What is culture worth?
Building a business case for culture is feasible. While measuring attributes like creativity, proactivity, or resilience in the moment may be challenging, calculating "total motivation" is surprisingly straightforward.
By answering six questions, one for each motive previously presented, organisations can reckon their total motivation and evaluate its impact on performance.
For example, when assessing the total motivation of employees in the airline industry and correlating it with customer satisfaction, a strong connection was observed.
Cultures that nurtured play, purpose, and potential while reducing emotional pressure, economic pressure, and inertia consistently achieved superior customer outcomes.
This pattern extends across various industries, from retail to banking, telecommunications, and fast food.
In a hedge fund, the highest-performing managers exhibited higher total motivation, while in a retail organisation, high total motivation sales associates generated 30% more revenue than their low total motivation peers.
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Question 3: What processes in an organisation affect culture?
Crafting a clear definition of a high-performing culture can be challenging for many managers.
However, the authors suggest a practical one: culture encompasses the processes within an organisation that influence the total motivation of its people.
In high-performing cultures, these processes maximise total motivation. Still, it becomes evident that there is no one-size-fits-all solution.
Multiple processes influence employees' total motivation, ranging from job design to performance reviews. While leadership plays a crucial role, it is just one element of the puzzle.
For instance, role design can significantly impact total motivation. Well-designed roles can elevate "total motivation", while poorly designed roles can diminish it.
Some encourage play by allowing factory workers to experiment with new tools, while others grant employees the freedom to develop new ideas.
Furthermore, an organisation's identity, mission, and behavioural code can profoundly affect total motivation.
For instance, a global company specialised in medical technology, services, and enables their engineers to witness the impact of their medical devices, thus reinforcing a sense of purpose.
Lastly, the career ladder and promotion processes also play an important role. Performance review systems that encourage unhealthy competition reduce total motivation. For this reason, forward-thinking companies are moving away from such systems.
In essence, culture is an interconnected ecosystem where various elements influence and reinforce each other.
For instance, while sales commissions may decrease total motivation, if employees believe in the value of their work, commissions can enhance motivation.
How can leaders contribute to building a strong company culture?
Culture serves as an organisation's operating system. Senior leaders can establish and sustain a high-performing culture by coaching managers to lead in ways that motivate their teams.
Studies indicate that high total motivation leadership training can significantly boost performance.
CEOs should make a compelling business case for culture, allocate resources, and engage HR and leaders to enhance cultural elements, from role design to performance reviews.
Even without extensive process redesign, team leaders can enhance their employees' total motivation by:
Building a great culture is a challenging endeavour, but organisations that succeed gain a substantial competitive edge.
Culture should not be left to chance. It must be treated as an engineering discipline rather than a mystical one.
In the fast-paced, customer-centric, digital world, understanding and shaping a company's culture are essential for enduring success.
This transformative tool is helping organisations around the globe to enhance their performance through the profound influence of culture.
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