Posts Tagged ‘culture’

 Employee communications will undoubtedly be the hot topic of the next few years, especially in the reputation space. As leaders come to terms with the fact that employees can be their best advocates and worst badvocates, internal communications will rise to a new level. That’s a good thing because I think leader-to-employee communications is more immature than the art and science of external communications.  With all the technology we have, you’d think that employee communications would be more advanced. But it is not.  Research by Dov Seidman and the Boston Research Group surveyed thousands of employees at all levels. One of the more startling  findings was that 27% of bosses think that employees are inspired by their firm, when in fact only 4% of employees agree.  And 41% of bosses say their firms award people based on values rather than financial performance.  Only 14% of employees agree. Bosses have  much to do to get employees inspired and willing to go the distance to make their firms successful and a place others want to work at. Talent, leadership and culture are drivers of reputation. Time to inspire before it is too late.

One of the advantages of having worked at several companies is that you really get to understand how different cultures can be. In the newest strategy + business study — The Global Innovation 1000: Why Culture is Key, the researchers make the point that the most important ingredients in building an innovative environment is strategic alignment and a culture that supports innovation. They found after studying the world’s biggest spenders on R&D over seven years that “there is no statistically significant relationship between financial performance and innovation spending, in terms of either total R&D dollars or R&D as a percentage of revenues.” That’s a very revealing statistic. It is natural to assume that high R&D spenders would have the best bottom lines and most success. It just is not true.

Now that innovation spending is back on track after a poor economy, the authors conclude the following below. This is such a critical point for those wishing to understand innovation and what really is important in building a reputation for being a best place to work:

“Culture matters, enormously. Studies have shown again and again that there may be no more critical source of business success or failure than a company’s culture — it trumps strategy and leadership. This isn’t to say that strategy doesn’t matter, but rather that the particular strategy a company employs will succed only if it is supported by the appropriate cultural attributes.”

It always gets back to the people and the culture. The research is alot deeper than this but the quote above about culture trumping strategy and leadership just jumped out at me. I’d have to argue that the leadership provides the foundation for a culture that supports innovation and that leadership might matter even more than strategy but culture shapes success, and ultimately reputation.

I recently had a discussion with someone about self-inflicted and non-self-inflicted reputational disasters. Most of the reputation crises I have worked on and written about were self-inflicted because the early warning signs were there in the first place and leadership had an opportunity to change course. Unfortunately, the early warning signs were ignored or deemed inconsequential. An article in strategy + business, the Booz & Company journal, discusses the concept of self-inflicted black swans (a surprise occurrence that causes a major impact) and provides excellent food for thought.  Essentially, the author points out that there are ways to detect if the culture is ripe for these kinds of disasters and ways to protect against their occurrence. And it all gets down to the organizational culture or DNA. There are some very good suggestions such as clarifying who is really in charge of identifying risk exposure, aligning incentives so that people are rewarded for anticipating and disclosing risk and third, creating unfiltered pathways so that those at the top hear the “ground truth” and not just what they want to hear.

The bonus for me after reading the article was learning about some stats that the authors uncovered. Since I am always looking for good stats to illustrate the downside of reputational disasters, self-inflicted or not, I want to share here:

The unintended consequences associated with a self-inflicted black swan can be devastating. They include negative publicity; huge, sudden costs; lost revenues; lawsuits and criminal judgments; and regulatory penalties. Analysis of the stock prices of companies that suffered such events in 2009 and 2010 in the oil, automobile, aircraft manufacturing, and financial-services industries shows that within two months after a visible self-inflicted crisis, an average of 18 percent of shareholder value was lost, relative to the S&P 500. Moreover, stock price performance continued to diminish over time: On average, shareholder value came down 33 percent within a year.

A loss of shareholder value of 33 percent over a year’s time is catastrophic in my book.  It is worth learning how to prevent these unexpected surprises from occurring and figuring out how to turn these black swans into white ones.

 As the economy ebbs and flows, employee engagement is rising in importance. More CEOs are talking about it and thinking about new and creative ways to communicate with their workforces.  Some interesting stats surfaced from a survey of global HR professionals from Boston Consulting Group and World Federation of People Management Associations. [By the way, that sounds like a new term for the upcoming new year in 2011 -- Federation of (FILL IN).  I have not heard it used much except in connection with wrestling (WWF).  I might try to use it somehow myself -- Federation of People Interested in Reputation or Federation of PR Professionals or Federation of Reputation Recoverers.]

But back to the point of my blog post. HR executives were asked to rank priorities for the upcoming year and the findings were compared to 2008.  Take a look.  Enhancing employee engagement has risen over the past two years and for good reason (see below). Leaders need to build morale among the workforce which has been hit hard by the Great Recession and they need to hold on tight to their best talent. It makes sense to keep the dialogue flowing by engaging employees and listening to them.  A recent article in Strategy + Business about Zappos reflected on this idea of building the right culture. The head of business development and brand marketing is quoted as saying, “I read about how Zappos is focused on customer service. It isn’t. It’s focused on company culture, which leads to customer service. We don’t talk about customer service; we allow it to happen on its own by having the right people.” And I would add by taking the time to talk to employees and building an open culture.

2010 Ranking 
#1 Improving leadership development (#2 in 2008)

#2 Managing talent (#1 in 2008)

#3 Enhancing employee engagement (#7 in 2008)

Source: BloombergBusinessWeek (9.19.10 issue)

Interestingly and I should add depressingly, work-life balance suffered the most as an action item for HR professionals. In 2008,  it was #9 on the agenda and this year it was #16.  To build a reputation as a good place to work, employee engagement and work-life balance need to be linked. The Great Recession has knocked out work-life balance issues but I have no doubt that it will come roaring back in time. This next generation demands it. And we owe it to them.

  Harvard Business Review’s January issue features an interview about charisma and social signals that people send. Research by MIT’s Alex Pentland who directs the MIT Human Dynamics Lab found that social signals or charisma can be measured and matters (better to have than not). He and fellow researchers found that it’s not what you say but how you say it. High energy and a positive point of view can drive success. “Honest signals” such as people’s gestures, expressions and tone change the receivers of those signals and change their behavior. “The more successful people are more energetic. They talk more, but they also listen more. They spend more face-to-face time with others. They pick up cues from others, draw people out, and get them to be more outgoing. It’s not just what they project that makes them charismatic; it’s what they elicit. The more of these energetic, positive people you put on a team, the better the team’s performance,” says Professor Pentland.

I am a big proponent of more face-to-face communications from CEOs and senior officers. To me, the best reputations are built that way.  After all, aren’t we social creatures? In the HBR interview, a fact jumped out at me which business leaders should think twice about. The professor said that some of their research is showing that being face to face with colleagues is 2.5 times as important to success as additional access to information. In their research with call centers, they are finding a 10% increase in productivity by restructuring the environment to enhance more employee interaction. More positive or employee face to face and social interaction, listening and engagement delivers a higher return on investment. Although I am fairly “social” myself (have a blog, twitter and use email like crazy), I believe that the mix of face to face and electronic needs to find a better balance. CEOs really do need to walk the halls and send the right signals that show that they are listening to what’s on people’s minds. If I recall, there is a CEO who has “office hours” like teachers do. Not a bad idea.

Pentland ‘s research is not saying that charisma and energy alone can change company culture and performance. But he is saying that charisma and positive energy impact others, send positive signals that can charge up people and foster greater cooperation and collaboration. At least, that is how I read it.

 Took a vacation last week in the Berkshires. If you live in the Northeast of the U.S., you know that the weather was gloriously sunny and summery.  I am a lousy vacationer in the traditional sense.  All I wanted to do this vacation was catch up on my mile high reading pile. There are so many distractions and demands at work that I never feel that I am focusing enough on new ideas and insights that come from those random odd moments when a new idea jumps from a page into your head.  So I took my reading pile and dumped it all into a big LLBean canvas bag and got down to work after stocking the house with food and plenty.  I read Jim Collins’ popular new book How the Mighty Fall, several HBRs, BusinessWeeks, Fortunes, Forbes, The Conference Board Review, The Week, and several binder-clipped downloadable presentations and white papers on reputation and leadership that I wanted to review.  I can’t say I read everything but I did glance through what was going on in the world of business performance, reputation, public relations, internal communications, leadership, CEOdom, online everything, and so forth.  I was pleased with my own personal reading performance and think I mayhave hit on a new idea for vacationing – the reading retreat.  I bet there are many people who just want to sit without a laptop or smartphone and kick back with hard print. Maybe I am revealing my age but it sure was easy to concentrate and tumble ideas in my head that might have some sway in the months ahead at home and work.  My own reputation might be damaged from my reclusive behavior but I feel rested and relaxed.

In the June 2009 Harvard Business Review, I found an interesting interview with Alice Waters, founder of  the highly reputable restaurant Chez Panisse in Berkeley, California.  She has a smart way to retain and motivate staff.  Work cultures are critical to reputation-building and Waters definitely hit the right chord with her recruiting method. “The main chefs downstairs each work six months on and six months off, but I pay them for the whole year.  Not as much as a superstar chef, but pretty well. When they’re not working at Chez Panisse, they’re in France. One teaches in Bordeaux, and the other goes to Paris. They travel and then come back to the restaurant.”  As Waters says, the returning chefs bring back new ideas, new energy and new excitement into the kitchen.  When asked if she would keep this idea going despite the rough economy, she said absolutely yes. 

Most companies could not afford to pay people for taking half the year off but what is important to note is that job flexibility can do wonders in building a company or organizational reputation that benefits everyone – employees, bosses and customers.

I am part of a panel tomorrow in Cambridge talking about our new research on managing reputations online. Since I try to anticipate questions, I thought I would review which CEOs are blogging these days. I expect that someone might ask if CEOs should blog. Our research found that most executives say that less than 50% of corporate blogs are accurate. That may or may not be the case but I would add that any CEO who blogs has put their reputation on the line because it is easy to slip up.

Lately I have been fascinated by Zappos’ CEO Tony Hsieh. I have bought shoes from the online retailer and have to admit it was a great experience. My daughter is always buying from Zappos which is how I heard about them (word of mouth). The Zappos return policy is perfect for her because she gets 365 days to return shoes. Tony also twitters which is where I usually follow his comings and goings.  Zappos’ culture is all about the best customer service and the CEO says that culture is the brand. I think he has it right. I found this comment about their hiring process which says it all:

“At the end of the first week of training, we make an offer to the entire class. We offer everyone $2000 to quit (in addition to paying them for the time they’ve already worked), and it’s a standing offer until the end of the fourth week of training. We want to make sure that employees are here for more than just a paycheck. We want employees that believe in our long term vision and want to be a part of our culture. As it turns out, on average, less than 1% of people end up taking the offer.”

Reputations are built on many factors. Culture is certainly one and that is evident when reading Fortune’s Best Companies to Work For. Customer excellence is another prime factor. Zappos is a good best practice company for those interested in reputation-building.