Business On The Ropes: Instilling a Culture of Consequences When Your Organization Has Lost Its Drive
When a business’s culture stagnates and complacency sets in, performance declines, growth stalls and existing customers sense the lack of drive and erosion of value. In situations where a business has lost its drive and begun to backslide, the cure is to begin the process of resetting to a performance-based culture – a move that can have a significant impact on an organization’s long-term economic performance. This article addresses instilling a performance-based culture as a means of improving upon product and service delivery and concentrating on three main components: goals, incentives, and measures.
Why Culture Can Degrade Over Time
It is well accepted among organizational theorists that companies with strong cultures outperform those without. Organizational culture usually starts with the style of leadership adopted from founders or senior executives of the organization, but that influence is quickly diminished over the life of the business as other coefficients of culture become more powerful.
Undoubtedly, culture is impacted by many factors. Sometimes corporate culture is nurtured by involved and caring management where it flourishes and sustains, while other times the culture gets dinged and damaged over the years to the point of being unrepairable. Among the many not-so-positive factors that might harm the culture are: major restructuring, mergers and acquisitions and frequent changes in leadership at the corporate level.
Factor 1: Mission Drift
Businesses naturally evolve and change. While that is occurring, executives come and go, key customers rise and fall in prominence to the overall business model and financial turmoil in the economy forces detours in business plans that were not anticipated. Change and evolution are good and to be expected, but over time, businesses can also experience “mission drift”. Let’s define that term for our purposes. In young businesses, the early years are spent on highly-focused activity, normally limited to the organization’s core competencies and intended purpose. As the business experiences prosperous years of growth, the organization’s workforce expands to keep up. Roles change as key resources stretch to take on new responsibilities and try to transition some of their knowledge about their old role to someone else. Interpretation creeps in. So does improvisation.
It is at this point that the original organizational culture and initial passion that the business has grown up with gets a test, as potentially damaging dilution of those attributes begins to occur as fresh blood being pumped into the environment. It is also at this inflection point that culture can begin to transform. Sometimes the change is positive. New ideas are added to the mix and innovation is revitalized. The key is to take measures to preserve the core essence of goodness that allowed the growth to transpire in the first place and keep the culture fresh, vibrant and reflective of the values and strategy held dear by the business.
Factor 2: The Relentless Charge
The relentless charge to expand creates fatigue and burnout within the organization and can also lead to an exhausted and ambivalent workforce that is detrimental to growth, innovation and operational excellence of our business. That does not mean that we cannot push or should coast along and slack-off in regards to advancing the betterment of our businesses. However, it does mean that we must have a formula mixed correctly in order to fuel our business for the long-run. We need to think in terms of running a marathon and not a sprint. Given that, the formula must be calibrated to the culture and it must also be attenuated to our business strategy and goals.
During boom times, business leaders must listen to the signals our business is sending us. Organizations get tired and need rest cycles too. Not quite the same as we humans need rest, but instead, organizations cannot endlessly expend energy without replacing it along the way. Like humans, businesses need cycles of work and then rejuvenation. Constant full-speed acceleration, without maintaining the organizational pistons, will wear out the engine and momentum will slow. This means that balance is needed between the need to constantly move the organization forward and the need to recharge energy and celebrate successes along the way.
Factor 3: Complacency
One of the biggest enemies culture faces is complacency. Complacency can come from having reached a level of comfort that accompanies some degree of achievement and feeling of success. Once significant achievement milestones has been reached, employees throughout the organization sometimes gravitate towards remaining where it is comfortable and feels safe. Why risk what we’ve worked hard to get? Complacency develops out of our natural desire for the predictability of a routine over the uncertainty of change.
So why is it that complacency is a cause for concern? The primary issue with complacency is that we cannot remain in a fixed position when our environment is moving and changing around us. To do so guarantees that we will be passed by competing businesses that embrace change. Businesses that do not systematically strive for improvement and growth will plateau, stagnate and then decline. Those businesses that continue to reach beyond the status quo and adapt to evolutionary changes in their environment (markets, economic developments and emerging trends) will thrive.
Strong leadership during growth periods is essential to curtail strategic dilution and avoid organizational complacency (one of the negative outcomes of uncontrolled growth). To understand why, let us examine the potential impact of poor leadership.
Non-proactive leadership during a growth period can slowly erode confidence throughout the organization and lead to complacency and disconnectedness. So why would business growth possibly lead to complacency and disconnectedness?
It may seem counter-intuitive, but these outcomes show themselves when people begin focusing on the wrong things as a result of the business-essential tacit knowledge held by the original core team (the same team that had helped keep the ship on course early on) being stretched and worn thin. Some workers begin to feel overworked, while others may feel vastly underutilized.
So what do you do when your organization’s culture has been pummeled and is no longer reflective of the workplace that once was?
What’s The Ideal Target?
Clearly, a broken culture must be addressed by changing it, but that requires a vision of the target culture be in place before attempting any transformative actions as well as a realistic plan for change. Ultimately, the goal of the cultural reset is to create a strong and positive culture that is well-aligned with the organization’s core values.
A strong organizational culture is one that is extremely well aligned to a common set of core values, making policy and procedure changes easier to introduce. However, rigidity and groupthink are two risk factors that accompany strong organizational beliefs and corporate dogma. Having a strong culture is certainly preferable to a weak one, but is not entirely the optimal situation.
A healthier model is the performance-centric culture, striking a balance between the desirable attributes of a strong culture and the equally important ingredients of goals, incentives, measures, flexibility and acceptance. A performance-centric organization allows for and promotes diversity in thought and business innovation but does not tolerate complacent behavior. Such organizations have developed corporate mores that promote accountability and reward performance target achievement while accepting and embracing challenges to the status quo. In such organizations, bureaucracy and groupthink are viewed as the demons of innovation that must be kept in check in order to allow fragile new and game-changing business ideas to survive and one day be implemented.
Research shows that organizations with performance-centric cultures experience better financial growth. One such study, conducted in 2003 by Harvard Business School, reported that culture has a significant impact on an organization’s long-term economic performance. The study examined the management practices at 160 organizations over ten years and found that culture can enhance performance or prove detrimental to performance. Performance-centric organizations witnessed far better financial growth. Another study, conducted in 2002 by the Corporate Leadership Council, found that cultural traits such as risk taking, internal communications, and flexibility are some of the most important drivers of business performance.
The Reward: A Culture With A Bias For Action
Make no mistake, transforming a culture is not easy and requires an organization to seek change. Unfortunately, an organization mired in mission drift, exhausted from the relentless charge and / or suffering from complacency is not an ideal patient to respond quickly to treatment. Conditions that developed over a long period of time will require a careful and paced culture change program as opposed to an attempt to introduce quick fixes that create more disruption and distraction.
For those organizations that succeed in change, the rewards are enormous.
Realizing the Benefits
Performance-based cultures unify employees and naturally bridges organizational gaps such as hierarchy or geography. In a performance-based culture, the organization feels and behaves much like a family. This commitment helps guide employees to do the right things right and strive to advance the business in the absence of explicit direction.
Perhaps most importantly, employees in performance-based cultures demonstrate a marked bias for action – remaining fundamentally dissatisfied with the status quo and thinking and acting more like owners of the business. They show accountability and take personal responsibility for overall business performance and not just their own domains. As such, the culture tolerates very little bureaucratic debate and expects team players who display high levels of passion and commitment to achieving organizational goals.
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