Edgar Schein, a former professor at MIT Sloan School of Management, put forth decades ago what is perhaps the bedrock definition of organizational culture. Here is the first part of it: "A pattern of shared basic assumptions learned by a group as it solves its problems of external adaptation and internal integration."
A simpler way of putting it: Corporate culture is the discretionary effort employees give when the boss isn't looking.
For any middle market firm to achieve long-term success, its corporate culture must be locked in throughout and across departments. Consider this: Every culturally disengaged employee at a middle market firm brings a substantially higher probability that customers will have an experience that doesn't match the company's credo. This not only raises the chances of lost immediate and/or future revenue from that customer, but also makes it more likely that the customer will share a negative experience via word of mouth and technology outlets, poisoning the impressions of countless prospects. So a middle market firm that lacks strong cultural alignment among employees will face increasing headwinds that, in time, could become too strong to overcome.
In light of this, company leaders must act to make real the second part of Schein's definition of corporate culture: "A pattern [of shared basic assumptions] that works well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those [external and internal] problems." At companies where this happens, people not only know what they should do - they also understand why they should do it, boosting satisfaction first for employees and then for customers, and creating a virtuous cycle.
Executives who drive the establishment and maintenance of a strong corporate culture by way of diligent hiring, clear expectations, oversight that still allows for autonomy, honest feedback and sincere recognition - as well as holding themselves openly accountable to the firm's cultural tenets - will develop an organization that occupies the correct side of what is a zero-sum game. Your corporate culture either helps you versus your competitive set, or it hurts you. There is no middle ground.
Leveraging "The Fingerprint" for Profit
A 2006 executive report from Bain & Company titled "Culture as Competitive Advantage" noted that "it's tempting to imagine that all high-performance cultures look alike. They don't - and that is part of their power. To be effective, a high-performance culture must be tailored to the business that the company is in." Examples: Apple's is innovation; Coca-Cola's is reliability; Ritz-Carlton's is flexibility. "A high-performance culture is as unique as a fingerprint - and the one thing about a business that rivals cannot copy."
One of the firms routinely lauded for a corporate culture that drives competitive advantage is Southwest Airlines. Micah Solomon, a customer-service consultant and author of the recent book High-Tech, High-Touch Customer Service, says their "strong pro-customer culture is the ultimate competitive advantage because it helps retain customers, increases per-customer spend, and draws additional customers who are recruited by existing customers who became brand ambassadors."
Furthermore, such an environment turns employees into brand ambassadors, too, which leads to better employee-recruitment opportunities in both number and quality. "And the best part is that these advantages are 100-percent knockoff-proof; Southwest is never worried about being copied." In fact, this was tried - and it failed - multiple times: Shuttle by United; Ted, a division of United; Delta Express; Continental Lite. "All were set up to try to take market share from Southwest; none of them exist today. Why? They wouldn't buckle down to create the relentless culture of Southwest," Solomon says. "Competitors won't take the time or expend the resources to create a true customer-centered culture - and one that matches that firm's personality, too."
A strong culture "is the emotional path by which a company's vision and priorities spread from top to bottom," said the Bain & Company report. "It's the organization's soul, shaped through success and setback." And while a firm's heritage certainly plays an important part - especially at many middle market firms - culture must also be molded and actively managed by leadership.
Take the Zimmerman Agency in Tallahassee, FL, a 162-person marketing, PR and advertising firm with $160 million in annual revenue. Carrie Zimmerman, its co-founder, was a member of the 1976 U.S. Olympic gymnastics team. She describes herself as "creative and high-energy," attributes which she and her people exude both within the firm's offices and to the outside world. This culture has thrived for 26 years in large part because of a discerning hiring process that looks for personalities and skills that match what the firm is known for: high-energy, creative ideas and campaigns. As a result, employees relate well not just to the work but also to each other, resulting in strong job satisfaction and corresponding high discretionary effort.
What's more, the agency's unique selling proposition relies specifically on displaying the firm's culture during presentations. "The agency is famous for its over-the-top, themed Halloween and Christmas videos that involve every employee," Carrie Zimmerman says. "Whenever we have potential new business who is not planning to visit Tallahassee and won't experience our culture firsthand, we present them with one of those videos so they can witness a slice of 'the Z life.'"
In early 2012, the firm presented such a video while trying to secure the entirety of Aruba's public relations business. "The message we wanted to get across was that our people work hard, and play hard, and do it together. The exuberance they invest in their work is a reflection of our culture as a whole," she says. "The Z DNA is to excel in creativity in a way that will strategically disrupt the marketplace."
Zimmerman does acknowledge that "it can be a bit risky sometimes" to be so up-front with prospects. And at the conclusion of their first meeting, Aruba's decision-makers "seemed a bit shocked." But nearly two years later, "our client is still telling people about these unbelievably choreographed videos, and how different they were from what other firms had shown them. We captured our Z DNA in that way such that the client understood we would put it to work for them too."
Culture Can Produce Business From the Rearview Mirror
Even in firms where many employees are aligned with the culture, leaders who redouble their effort to get at least some of the disengaged to buy into the firm's culture can benefit both a firm's momentum and its bottom line. To wit: A Towers Perrin report from some years back found that just a five-percent increase in total employee engagement correlates to a 0.7-percent increase in operating margin. So termination doesn't need to be the first solution when trying to align more employees with a firm's culture. Perhaps all it takes is a review of how leadership is implementing each building block of culture, to find areas that could use an adjustment.
Then again, in firms with the strongest cultures, even terminated employees can be a driver of revenue. Consulting firm McKinsey & Company has an "up or out" culture that does not tolerate employee complacency, yet also offers much career-development assistance. But for those managers and executives who are let go, the firm helps them find work at other companies. Considered "alumni" by the firm, they are held together as a network via communication vehicles and events run by McKinsey.
"This respect translates into significant business sent to McKinsey by its alumni and immeasurable amounts of goodwill" that keeps the firm's name swirling through many industries, noted Sally Krawcheck, former head of Smith Barney and Merrill Lynch, in a recent blog. "While the financial returns on culture can be impossible to quantify, this is one area in which they are most certainly positive."
Rob Carey is an NCMM contributor and a featured writer who has focused on the business-to-business niche since 1992. He spent his first 15 years at Nielsen Business Media, rising from editorial intern to editorial director. Since then, Rob has been the principal of New York-based Meetings & Hospitality Insight, working with large hospitality brands in addition to various media outlets.