We see it play out before us every day. Organizations in the same market with similar or identical goods or services, yet one is thriving and the other is barely surviving ― or, put another way, one is healthy and one is not.
Somewhere around 2010, after the publication of the Epstein, Buhovac, and Yuthas Strategic Finance article, “Implementing Sustainability: The Role of Leadership and Organizational Culture”, business leaders began to realize the role the culture of an organization plays in its ability to succeed. Their research confirmed what we already knew intuitively and mostly reported on what already existed in terms of culture within the researched organizations both healthy and unhealthy. While it’s great to study these successes and failures, leaders must also know how to take an organization from where it is to where you want it to be and keep it there in a sustainable way.
Sales and efficient systems are table stakes in today’s highly competitive, global markets. Access to market research and business systems formerly available only to the largest enterprises are readily available and affordable these days. So why do some organizations thrive and others simply survive?
The answer is organizational health.
Healthy organizations are aligned around a shared vision, effectively execute on that vision, stay relevant through innovation, and are intentional about their organizational culture. According to McKinsey & Company research over a 9-year period, these organizations out-perform their peers by 300%. While shared vision, effective execution, and innovation are essential, the catalyst is culture.
Every organization has a culture, but here’s the key. In my experience of working with organizations around the world, it is the intentionality about the organizational culture that will enable or inhibit the other components of organizational health.
So here are 5 essentials to creating a healthy organizational culture.
- Define It – The culture of an organization is simply the understood norms for behaviors and attitudes within an organization. Think of your best employees or co-workers. What are their normal behaviors in the workplace? What are their attitudes? Start by writing those down and combine and delete to get to the top five to seven behaviors that define the ideal member of your organization. These should be non-negotiables. Remove the “nice to haves” from the list. Once the list is made, everyone in the organization from top to bottom should know and understand the final list.
- Model It – If you are not willing to model the behaviors you just listed and be held accountable by anyone in or out of your organization, then you can stop here. You are either intentional about creating a healthy culture in your organization or you are not. You must begin by modeling the norms you want in your organization. If the current mess has been caused by people modeling your behavior up to now – acknowledge it, explain why it’s not what is needed, and commit to being held accountable like everyone else. I know it’s a big pill. Sometimes we are our own biggest problem and need some strong medicine.
- Reinforce It – The behaviors need to matter. They should show up as standards as you are making tough business decisions. They need to be incorporated into performance reviews, and performance reviews should impact compensation. Consistent failure to exhibit the defined behaviors of the organization should result in termination. This has the potential to lead to some difficult conversations with high performers as well as those you want to leave. You will be tempted to justify the bad behavior of the high performer – don’t. If your people see you willing to compromise on your core behaviors, it will have the opposite effect of what you want. Compassion is holding people accountable. This step will not work sustainably or effectively without step 2. You may have people react for a while, but your best players will soon find a less hypocritical place of employment leaving you with all the folks too scared to leave or who no one else will hire.
- Recruit It – These core behaviors should be so essential to your organization, you figure out ways to determine how well potential hires have been living them out already. That means you are going to have to examine your recruiting process and implement systems to do this. You may even need to engage a recruiting specialist through CXO5 or another firm to help you design your recruiting process in such a way that you achieve your objectives without violating the law. If you hire people who have a history of not exhibiting your cultural behaviors, what message does that send to your organization? How hard is it going to be to get them to change behaviors inconsistent with the core behaviors of your desired culture? It’s much easier to hire for fit from the beginning.
- Engage It – The fifth key to creating a healthy culture is getting the organization to own it. We’ve had clients do all kinds of cool things to engage their teams and create ownership of the core behaviors. Some clients have a behavior of the month and nominate co-workers with the winner or winners getting a cash prize. Others have engaged the artistic side of their teams to find ways to represent each of the core behaviors in a creative way. There is no limit to how creative you can get here so long as that creativity doesn’t run counter to one of your core behaviors. The key is engagement to create ownership.
Creating a healthy culture takes intentionality and consistent, hard work. It begins by getting everyone on the same page to define it. Then ALL the leadership needs to model it. The decision-making and evaluation systems of the organization should reinforce the desired behaviors, and, when you are making a new hire, recruit someone who is already living them out. Finally, create ownership by engaging everyone in the organization in understanding the core behaviors, owning them, and holding one another accountable to them. A proven framework exists that has helped thousands of companies create strong organizational health that skyrockets revenue. Learn more about Entrepreneurial Operating System.
Yes, it’s hard work, but the payoff is absolutely worth it.