Last year, glassdoor published a list of the top 25 companies for culture and values. It’s populated by such names as Chevron, Twitter, Disney, Google, Apple, and Facebook. These same names, you will notice, also top the list of companies ranked by market valuation.
This correlation isn’t just incidental, either. James Heskett, Professor Emeritus at Harvard Business School and author of The Culture Cycle, stated in an interview that culture can affect up to 50% of a business’s profit. The implication is clear: many of the companies with the best cultures are also the most successful.
Last week, I discussed some principles of hiring, including the importance of hiring for cultural fit. But what culture do you want to develop in the first place? How can you emulate companies with strong cultures?
Here are some of the things you need to know as a business owner, founder, or executive in order to shape an effective company culture.
Have a clear mission statement
Southwest Airlines is known for their strong corporate culture, which some believe is responsible for its continued success even in times of crisis for the airline industry. For example, it was the only major airline to remain profitable after 9/11.
Let’s take a moment to consider this case. How was Southwest able to do this? True, Southwest secured lower fuel costs to keep their ticket prices competitive. But if you consider why airlines suffered in the wake of 9/11, one of the big reasons was a loss of trust by consumers.This was irrational – statistically speaking, 9/11 did not greatly increase the risk of air travel – but the ubiquity of airplanes crashing, played over and over again in the media, had an emotional impact on travelers that was very powerful. But because Southwest’s culture was so strong, its customers trusted it enough to overcome these misgivings.
What are the things that contributed to Southwest’s culture and allowed it to weather this industry crisis? First and foremost, having a clear mission statement from the very beginning played a big part Southwest’s cultural development.
As Professor Heskett points out in his interview, “cultures generally reflect the beliefs and behaviors of the founder of the organization.” Southwest Co-Founder Herb Kelleher exemplifies this point in the way he approached managing his business.“I tell my employees” he once declared “ that we’re in the service business, and it’s incidental that we fly airplanes… We treat our passengers well.” Southwest’s mission is to make the customer experience its first priority.This is a memorable, clear vision that everyone in the company can work towards, from the CEO, to the pilots, to the check-in counter agents.
Kelleher’s mission statement was adopted wholeheartedly by his successors, including former Southwest CEO James Parker, who explained how Southwest’s mission shapes their corporate culture in an interview over at Bloomberg:
“We tried to define it as a grand mission. We weren’t just carrying passengers or freight. We were giving America the freedom to fly. We tried to give [the employees] an understanding of how their role fit into that mission and how they contributed to that mission.”
Because of that understanding of a grander mission, Parker went on, employees were more motivated and felt the value of their contributions. That’s because employees feel a sense of accomplishment when they realize exactly how their efforts directly impact their customers. What’s more, it reduces friction between co-workers when they have a sense of common purpose and appreciation of each other’s roles.
Construct core values
A clear and powerful mission statement can help lay the foundations of a sound company culture, but it is not sufficient on its own. Values are also crucial in laying cultural foundations.
COO of Gnip Chris Moody thinks that values are the single most important component of corporate culture. Values need to take on a particular form in order to be effective. Moody argues that the most effective values comprise a short but memorable list that is unconventional and require sacrifice to uphold. Classic examples of this include Google’s “Ten things we know to be true” or McKinsey’s shorter but also admirable “what we believe”.
These values should reflect your overall vision for your business in a way that allows everyone in the organization to make the hard choices according to your mission priorities. Publishing them in a clear, short, and easily accessible way will make your company more accountable and cognizant of its core principles. This can also prevent them from being seen as meaningless platitudes.
Consider the above examples. Employees at Google and McKinsey can all easily access, understand, and remember the values that their companies hold as the most important. When they make difficult business decisions, they know that basing decisions on the company values can be justified if that decision undergoes criticism of scrutiny.
For instance, imagine a Google employee under fire for not seizing a short-term opportunity because it was too cutthroat. That employee could simply appeal to the company value “we believe that you can make money without doing evil” to dispel the controversy. As a guide in difficult and risky business situations, core values motivate employees across the company to adhere to the company’s mission. They set examples for their co-workers in doing so, encouraging cultural consistency across large organizations.
Eliminate internal barriers
A crucial component of James Parker’s strategy at Southwest was to prevent hierarchy and compartmentalization from dividing the company. Although the existence of different roles within a modern corporation is crucial to its ability to conduct business, it can create a mentality of division that damages corporate culture by eroding employee’s sense of belonging to a greater whole.
Parker was able to accomplish this by taking several concrete steps. For one, he educated his employees about the roles others were playing during orientation. This reduced the tendency of people to undervalue the work that others were doing and the suspicion that they might be slacking on the job. In businesses with many different departments or teams, interdepartmental resentment can be a serious obstacle to maintaining a pervasive company culture and vision.
Another common obstacle to unity of vision is hierarchy.While corporate hierarchy is necessary in roles, that need not translate into a separation of values and identities for employees at different levels. Southwest decided to overcome this obstacle by not having an executive dining hall, so that executives could be seen sitting and having lunch with other employees. Even a small spatial adjustment like this can make a difference.
It can be tempting to think of company culture as a soft aspect of business. But with such a high rate of ROI and an up to 50% impact on a business’s bottom line, culture is actually one of the most important responsibilities of executives and business founders. Ensuring that your business has sound values, a powerful mission statement, and integration at all levels of employment will surely lay the foundations of a great corporate culture and a successful long-term business life.