MANAGEMENT SPECIAL Improving Company Culture Is Not
About Providing Free Snacks
What’s the difference
between culture and employee engagement? It’s a good question. Many people use
the two terms interchangeably. In their minds, the term company culture is
synonymous with free food, foosball tables, and other workplace perks deemed to
improve the employee experience, increase satisfaction, and drive greater
commitment to the company. There is, of course, a lot more to employee
engagement than workplace goodies. Employee engagement surveys typically ask
about factors such as empowerment to make decisions, freedom to innovate, and
work–life balance. There is some evidence to suggest that high
scores on these issues make a difference to a company’s bottom line. According
to Gallup's
2016 Q12 Meta-Analysis report,
business units in the top quartile in terms of employee
engagement outperformed business units in the bottom quartile by 21 percent in
profitability.
However, simply changing a
culture in an effort to improve employee engagement won’t necessarily lead to
improved business performance. In fact, treating engagement as the goal of
culture evolution can have a negative impact. That’s because although there are
widely recognized drivers of engagement that are independent of strategy or
industry, the cultural drivers of success differ widely from
company to company. The same behavior can drive success at one company while
hampering success at another .
We’ve
learned through our work at the Katzenbach Center that the key to unlocking
performance via organizational culture is
to align company culture to business priorities. This requires the selection of
a “critical few” behaviors that enable the desired business outcomes.
When these behaviors are coupled with structural and process changes that
support them, the entirety of these changes have an impact on the employee
experience. Using culture to drive performance thus requires emphasizing
elements of the employee experience compatible with desired business outcomes,
and downplaying non-compatible elements. Whether the elements of the employee
experience that drive performance also drive increased engagement is of
secondary importance. Employee engagement should be regarded as a byproduct of
culture evolution efforts rather than a tangible goal of them.
A company in a fast-moving industry like social media that must
continuously come up with new and better products needs to encourage
risk-taking and fast failure. Disruptive technology companies like Facebook
succeed via a non-hierarchical culture in which individuals are empowered to
speak up, try new ideas, fail fast, and iterate. It is easy to see how a
culture that encourages these behaviors would be both engaging and productive.
But for a company in a regulated, compliance-focused industry, such as a utility
that operates nuclear power plants, culture must stress process adherence and
behaviors that stress prevention and safety. In that context, tolerance for
failure is extremely low. Although a focus on compliance is often seen as
tedious and not conducive to employee engagement in general, at some companies
it is very much necessary for performance (and survival).
Let’s
take some other examples. According to PwC’s
2017 Employee Engagement Landscape Study, the
number-one obstacle that creates a drain on people’s engagement is “doing work
for others that is not part of my job.” But in fast-moving, creative
environments (e.g., startups), an all-hands-on-deck culture in which everyone
does everything is often necessary for rapid growth.
Similarly, if a company is pursuing a low-cost strategy, its
culture should emphasize behaviors around aggressive cost-control, including
clamping down on employee expenses. Asking employees to always choose the
cheapest means of travel — taking a five-hour bus from Washington to New York
instead of the one-hour shuttle — is unlikely to increase engagement. But it is
consistent with the company’s strategy and may be necessary for performance.
Clearly, the necessary critical behaviors that drive performance
in a culture evolution effort are distinct from behaviors that improve employee
engagement. Of course, driving performance through culture is not mutually
exclusive with driving engagement. Ideally, the critical few behaviors and
related structural/process changes that drive performance will harness sources
of emotional energy within the company and thus also improve engagement. In
addition, working at a successful company tends to be more engaging. Culture
evolution can thus lead to greater engagement as a side product. However, when
improving both isn’t possible, leaders should be willing to choose elements of
the employee experience that drive performance at the expense of engagement. For
example, involvement in decision making that affects one’s job is a commonly
recognized driver of employee engagement. But in turnaround or M&A
situations, in which quick decision making is imperative, it is neither
practical nor desirable to involve everyone who will be affected by the
changes.
Furthermore, employee engagement is often transitory and sensitive
to short-term external shocks, whereas culture is more enduring and
self-sustaining. When a company faces negative publicity, for example, engagement
may suffer. This does not mean that the culture is broken. Similarly, because
change is difficult and often disruptive, even the most well-managed change
programs can result in a short-term drop in engagement. This does not mean that
the program has destroyed the culture and is doomed to fail.
In 2011 and 2012, Qantas
Airways experienced a strike and an employee lock-out due to an impasse in
negotiations between the company and labor unions. Friction culminated in a
decision by Qantas to ground all flights in October 2011. Although Qantas was
widely deemed to have prevailed in the months-long mediation that followed,
employee engagement took a large hit, as evidenced by lower overall employee
engagement scores. And yet Qantas’s reputation for customer service
remained intact and its Net
Promoter Score for the FY2012 was actually higher than before the industrial
dispute. From the airline’s perspective, trading off
employee engagement in the short term for an improvement in its operating
performance and cost structure was a necessary move, and did not hurt its
culture of customer service.
Of course, this is not to say we should ignore employee engagement
entirely. In theory, leaders can spread the critical few behaviors through
force and fear, effectively scaring employees into compliance. In reality,
however, a demoralized workforce is unlikely to perform at its best, and the
highest-value employees are likely to vote with their feet. Driving cultural
change means being willing to consider trade-offs, balancing efforts that are
likely to drive greater engagement with those that are not. At Qantas, as
mediation wrapped up, concrete steps were taken to improve employee engagement
in order to rebuild labor relations. There is thus a time and place to focus on
employee engagement, and a time and place to focus on culture evolution. Let’s
not conflate the two, or we may end up solving the wrong problem.
31JULY17
https://www.strategy-business.com/blog/Improving-Company-Culture-Is-Not-About-Providing-Free-Snacks?gko=14d54&utm_source=itw&utm_medium=20170801&utm_campaign=resp
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