RBL INSTITUTE Q&A WAYNE BROCKBANK APRIL 2010

Question: How do we create the ideal culture for our company?

QUESTION: How do we create the ideal culture for our company? For the last twenty years, partners at the RBL group have conducted the Human Resource Competency Study. One clearly visible performance differentiator is the extent to which HR professionals work with line managers to define and deliver high performing business cultures. With clients throughout the world, we find that the creation of the ideal corporate culture continues as major defining agenda for many companies and their HR departments. Two Assumptions The first assumption is that culture must be defined from the outside in. Building organization culture from the outside brings HR into the fold of mainstream economics. Every aspect of an organization must ultimately exist to create value for customers and shareholders. Think about this issue in the following manner. If a company supplies something at a high level but the external market demand as indicated by sales is zero, then what is the economic value? The answer is of course, zero. Thus a companys culture must ultimately be designed in a way creates value for external stakeholders. Second, culture words have a distinct role in the human experience. Culture words represent aggregation of behaviours. For example, at Disney courteous is a cultural aspiration. The culture word courteous represents an aggregation of behaviours at Disney that includes smiling, allowing your eyes to be seen, and addressing children, approaching guests who appear confused and offering assistance, answer questions accurately and responding to the question behind the question. Thus when we manage culture we are actually managing aggregations of behaviours and their antecedent patterns of thought. Identifying culture In the culture identification process three factors must be considered. As discussed above, of primary consideration are the trends that occur in the business environment. Within the business environment, customer requirements should generally receive primary consideration. Other considerations may also require attention including regulatory requirements, industry structure,

supplier relations, owners expectations, global demography, and the rate and direction of technological innovation. A second consideration should be the business strategy. If the business strategy accurately and directly, reflects market requirements, then aligning culture with strategy might be sufficient. However, frequently business strategies suffer from a variety of maladies including being a aggregation of tactics instead of a statement of competitive advantage, being dominated by internal logic instead of external logic, having a short term instead of a sustainable focus, and being framed in terms of a single dominant discipline (i.e. finance) instead of a more balanced approach. A third consideration is to identify the culture that is friendly and accommodating to the key wealth creators: the A players in A positions. Companies need to have clear sense of what positions create the greatest value and which people in those positions create the greatest value. As a tertiary consideration, the culture should be defined so that the key wealth creators are comfortable and productive in that environment. Embedding the Identified culture The good news is that there are a limited number of HR practices (i.e. tools, processes, structures and policies) that can be leveraged to influence culture. These include and are generally limited to the following: people practices (recruitment, promotions, transfers, outplacement, training, and on-the-job development), performance practices (measurement, performance management, financial and non-financial rewards), structure (organizational structures, job design, work process design, and physical setting) and communications (outside in, inside out, up and down, within departments, and across departments). Having identified the HR practices that might possibly influence a companys culture, the challenges then is to answer the question: How many specific HR practices can be realistically created or changed within a relevant time frame? The answer is, of course, The number of practices that are required to reach the tipping point of culture change within the relevant time frame. In our experience that number is usually between 4 to 7 over a nine to 18 months period. These four to seven HR practices may be identified by asking two questions for each possible HR practice. The first question is To what extent is this HR practice currently designed and delivered with the desired culture as the explicit target? Each HR practice may be evaluated on a three point scale (i.e. high, medium or low). The next question is: If this practice were fully implemented, how much would it help to create and sustain the desired culture? This can also be evaluated on a three point scale (i.e. high, medium or low). The two scores may then be combined. The high-high or medium-high scores are those practices that are most out of alignment with desired culture and would give greatest impact if accurately aligned. The final step of embedding culture is to design or redesign and implement the identified HR practices to be totally aligned with the desired culture. These practices must then be implemented with relentless discipline and focus. When these steps are followed with rigor, discipline and focus, they aid in identifying, creating and sustaining the culture that will transform a company into higher performance.