The Name of the Game is Culture

Although there is evidence that the economy is improving, it is taking a long time to get up a head of steam. Extending that metaphor, some believe that the light at the end of the tunnel is an oncoming train. Although I like to think of myself as an optimist, they could be right.

The Signs
Look at the macro signs: new job creation is very slow; the stock market is stuck in a narrow range; consumer confidence is dropping dramatically; and inflation is still low but interest rates are rising in anticipation of recovery. To top it off, recent surveys have shown that from 45-percent to 25-percent of employees say that as soon as the market improves they expect to leave their present employer.

Cultural Shift
It is no wonder that so many workers talk about looking for a new job. They are angry and resentful for the treatment of the past fifteen years. The problem they will face is that the grass is just as brown on the other side of the fence. Today's resentment began in about 1989 with the first massive layoffs. This broke the age-old cultural contract of mutual loyalty. The layoffs continued for a half dozen years until the dot-com economy blasted off and three years later crashed. During those ten years, people were constantly under great pressure. They were continually told to do more with less. They worked hard because they didn't want to be caught in the next layoff. The worst part is that they were never offered anything of value in return for their forced loyalty. The culture had shifted toward indentured servitude. The only payoff was that they might get to keep their job, at least for a while longer.

Leadership, Culture and Loyalty
Now management is frantically striving to build leadership that can inspire new loyalty as well as manage the enterprise. As I mentioned in last month's column, there is a great shortage of leaders. Leadership development is probably the greatest human capital test that top management faces. It is even greater than loyalty, because loyalty hinges on two factors: leadership and culture. Strangely enough, within that conundrum lies opportunity.

If leadership drives culture and culture drives loyalty, where does the leadership come from? The answer is simple: the top.

Developing Culture
Culture starts with the vision of the CEO. Everyone looks to the CEO for clues as to what is desirable and rewarded, as well as what is taboo. We see this in companies where one CEO leaves and a new one comes in. If the new person has a different view of how an organization should function, gradually the culture starts to move in that direction. We saw it happen at IBM, Coca-Cola, Motorola, Hewlett-Packard and others when top leadership changed. Culture doesn't change overnight. It might take years for a full turn, yet in the meantime, behaviors start to change because rewards start to change. Every organization has a culture, whether or not it recognizes it.

HR and Culture
Some claim that HR is the keeper of the culture, and, to an extent, they are correct. If there is a culture manager after the CEO, it is HR. There are several aspects to culture keeping. The first is working with the CEO. 

HR needs to be a counselor to the CEO in these areas. It needs to discuss culture, the role of the CEO and the impact of top management's behavior. In addition, the HR director can have a profound influence on the organization by keeping culture in the conversation. Executives come up through disciplines other than psychology or anthropology. They are very astute at finance, marketing, production, or other fields, none of which consider culture. They need help with this, and, if the HR director becomes their counselor, many of them will admit it.

Second, HR needs to review the systems of the organization to ensure that there is consistency between culture and systems. Major problems emerge in organizations where culture and systems don't match. It is one form of misalignment, the most common organizational illness. One small example can make the point. Why is there so much skepticism regarding teamwork in organizations? It is because management touts teamwork (culture) but pays for individual performance.

Employees feel betrayed when they are told one thing and see management practice the opposite. People are not stupid. They are constantly watching for clues as to what is really valued by management. Employees are very adaptable. They have to be. They usually will go along with whatever directions the culture signs give them. When they reach an intolerable point they drop out, lower their productivity or quit.

Culture/System Congruence
HR needs to build services in a way that reinforce the desired culture. For example, if top management claims that it wants a flatly structured culture of challenge, risk taking and innovation, that implies an open social order, in which responsibility is delegated. Accordingly, HR programs should give employees the opportunity and responsibility to make choices regarding benefits, planning of career paths, use of paid leave and maintenance of their basic employee records, as well as latitude in their work style.

Beyond that, HR should look at operating practices. Again, if the culture is supposed to be open, then organization and direction should reflect that. If the culture is one of low degrees of freedom, then the employees need explicit guidelines for their work and behavior. In most tight cultures, systems are strict. It is in cases where management calls for openness but responds with tight controls that HR needs to step in.

At the End of the Day
Under any circumstance, culture is an extremely powerful force in an organization. If HR wants to make an impact,  there is no better way to do it than to manage the culture. From the CEO to first line supervisor, from structure to system to process, the name of the game is culture management.

Dr. Jac Fitz-enz is the father of human capital benchmarking and workforce analysis. He carried out the original research on HR measurement in the 1970s and followed that by publishing the first human capital metrics in 1985. As the founder and chairman of Saratoga Institute, Fitz-enz led the development of the world's most comprehensive human capital benchmark database.