Wednesday, August 11, 2010

How Important Is Corporate Culture?

How important is company culture? Does it really matter to the bottom line?

Tony Hsieh, CEO of Zappos.com, thinks so. Tony is all over the business news these days, as his new book Delivering Happiness: A Path to Profits, Passion, and Purpose was recently published. His nation-wide book tour launches on August 14th.

Says Tony: "Our number one priority is company culture. The whole belief is that if we get the culture right, the rest of the stuff like building a brand and great customer service just happens on it's own."

Tony acknowledges that he looks long-term - 5 to 7 years out - and with that strategic outlook his ideas make sense. But they may not work well for those leaders who need to focus on immediate gains and so rely on more traditional practices such as hiring primarily for skills, or following call center scripts.

What stands out for me in reading his book - which I recommend, by the way - is that Tony insists his company really walk the talk. The company culture is based on ten core values that guide the employees like the Ten Commandments guide Christians. After the employees created their core values, they were incorporated into the hiring process by using interview questions that support each of the ten values. If a candidate doesn't pass the culture fit interview, they are not hired, even if their skills and knowledge are exemplary. Once hired, a candidate goes through training and a couple weeks on the job, after which they are offered $2,000 if they wish to quit the company.

The core values are not forgotten after the interview process. Fifty percent of an employee's performance review is based on how well they have upheld the core values. Every year, a new culture book is created by the employees themselves, where they write about their experiences of the core values.

Although Zappos.com was merged with Amazon.com last year, part of the agreement was that Zappos would operate independently and be able to keep it's culture.

It's wonderful to have employees that are all aligned with the purpose and culture of the company. With everyone so engaged, progress toward mutual goals is no doubt swift. However, I have to wonder whether so much emphasis on culture might result in a bias toward hiring similar behavior styles. And when everyone in the company is predominantly one or two behavior styles, blindspots are overlooked or are overruled by the dominant behavior styles. For example, if a company's employees and culture are primarily Persuader-Controller, then possible blindspots would be thorough analysis of options, cutting corners, following processes, and follow-up. I don't know that this occurs at Zappos, but I have seen similar trends in other companies.

Zappos.com is currently number 15 in Fortune's Best Companies to Work For. That's pretty darn good. But their employee turnover is 15% and REI, which is number 14 and in a similar industry, (and one of my former employers) has a turnover of 8%. If there is such an emphasis on hiring for the right fit, why is turnover 15%?

These are just a couple of the questions that came to mind as I read Delivering Happiness. My overall impression after reading the book is that Tony is a groundbreaker and a revolutionary manager. Tony’s standout traits as a leader are intelligence, creativity, integrity, and caring about the people in his company, and I don’t mean just employees. He talks about his customers and his vendors as much as about the Zappos staff. He applied learnings from the positive psychology movement to his business, which resulted in employees having more control over their promotions and pay, among other things. With a leader like Tony Hsieh in the business world, evolutionary management is alive and doing well.

And to answer the question about whether company culture affects the bottom line, well, take a look here at the most profitable companies in the world.
With the notable exception of Google (#4 on Best Companies to Work For and #47 on Most Profitable), none of them are known for emphasizing their positive corporate culture.

1 comment:

  1. Good information about corporate culture. Thanks for sharing this post.
    Coach Skinner

    ReplyDelete