“Culture eats strategy for breakfast” - Peter Drucker
Of all the factors that determine long term success of a company, culture is at the top. Too often leaders try to fix second order problems such as strategy, execution, speed, quality and morale when the real root cause and solution lies in fixing the company culture. So what really is culture? Before I try to answer that, let me tell you the story of a smiley. Yes, a simple smiley. This is a story of something that I experienced and I promise I will tie it back to culture.
The power of a simple smiley face
Every time I am out grocery shopping with my 3 year old, he has to have the printed receipt after I pay and the store assistant hands the receipt. It’s a custom now. So a few months back we went to Costco for our routine grocery run and checked out, like clockwork my son grabbed the receipt. Now, if you have shopped at Costco you know that as you exit the warehouse, a friendly Costco warehouse assistant asks for the receipt and does a quick audit of the items in your cart and the receipt. So, as we were exiting the warehouse, a Costco assistant took the receipt from my son, audited the items in the cart and then drew a smiley face on the back of the receipt and handed it back to him. The whole interaction was 5 seconds. My son was elated to find the totally unexpected smiley face on the receipt. The smile on the receipt basically translated on my son’s face. I thought -”That's a nice gesture from the Costco assistant”. And I kind of forgot about it. After a couple of weeks, I was again at Costco with my son. This time while leaving the warehouse, another Costco assistant took the receipt from my son and returned it to him after drawing a smiley face. Aaah! So the first time this happened to us, it wasn’t just a nice gesture from a random Costco employee. It is what every Costco employee would do when a kid hands them a receipt.
My kid and I have tested it every time we have been to Costco since then. My son hands the Costco assistant the receipt and they return it with a smiley on the back. Sometimes it’s a basic smiley and sometimes it’s quite an elaborate one. But there is definitely a smiley. Every single time!
I was super impressed. If a small mom and pop store was doing this gesture I would have understood but for the third largest retailer in the world with more than 300000 employees, to consistently do this small gesture is something else. This was a small gesture but it showcased a lot of important things that are exemplary in a company’s culture. First, it shows the focus on customer happiness. A simple and zero cost act by the Costco employees put a smile on the customer’s face and made the visit memorable. Second, this gesture was standardized across the company. It was religiously followed by the staff on the ground without supervision with a 100% success rate. And third, it shows that the company really cares. And care is the key word here which I believe has a lot to do with building a great culture.
So, what is culture?
The word culture originates from the latin “cultura” which means to tend, cultivate or care. I think of culture as the language through which a company encourages and discourages behaviour that it values. The language of culture is at times spoken but most times it’s unspoken and seen in actions of the company’s leaders and employees. Culture gets built over time by creating and reinforcing incentives for the behavior that the company desires of its employees.
Culture vs Values
Every company has a set of core values, whether it knows or not. The values may be deliberate, written down and communicated. Or they may not be deliberate but they are reflected in the action of the leaders and the employees. These lived values create the culture at a company. I like to think of values as the ingredients that create culture. It’s like a great recipe. A healthy balance of various complementing ingredients is required to create a masterful dish. Too much or too little of a key ingredient and it can leave a bad taste in the mouth.
The three pillars of Culture
At its core there are 3 pillars to building a great culture.
Role-Model : Lead with example
Reinforce : Demonstrate it at all levels
Reward & Recruit : Promote, Hire and Fire the right people
Role-Model : Lead with example
The Apple iPad does not have the calculator app. Yes that’s right!
You probably know this if you have an iPad. If not, then go ahead and check it. I will wait. The iPhone, Macbook and mac all have the calculator app but the iPad does not. Why? Like many Apple quirky stories it has to do with Steve Jobs.
When they were prototyping the iPad, they ported the iOS calc over, but it was just stretched to fit the screen. It was there all the way from the beginning of the prototypes and it was just assumed by everyone at Apple that it was going to be shipped that way. A month before the release, Steve Jobs calls Scott Forstall into his office and says to him, "where is the new design for the calculator? This looks awful" He said, "what new design?" This is what we are shipping with. Steve said, "no, pull it we can't ship that". Scott fought for it to stay in, but he knew he had to get their UI team involved to design a new look for the calculator but there was no way they could do it in that short time frame, so they just scrapped it.
Jobs was OK to ship a device to millions of customers without the most basic calculator app but he was not OK to ship an ugly app and compromise the user experience. No wonder we associate high quality with Apple's products and it commands a premium price over its competitors. When Apple builds something they do it right. It might release a year later than the competitors but when it releases it’s the best in the market.
It’s fascinating how a company’s culture is basically an embodiment of the values of its top leadership - the chief executives, founders and senior leadership. They define the actions that are encouraged, rewarded, discouraged and go unrewarded. A company could have all lofty values plastered on the walls but they mean nothing until they are practiced by the top leadership. Saying you value a culture of honest feedback but failing to create an environment of psychological safety and inclusion means you don't have a culture of honest feedback. Saying you value high standards but failing to do the right thing even when it hurts means you don’t value high standards. Unless practiced by leaders in a company, values with good intentions just remain mere words on a wall and a document.
Reinforce : Demonstrate at all levels
My two favorite stories of enforcement of culture are both from my days at Amazon prime video. The first one is on reinforcing a culture of customer obsession.
The story goes like this - In 2014, many amazon customers who had purchased and streamed a video on its platform started receiving emails from Amazon saying “we noticed you recently experienced interruptions while viewing your title. We apologize for the inconvenience. We have refunded the amount to your account.”
The crazy part was that the customers who received these emails had not complained to Amazon about the poor streaming experience. Amazon had looked at the impacted customer’s streaming metrics on its end and decided to refund the customers impacted by the poor experience without the customers asking for it. Yes, it probably cost Amazon a few hundred thousand dollars or more in refunds but it was the right thing to do. Customer obsession at the next level!
Not only did that gesture reinforce the customer’s trust in Amazon, it also sent a powerful message to us employees. It reinforced that Amazon truly cared for a great customer experience and it was even ready to lose money to uphold the value of customer obsession.
The second story is on creating a culture of high standards. This was during one of the press events of a Kindle Fire tablet launch. Jeff Bezos had just unveiled a new tablet on stage and then the press was invited to interact with the new devices and have an initial early impression. The full public launch was a few weeks out. While one of the tech reporters was interacting with the tablet, they opened the prime video application and it silently crashed. A silent crash is when the application closes unexpectedly without showing any error message to the user. The reporter didn’t notice it and moved on to try the other features of the tablet. But someone on the Amazon prime video team noticed it and reported it to the engineering team. What transpired after that was a multi day hunt to reproduce that silent crash by teams across the globe. The faulty piece of code was eventually found and promptly fixed. The public launch of the tablet that happened a few weeks out was of much higher quality. I can share many such stories when teams pushed it to improve standards or pushed out launch dates to ensure a high quality bar was met. The point is that if you want to create a culture of high quality you have to live the values of high quality.
Reward & Recruit : Promote, Hire and Fire the right people
A critical step for creating the right culture is to hire and keep people that have similar values that cultivate the culture you want to create. That’s why having the right bar while hiring is crucial. It’s more efficient to hire people who naturally align with your values than hiring people who don’t and expecting that they will be transformed. Behavioral and values based interviews try to assess for this alignment. They can be gamed though. People can pretend to be aligned with your culture and values just to get the job. Or they may feel like they will like the culture but after they join they may realize it’s not what they signed up for. Zappos the online shoe company had an unique solution for this. Zappos has one of the strongest company cultures in the world and its leader Tony Hsieh was a visionary. After new hires went through the week-long onboarding, Zappos offered $2000 to new hires for quitting. That is if the new hire felt this is not the company they want to work for then they had the option to quit and get $2000. No questions asked. 1 out of 5 new hires would take the offer. And Zappos was fine with that because it ensured that people who really aligned with the company’s values were getting onboard.
Culture gets built through the right incentives. How a company promotes, does not promote and lets go of people sends performance cues to all the employees. When a new hire sees someone get promoted, they immediately try to understand what led to the promotion and how they can replicate that behavior. Similarly if someone gets denied a promotion or even worse gets fired then other employees pick up on the behaviors to avoid. That is why it’s important for leadership to create the right incentives. Promoting someone who upheld one of your core values while breaking two other values will send the message that leadership does not care about the 2 values that were broken. They only care about the value that was showcased by the person who got promoted.
What can leaders do to improve Culture at work?
Live the company’s values yourself. Actions speak louder than words. Employees pick cues from what we do in a situation. Be mindful of doing the right thing. Always.
Evaluate for values in interviews. Hire people that are aligned with the company’s values. Be OK to let go a prospective great hire if they show red flags on values
Write down the values and culture you want to have. Expand each value with examples. What success and failure mean for each of them. It helps drive clarity for employees.
Hold a high bar on promoting talent. Reward employees who uphold values and create a positive culture.
Don’t create a culture where brilliant jerks thrive
Talk about what a good culture looks like. Especially with your new hires.
Listen to employees to understand what culture means for them. Create the environment so employees can speak up openly
Be very deliberate about culture during times of high growth. It’s easy to take shortcuts and compromise when things are going great for the business. Unwinding those mistakes is painful.