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Company Culture: The Intangible Pathway to Profitability

Scott Cawood

including using nifty tools to help us execute

E verything works better when companies
make money. Every CEO wants to lead a
profitable company, every employee wants to
our business strategies better than our com-
petitors. Creating cultures where people want
work in one, and every investor wants to have to give their all is a much tougher task. Yet
one in his or her portfolio. Even competitors it’s today’s most pressing business impera-
can benefit from those businesses that tive. It requires leaders to leverage the talents
expand their marketplace. So with all this of their people to grow a business by connect-
focus on profitable growth, why do we still ing their people to the heart of their business—
have so many poor-performing companies— all through the culture they have intentionally
or companies in the same industry that out- groomed.
perform their peers when they offer virtually Creating a unique culture in today’s
the same product? What makes Southwest white-hot competitive environment takes
Airlines continue to be in the black, for exam- much more than financial incentives. In the
ple, when other airlines struggle? fight for talent, success will increasingly be
It might come down to the one constant measured by each organization’s ability to
that best enables competitive advantage in any identify, and leverage, its own culture. Regard-
economy, and also the one variable most often less of what’s going on inside and outside the
overlooked: culture. A vibrant organizational organization—changing structures, new busi-
culture may well be the truest competitive ness strategies, fluctuating markets—a well-
differentiator for businesses today. Fortune defined and consistently reinforced culture
magazine’s “100 Best Places to Work” regu- can enable leaders to hire and retain the best
larly outperform other stock market indexes. people and to deliver profitable growth. It
When these “best of the best” are asked can be the constant that not only maintains
about why they are so successful, they usu- equilibrium when bad things happen, but
ally respond with an answer that ties to their also accelerates momentum when things
culture—that they have something special or are great!
unique that has led them to profit. Leaders who can transform their organiza-
Leaders are typically talented at managing tion’s cultural nuances into competitive
their company’s operations, finances, and advantage understand the equation to suc-
strategic direction for market advantage. After cess: engaged people ⫽ enriched profits. In
all, how many “business schools” are there this article, we take a look at how you can
compared with “people schools”? We’ve all build a culture that fits this equation. It’s
been educated on how business works, what we call a “people-profit” culture—one

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where employees at every level enjoy what invites participation; bad culture reinforces the
they’re doing, have a good relationship with “this is just a job” mentality. In the coffee
management and colleagues, and are treated business, this may mean the difference
as the most critical contributors to their between mundanely serving beverages to the
organization’s success. more preferred behavior of upselling to every
customer.
FROM BARISTAS TO BARRISTERS: Industries that over the years have let
CAPTURING THE CULTURAL ADVANTAGE tradition dictate culture are now taking a
closer look at the need for change. Law firms,
Culture is an intangible pathway to profitabil- for instance—facing increased competition to
ity for companies in every industry—whether recruit and retain top talent—are understand-
at the local shopping mall or on the corridors ing that the happier people are on their jobs,
of Wall Street. Consider, for example, two the more they’ll contribute to the collective
coffeehouses found these days in nearly every goal of satisfying clients and building the
town: Dunkin’ Donuts and Starbucks. It’s hard bottom line. Clearly, this is the right time for
to go a mile in any direction without seeing industry introspection. According to the
either the green siren or the steaming cup American Bar Association, 75 percent of
luring us in for a latte. Both companies serve lawyers surveyed said they wouldn’t want
essentially the same market, yet they have their children to follow in their footsteps in
generated a very different level of customer choosing a vocation.
loyalty and return to shareholders. A key part of transforming law firm cul-
ture is moving from a “lawyers versus every-
one else in the organization” mentality to a
Great culture invites participation; bad culture reinforces
focus on equality. Progressive firms are real-
the “this is just a job” mentality.
izing that fairness in the workplace is key to
getting the most out of employees at every
Did you ever notice the difference in how level. When people perceive unfairness at
you feel when you walk into these places? work, they retaliate in all sorts of ways. They
It’s not that Dunkin’ Donuts is bad (although take things back, not just things from the
I admit some of their locations are scarier supply closet, but ideas, perspectives, service
than others); it’s more that the Starbucks to internal and external clients, communica-
stores are ready for you every time you come tion, and the drive to deliver their best per-
in. From the fun, energetic staff to the com- formance. That withholding costs the organi-
fortable places to rest and send e-mail, Star- zation at every level. Firms that still hold on
bucks just feels good. Why? It’s their culture. to practices and policies that keep lawyers
It’s one that makes it easy for the company to and staff at odds will find this perspective is
charge nearly 30 percent more for their prod- ineffective—and costly—in the twenty-first-
ucts than Dunkin’ Donuts does. century business model.
Culture is not only the competitive edge; it A few law firms are standouts in capturing
is often the culprit—for example, in employees the cultural advantage. Atlanta-based Alston &
deciding whether to just “show up” or actually Bird (A&B), for example, which ranked num-
contribute to your business. Great culture ber 19 on Fortune’s 2006 list of the “100 Best

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Places to Work,” hasn’t had a layoff in its In encouraging life outside of work, PC
115-year history, underscoring how much it lets its employees determine how much time
values its people—and how much its people they want to be on the job—yes, the employee
live the firm’s values. “You can be a great gets to decide. Associates guarantee the num-
place to work and a profitable organization,” ber of hours they’ll work in a year, and if
says Cathy Benton, chief people officer at they log over the designated amount, they’re
A&B. “But what makes the difference is you rewarded with a bonus. It’s an extraordinary
have happy employees who will really take shift from the business model of billable hours
care of your business.”1 to one of personal choice. Work-life balance is
In A&B’s two mergers, values were a key further fostered through flextime schedules,
part of merger discussions. “In considering job sharing, and part-time employment.
another firm, it’s not just about the book of PC also offers a sabbatical program to its staff
business they bring,” notes Benton. “It’s just and attorneys. Exempt employees are eligible
as important that they will fit with us cultur- for a two-month paid sabbatical after 10
ally and their people practices are aligned years, and nonexempt after 13 years. If they
with ours.”2 have additional personal-time-off (PTO) hours,
Cultural misfits are coached in the A&B they can be gone for up to three months.
values in an effort to nip inappropriate situa- “People travel all over the world on their sab-
tions in the bud. “People may join us from baticals and do things they’ve never done
another law firm, believing that the way of before,” Emerick explains. “It gives them an
getting something done is by bullying—or opportunity to rejuvenate themselves. When
what we consider mistreating somebody,” they return to work, they often write stories
Benton explains. “We don’t do that here, and of their adventures, posted for all to share.”4
when we see that behavior, we’re quick to
bring it to light. If employees, even profitable HIRING FOR WHO YOU ARE: THE FIRST
STEP IN BUILDING A PEOPLE-PROFIT
CULTURE
In encouraging life outside of work, PC lets its employees
determine how much time they want to be on the job—yes,
A people-profit culture begins with defining
the employee gets to decide.
who you are as an organization—and hiring
those who are in sync with the definition.
partners, cannot or will not change their Those employees will be likely to stay longer,
behavior, we will let them go.”3 understand expectations more clearly, and
Another law firm that prides itself on its decide for themselves how to spend their
people-centric practices is Seattle-based time growing the business. They will also
Perkins Coie (PC). Darrin Emerick, chief peo- help perpetuate the values of the culture.
ple officer, says the firm focuses on engaging In hiring, Alston & Bird looks for candi-
its employees, giving them a sense of purpose dates who have a previous background of
beyond their job, and being present to the excellence, including work ethic, performing
needs of the whole person. Employees are well in a team environment, and a commit-
treated as full human beings, rather than just ment to more than just themselves. These
human “doings.” characteristics are scrupulously screened for

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in the firm’s interviewing and hiring process. moving rapidly to a managerial or executive
“We hire tough and manage easy,” says Chief career track. That’s not who we are.”
People Officer Cathy Benton. SAS doesn’t use temps or contractors
The Container Store, a national retail chain, because it hires for the long term. Although
has purposefully created—and hires for—a cul- the initial process can be lengthy, the com-
ture that stands out from other retailers. Com- pany finds it’s more important to focus on
pany founders Garrett Boone and Kip Tindell hiring the right fit than to pay the price later
use an unusual word to describe their culture: on. As a result, voluntary turnover at SAS
yummy. They’re fanatical about whom they is about 3 percent. Most who leave do so
hire because they recognize that one mishire in the first few months on the job. This low
could erode the unique culture they’ve turnover rate saves the company an estimated
worked so hard to build. $50 million a year.
What’s so yummy about the Container
Store? The company pays its workers gener- CONNECTING YOUR PEOPLE TO THE
ously—50 to 100 percent more than the retail CULTURE: NURTURING THE SIX KEY
industry average—believing that one great RELATIONSHIPS
worker is three times more productive than
“just a good one,” so it makes sense to pay Culture exists in every organization; you can’t
larger salaries to fewer workers. The com- not have a culture. The goal, of course, is to
pany also invests heavily in training to edu- create a culture where managers are aligned
cate new workers and immerse them in the through a shared set of values, which results
in an aligned set of actions. When you have
competing values or activities (of individuals
No amount of team building and organizational development
or groups), you will get the “silo” effect most
will matter if you have an executive team that is misaligned
HR people fight so hard to dismantle. No
on either values or behaviors.
amount of team building and organizational
development will matter if you have an exec-
corporate culture. New full-time employees utive team that is misaligned on either values
receive 235 hours of annual training, com- or behaviors. JetBlue Captain Mike Barger
pared with the industry average of 7 hours. blames company failures on this misalign-
SAS, a leading software company based in ment: “Companies fail because they discon-
Cary, North Carolina, also hires directly for the nect the business and people sides of the
culture it has built. “If your goal is to work business. That’s wrong. They’ve got to be the
where you can climb the corporate ladder, it’s same thing.”5
a different ladder here than the one you Key to alignment is ensuring all employees
learned about in business school,” says John are connected to the business. Connected
Dornen, former SAS manager of corporate people are motivated to be more effective
public relations. “If you come here with the and results-oriented. They’re willing to do
traditional model in mind, it’ll drive you nuts. what it takes to see the organization succeed
Considering the tenure of people who are here, because they are a part of something special.
the climb to the top could take 20 years. You’ll Returns are reflected through such measures
be recognized and well paid, but you won’t be as superior financial performance, higher

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productivity, better quality at a lower cost, several, they may believe that they or their job
and reduced employee turnover. are not important to the organization. Perhaps
Throughout the employee life cycle, many they simply feel they don’t fit in. You might
activities can cement this connection—from consider putting them into a new environ-
welcoming employees when they “onboard” ment—a new job or different department. Or
and helping them understand the direction of
the company to celebrating successes and Managers need to know who their employees really are so
showing appreciation to providing commu- that they can help them connect, through mind and heart,
nity service opportunities. Most significantly, with who the organization really is.
managers need to know who their employees
really are so that they can help them connect, it may be necessary to eject them from your
through mind and heart, with who the organization. We find sometimes that a separa-
organization really is. tion is long overdue for employees who have
To function at its maximum capacity, every already quit, yet still stay employed in the
organization must nurture six key relation- organization. Although this sounds harsh, the
ships, including three primary—company, reality is that if individuals can’t contribute,
manager, and coworkers—and three sec- no one wins. Help them help the organization
ondary—job, career, and customers. Leaders or help them find a place where they can do
need to tune in to the health of these rela- their best work. Then everyone wins.
tionships for each person in the organization.
If any of these relationships is unhealthy, the The Manager
organization will pay through waning perfor-
mance, high turnover, and lost revenue. One of the most critical links to connecting
people to the organization is a healthy rela-
The Company tionship between supervisors and super-
visees. By supervisor, we mean anyone at
In connecting to the organization, employees any level who supervises another person—
need to feel they’re part of the heart of what from a line manager to the CEO. Often, the
their organization is all about. They need to extent to which employees have a relation-
like being at work, care about the organiza- ship with the organization is based on the
tion, know where it’s going—and want to interaction with the supervisor, because in
contribute to its success. many ways, for many people, the manager
Even in the nation’s best workplaces, only can be the organization. He or she shapes
about 85 percent of the employees are engaged, each person’s day-to-day experience and ulti-
according to Fortune. For many companies, mately can be a great shaper of performance
this statistic would be a great achievement, or the main reason for disengagement.
but today they fall very short of having even People need to trust thir managers and feel
30 percent of their employees engaged. they are credible and competent. Managers
There are great people inside your company need to be trustworthy, have the capabilities
right now who, through no fault of their own, and confidence to manage well, set clear
are totally disconnected from your organiza- expectations for those they supervise, and pro-
tion. Because of one interaction, or perhaps vide meaningful feedback. For the supervisory

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relationship to succeed, both supervisor and If supervisory relationships can’t be

supervisee must have the desire to do well for improved, you need to look for other ways
the other. for employees to have their leadership needs
The supervisory relationship has a twofold met. Look for a different manager. Consider
focus, built on tasks and the personal connec- ways to strengthen the other five relation-
tion. When both focuses are good, we see ships. Or, it may be that some supervisors
results. When relationships begin to deterio- have a track record of poor relationships with
rate, supervisor and supervisee interact only most of the people they supervise. These are
around completing tasks. This is a problem the people who may need to be coached,
because the only part of the person being redirected, or exited from the organization.
acknowledged is the “doing” part, not the
“being” part. It’s not the right way to motivate Coworkers
and secure buy-in.
I was always told that you “don’t have to All employees need to feel they’re integral to
like your supervisors, but you do need to their group’s success. Sometimes the decision
respect them.” I totally disagree. You need between calling in sick and going in to work
both. Working for someone you don’t like is to contribute hinges on not letting down the
just miserable and always takes a toll on the team! When relationships among colleagues
bottom line. Although it’s true that both sides are strong, we see people giving their best
need to respect the task and the person, it’s work. Provide the room and space for people
not enough if either party dislikes or is to get to know each other. Consider team-
disliked by the other. building events or opportunities for one-on-
one information sharing.
I was always told that you “don’t have to like your super- East Alabama Medical Center, in Opelika,
visors, but you do need to respect them.” I totally disagree. Alabama—also named a Great Place to Work—
You need both. has a unique way of helping colleagues reach
out to each other through its Cornerstone Soci-
In the cases where you just don’t like your ety. It’s an employee-run program that helps
boss (or the boss doesn’t like you), acknowl- employees in crisis: a fire, a serious illness, or
edge it. Then, try to get a mutual commit- an accident. The only resource the hospital
ment to build some sort of process to get the gives to the program is a full-time employee to
work done. Usually bad relationships go bad manage it. Through voluntary payroll deduc-
because of mistrust. The ironic thing about tions from employees and some fundraisers,
trust is that you can’t get it until you give it. the society brings in about $125,000 a year.
When a relationship goes bad, people tend to And people contribute vacation and sick time
cross their arms and think, I’m going to wait for those who really need it.
until I can trust this person again. Trust is
never really earned; it’s extended. Look for The Job
ways for someone in the relationship to
extend trust again with the hope it will be People need to be in the right job, one they
well received. If it’s broken again, the cycle like and are motivated to excel in. Ideally,
of mistrust will continue. The relationship your employees can always answer yes to
will be worse, and so will the results. the three questions central to happiness on

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the job: (1) Do I love what I do? (2) Do I do it are more marketable in finding their next job
well? (3) Can you pay me for it? A three-point inside the company. If you’re going to pre-
yes usually indicates a good relationship with pare people for new jobs, why not make it
the job. simple for them to find something inside
It’s always better to pay people for what your organization?
they love to do instead of things they hate to Cross-training and internship programs
do. Those who love their job will look for help people manage their careers as they
opportunities to expand it, to improve pro- go—and, ultimately, keep people in the
cesses, and to be more innovative. If the job is organization. The message sent is this:
truly “dead-end” and has no room to expand,
look at ways to feed the other five relationships What a difference it would make if just one-tenth of the
and to focus on how the work itself is done, energy put into outplacement were directed to nurturing
from offering more job flexibility to helping the careers while people are still inside the organization—
job fit more easily into the work-life equation. inplacement!

The Career You don’t have to jump from company to

company to get ahead; you can jump around
People want to move forward and grow. But internally. It’s a model very different from
unfortunately, when it comes to careers, most what most companies use. And, it yields an
of us are left to our own devices. Organiza- enduring benefit for the company. The
tions may offer training programs. But more company can “test out” candidates for a job
often, what happens is, they pay the most before hiring them.
attention to people’s careers after a layoff or
downsizing—patching the pain with outplace- Customers
ment services. What a difference it would
make if just one-tenth of the energy put into Finally, everyone in the organization needs to
outplacement were directed to nurturing be connected to the customer. Current busi-
careers while people are still inside the orga- ness models have been built on organizations
nization—inplacement! that didn’t have to aggressively compete to
With an intentional focus from manage- stay in business. Over the past 50 years,
ment, people could be gaining additional we’ve seen companies spring up and profit
skills that will help the organization perform. because they were the only show in town.
When you meet regularly with your people, Now, with advanced technology and the new
it’s as simple as adding career to the agenda, global economy, organizations are competing
talking about where they want to go next and with the entire world!
what they want to do. How do you leverage Relentless competition requires rethinking
their experience to help them get there? how people get connected to the customer
At its Barkdale facility, W. L. Gore & experience. It asks organizations to connect
Associates, makers of GoreTex, started an with people in a different way than they
internship program that lets people work 10 ever have before, developing faster relation-
percent of the workweek in any other depart- ships with their customers, and deciding
ment of their choosing. The goal is to build which experiences customers are willing to
new skills and advance careers so employees pay for.

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In most organizations, the sales team is creating good inside the organization, the
very connected to the customer, but other community, the industry, or the world.
departments are in the dark. Every person in For many organizations, the legacy is a cul-
the organization needs to have some connec- ture of giving—one that opens up opportuni-
tion to the customer. Where they don’t have ties for employees to do something good for
day-to-day customer contact, they need to others. People are so busy working that they
understand whom they’re serving and what may not have time for a wider cause. Often,
that person is buying. they look to their employer to help them find
If your business produces women’s hair ways to give back. It’s this type of activity
care products, every employee needs to that builds compelling workplaces and gives
know what women want today for their employees the chance to provide for others
hair. Put a face on the product. Who is the that which they can’t do for themselves.
customer? What is she buying? What does These selfless acts are meaningful, and the
she say when she buys one of your prod- more you can help employees connect to
ucts? This “face” needs to be incorporated their own sense of humanity, the more likely
they are to stay closely connected to your
organization. Many companies have initia-
Many years ago, I learned a truth that continues to hold:
tives that do just this.
All CEOs want to leave a legacy—one that is ultimately
Medtronic, a leading medical technology
related to people.
company, builds heart valves and other prod-
ucts that save lives. The company invites
into every part of the organization, from people who use their products to come into
how you hire to how you coach. Paint the the workplace and talk about the difference
picture of the customer, determine what the these products have made in their quality of
customer needs, and address how each per- life. Their stories are often very touching and
son can contribute to meeting the need. Let inspire the employees to give more in their
this perspective drive how people receive work.
raises, bonuses, and feedback. Timberland, maker of outdoor clothes and
gear, has made community service an integral
CULTURE AS LEGACY: SEEING THE part of its strategy and brand identity. In fact,
BIGGER PICTURE it’s part of the company’s mission, to “equip
people to make a difference in the world.” To
Many years ago, I learned a truth that con- accommodate more time-consuming projects
tinues to hold: All CEOs want to leave a without hurting the company financially,
legacy—one that is ultimately related to Timberland came up with a plan that allows,
people. Never have I heard CEOs declare for example, an employee to take six months off
their legacies would be to ensure stakeholder to build a House for Humanity, if the team can
returns, albeit they may say this first or work extra to cover that person’s time. The
when they are in public. When you have the team decides. It’s a program that creates last-
deeper conversation, though, each CEO’s ing connections—from employees to Timber-
legacy turns to something much larger than land, from Timberland to the community, and
Wall Street. It comes down to some form of from the community to Timberland employees.

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Giving of our time and talents is a won- NOTES

derful reminder of what we have, and what
better place to be reminded than where we 1. Cawood, S., & Bailey, R. V. (2006). Destination profit:
work? A culture of giving is a true gift to all Creating people-profit opportunities in your organization.
who interact with the organization—and a Mountain View, CA: Davies-Black Publishing.
smart business decision. It models to your 2. Id.
employees a solid value: focusing more on 3. Id.
what you can give and less on what you 4. Id.
can get. 5. Id.

Scott Cawood, PhD, is the vice president for worldwide human resources for Synygy, Inc.
Formerly part of the Great Place to Work Institute, the creator of Fortune’s annual “100 Best
Companies to Work For” list, he continues his research on creating profitable organizations
where people want to work. He has held executive HR positions at Revlon, ModernThink,
and W. L. Gore & Associates—one of only five companies to make Fortune’s list of 100 Best
Places to Work every year since the list’s inception. He is also coauthor of Destination Profit:
Creating People Profit Opportunities in Your Organization (Davies Black & ASTD Publish-
ers, 2006). He may be contacted via e-mail at [email protected].

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