Mistake #6 (Part 2): Not creating the right culture to support the business

In my last blog post, I spoke about the importance of a CEO paying attention to culture creation and the role that the HR Leader plays in helping this to happen. All of these actions I described previously, however, can only validly take place in an environment where the culture has actually been discussed and agreed upon.

There is a lot of power in simply having the conversation to discuss culture. The conversation alone demonstrates its importance and sends the signal to the company that this is a matter that you take seriously. Employees will also be more likely to adhere to the standards of conduct and behavior that the culture requires of them. Not having the conversation and simply letting the culture develop haphazardly sends the opposite signal.

There is no one right culture for every company.  When thinking about what culture is appropriate for your company, there are many factors to consider.  These factors include such things as industry, product cycle, expected growth, and geographic location, to name just a few.

With that said, is important that your external brand promise match your internal brand promise, or culture.  When employees feel or see a disconnect, it makes for an uncomfortable discord and employees are likely to resolve this discord by leaving.  Accordingly, a keen awareness on a company’s part of its external brand will help to inform the right culture within the company, as well.

For instance, it probably makes sense for a Wall Street bank to have a culture that is more conservative, cautious, formal, rigid, and hierarchical. That would likely match well with the external brand perception of the company. On the other hand, it probably makes sense, as well, for a small social media start-up in San Francisco to be loose, informal, non-hierarchical, freewheeling, and playful. That culture is likely a good match with the external perception of that company (and the industry in general) creating harmony for your employees. In each of these cultures, each company would most expect to achieve the most success.

Siebel Systems was a software company founded in 1993 that for many years competed against software giant, Oracle.  In 2005, Oracle bought Siebel and that was the end of the company.  But it didn’t have to end that way.

Siebel was successful when it first began because it was an upstart blazing a new path in an exciting new industry. As it grew, however, the CEO and founder, Tom Siebel, consciously set out to create a more formal culture. The employee rulebook became thick and heavy with mandates regarding employee dress, the neatness of desks, rules against eating anywhere but mandated areas, etc. These rules would’ve been fine in 1981 at JP Morgan but were out of sync in the late 1990’s in Silicon Valley.

Accordingly, Siebel was no longer able to attract the best and the brightest. Engineers and other creative types would only consider joining Siebel as a last resort. I know one prospective employee who literally left in the middle of her interview schedule once she was exposed to all the rigid rules and regulations. she was shocked by what she saw.

What Siebel failed to understand was that employees had expectations for how a software company should look and feel to an employee in Silicon Valley.

In order to attract the talent they needed to beat Oracle, Siebel needed to create the right environment to attract, retain and motivate their employees. Instead they did just the opposite. Its culture felt disempowering, rigid, and not fun. Business analysts have conjectured many different reasons over the years as to why Siebel failed. But they missed what I believe to be the most important:  Siebel had created the wrong culture it needed to compete in the industry and geography it served. In the waning years prior to the sale, Siebel lifted some of their onerous employee restrictions in order to make a last ditch effort to attract and motivate the talent it needed to compete. It was unfortunately a case of too little, too late.

There are a myriad of reasons to care about your company culture, not the least of which is the impact to your bottom line due to satisfied, engaged, thoughtful, determined employees who feel valued, heard, and appreciated.  In the Juan example in my previous blog post, he was none of the above at the first company. In fact, he felt isolated, unappreciated and scolded, so much so that he was considered a poor performer and was fired.

Creating and aligning the appropriate culture to support a company’s business strategy and goals is at the very foundation of good human capital management. It helps to excite, energize, and retain the very employees you’ve worked hard to hire in the first place. It also ensures that your current and future talent will be appropriately aligned with your mission, values, and goals.

With the right articulated culture in place, you are able to take conscious, concrete action on a number of things to support your business that you couldn’t have done otherwise. As an example, once you’ve articulated your culture, it is easier to develop the right hiring profile to use in all future hiring. In Juan’s example, the company could have saved him and itself a lot of time, energy, money, and heartache by simply identifying the mismatch upfront and not hiring him. This would have been a net benefit to everyone involved.

The cost of a bad hire to a company is more expensive than you might think. According to Government Executive Magazine, the cost breakdown for a bad hire is as follows[1]:

Entry Level Federal Employee –  $5,000 – $7,000

Mid Level Federal Employee –     $40,000

Upper Level Federal Employee – $300,000

For private sector employees, ADP, Inc has a calculator that on its web page that lets you figure out how much each bad hire will cost you.  The default number for an entry-level employee is $50, 379.  Ouch.

Note, however, that in the Juan example it would have required an extraordinary level of company-awareness on the part of the hiring manager. When you think of defining your culture, one naturally gravitates to positive or idealized characteristics of the culture. It is hard to be brutally honest about the negative or unfavorable aspects of a culture.

This is again where your HR leader can help guide the company through the difficult conversations to create the awareness of even the downsides to the culture. Only with a frank understanding of your culture can you put in place both safeguards to protect the favorable aspects of your culture, as well as mitigation strategies to help ameliorate some of the harsher aspects of the culture.

[1] Government Executive Magazine – July 1st, 2005

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