Few leaders today would deny the importance of organizational culture — it shapes and sustains both employee productivity and business results. But although culture matters to managers trying to transform their organizations and even auditors who now work todocument culture, it is often ambiguous and hard to define.
Culture is more than individual talent, and it is more than a random set of well-intended and internally derived values, behaviors, or emotions. We propose three levels of understanding culture. In Level One, culture is seen through symbols, rituals, stories, and other organization events. These are the first cultural artifacts we experience when we join or visit an organization. In Level Two, culture is reflected in how people think, behave, and feel in the organization, based on internally defined criteria. Culture shows up in the values, norms, unwritten rules, emotional responses to, or flows of how things are done in a company. Most definitions of culture remain at Level One or Two. But we believe there’s a more advanced level of understanding culture that makes it even more valuable to business leaders.
Level Three defines culture as the identity of a company as perceived by its best customers, representing an outside-in view of culture. For example, Amazon wants to be known for disciplined execution of customer purchases; Apple for design and simplicity; Marriott for exceptional service; Google for innovation; and so forth. These brands or identities then become infused throughout the company through how employees think, behave, and feel.
To create a winning culture, it is not enough to have or recognize cultural artifacts (Level One) or to shape how people feel, think, and act based on internal criteria (Level Two). Rather, a winning culture ensures that people feel, think, and act consistently with promises made to customers and other key stakeholders (Level Three).
We have had the privilege of advising dozens of organizations on how to get to Level Three. These experiences have resulted in our consolidating our knowledge into three steps. They’re broad, but if your own company culture has gotten stuck at Level One or Level Two, they may help you move the next level of business impact through the outside-in approach to culture:
Step 1: Define the right culture. Leaders should begin to define the firm’s ideal culture by asking, “What is the shortlist of what we want to be known for by our best customers?” This question focuses culture less on internal values or behaviors and more on external promises and identity. Make sure that customers outside and employees inside have a shared mindset about this desired culture.
Step 2: Translate the ideal customer-centered identity into behaviors for employees. A strong culture guides employee actions. Employees think and behave so that the company’s brand is reinforced in the perceptions of customers and shareholders. The culture defines the principles, and then employees determine how their behaviors align with these principles.
For Amazon, the focus on disciplined customer-centered innovation sends a clear message to potential and current employees. As their website puts it, “If you love to build, to invent, to pioneer on a high-performance team that’s passionate about operational excellence — you’ll love it here.” This agenda signals to employees what customers expect from Amazon. In a recent workshop, all 350 participants had purchased something from Amazon but none really cared about their emotional experience as much as the timely execution of their order. These customer expectations (brand promises) shape employee behavior around operational excellence.
Step 3: Design the right processes, practices, and structures for supporting and encouraging those behaviors. Management and organization processes, practices, and structures create and sustain the right behaviors, thereby institutionalizing the desired culture. These processes, practices, and structures include staffing, training, promotions, measurement, rewards, organization structure, work design, information management, physical arrangements, and leadership development. Through these elements, managers reinforce employee actions that align with customer expectations.
And, of course, this also means choosing, developing, and promoting leaders at all levels who reflect your desired culture. Your leadership competencies become a leadership brand when leaders’ behaviors represent customers’ expectations.
Few doubt that culture matters; designing and implementing the right culture matters much more. By shifting cultural discussions from symbols and values to customer expectations and company identity, leaders can create a culture that wins in the marketplace.