Leadership Success Hinges on Creating a Purpose Driven Culture
- 24 Best Leadership Practices | Part 3 of 24 -
“Culture is a company’s nervous system meaning a domino effect of either growth or value destruction begins internally. People are a company’s greatest asset – more than its brand, products, or customers. If a leader creates an inspired culture a great brand, product, and customer base will automatically occur.”
An organization’s structure is its skeleton, the capabilities of the enterprise and its employees make up the muscles, and the culture makes up the nervous system. Without a healthy nervous system (i.e., culture) the enterprise will at best be a slow plodding, awkward entity and at worst, a paralyzed, lifeless organization that is being disrupted from the inside-out. As such, organizations don’t change until people change and people don’t change until a leader instills a purpose driven culture that is lived in breathed by the entire enterprise. Often, the biggest threat to any organization is not disruption, not competitors, not new entrants, and not dissatisfied customers but rather itself. A culture is not simply a feel-good, kumbaya moment but rather a quantifiable, profit generating machine that either creates or destroys value. As such, organizational health and an accompanying world-class culture drives employee engagement, inspiration, and an ownership mindset, which is the catalyst for creating significant customer loyalty, product innovation, agility, and profitable growth (See Exhibit 2). Simply, culture is perhaps the greatest yet most ignored profit generating engine.
“An organization’s structure is its skeleton, the capabilities of the enterprise and its employees make up the muscles, and the culture makes up the nervous system. Without a healthy nervous system (i.e., culture) the enterprise will at best be a slow plodding, awkward entity and at worst, a paralyzed, lifeless organization that is being disrupted from the inside-out. ”
In the era where volatility is the new normal and where enterprises must have an always-on transformation mindset, the demands on employees can be exponentially greater. Without a world-class culture people will feel exhausted instead inspired and exhibit a begrudging mentality instead of engagement. Thus, if leaders want raving shareholders and customers it first needs to create raving employees; and if leaders want raving employees it first needs to create a world-class culture. Accordingly, it is the leader's responsibility to create culture alignment from the top down while creating culture ownership from the bottoms-up. A root problem of a toxic culture is that many enterprise goals have a clear return on investment. The benefits of culture change, in contrast, can be harder to pin down and quantify. With that said, culture is the glue that holds everything together and is the catalyst where growth or the lack thereof begin. Indeed, most of the areas holding back a company’s growth stem from internal obstacles rather than external market or competitive forces. Indeed, Bain & Company found that 85% of the root causes for failure to maintain profitable growth are now internal to a company. In addition, McKinsey & Company found that culture is one of the most significant barriers to effectiveness and a major reason why growth efforts fail (See Exhibit 2). Finally, and according to both Gallup and Qualtrics, only 30% of employees are engaged in their work, illustrating a glaring, cultural root problem.
Exhibit 2 (Click to Enlarge)
Exhibit 3 (Click to Enlarge)
However, on the other hand, research has shown that purpose-driven companies provided returns of 1025% over the last ten years, compared to 122% for the S&P 500. Simply, culture drives growth and success (See Exhibit 3). Consequently, leadership teams that fail to plan for the human side of change often find themselves wondering why their best-laid plans go amiss. Changing behaviors is not about putting culture slogans on paper, which oftentimes simply collect dusts in employees’ offices, but instead, it is about creating psychological ownership from the bottoms-up because real change happens from the bottom. Many companies have a written culture but most would be hard pressed to tell you what that culture is let alone confidently say their organization lives and practices by it. Simply, the culture is merely lofty words on paper. Without psychological ownership these words never drive change, employee engagement, or growth. Thus, any growth transformation will stop in the executive room and never successfully work its way down to the company's employees let alone its customers. On the other hand, leaders that prioritize culture will discover a new runway of profitable growth that maximizes both people and financial potential (See Exhibit 3).
“Many companies have a written culture but most would be hard pressed to tell you what that culture is let alone say their organization lives and practices by it. Simply, the culture is merely lofty words on paper. Without psychological ownership these words never drive change, employee engagement, or growth. ”
Exhibit 4 (Click to Enlarge)
Exhibit 5 (Click to Enlarge)
To begin, leaders must stop treating people as a means to an end — or, in many cases as collateral damage — and instead take a mindset of people first. Simply, leaders must take on a founder’s mentality - one that has the agility, frontline obsession, and employee engagement of a startup combined with the scale, muscle, and processes of a Fortune 100 enterprise. However, more often than not successful companies often begin with an inspired culture that drives immense growth. Over time, growth ushers in complexity and its value destructive influence which can quickly turn that culture into meaningless words on paper. This ensures internal health problems abound which ultimately destroys the company from within. As such, many companies experience what this articles calls the “culture paradox” (See Exhibit 4). Simply, a great culture creates growth, growth creates complexity, complexity destroys that culture, and a poor culture destroys growth. To learn more about the culture paradox™ click HERE. Leaders can avoid this value erosive culture paradox phenomena by following a six step process (See Exhibit 5). Read more about this six step culture creation process HERE. To summarize, a leader can create a purpose driven culture by following these six steps:
- Ensure Psychological Ownership: Leaders must mitigate artificial buy-in, complacency, and a begrudging mentality that transpires from a culture that simply collects dusts in employees' offices. Without psychological ownership these words never drive impact.
- Reward Transparency: The right culture rewards – not punishes – its employees for transparency. Simply, leaders must create "why" not "yes" people. "Why" people creates challengers of the status quo and a culture that innovates instead of imitates. On the other hand, "yes" people fosters artificial harmony which gives way to groupthink - the destroyer of innovation and profitable growth.
- Align and Bring Focus: Without organizational wide focus and alignment, both of which stems from the right culture, a firm will never gain the positive momentum it needs for sustainable growth. Simply, leaders must get everyone on the bus by prioritizing and driving laser focus.
- Usher in Choice and Learning: While excessive rules may work for compliance, autonomy and choice is a far better option for bringing the best out of a company and its employees. Simply, autonomy and choice is the fuel for employee engagement, innovative products, and loyal customers.
- Empower: Leaders must create owners instead of employees and leaders instead of followers. Simply, the heartbeat of any company is the customer and the employee. If organizations don’t empower and listen to the frontline it’s analogous to a patient being put in front of a doctor without the necessary tools for the required surgical procedure.
- Create Engagement: If leaders want to create raving, engaged customers they must first create raving, engaged employees. Simply, the first step to innovative products, customer advocates, and ultimately profitable growth is to create employee advocates that in turn will be inspired to create those “wow” moments for customers because a company first created those “wow” moments for its employees.
“A visionary leader ensures an inspired culture is firmly embedded - one that creates ownership, not simply artificial buy-in as there is a big difference between the two. ”
The word “culture” connotes many different meanings for those in the corporate world. However, too often it is simply a misunderstood buzzword that companies easily throw around in boilerplate speeches while concurrently failing to truly address culture head-on. Instilling any culture change begins and ends with leadership who must be the role model for lasting change (Read about becoming a leading role mode HERE). As renown Harvard Professor John Kotter noted, change is a process that is 70 to 80 percent leadership and 20 to 30 percent management. Accordingly, a visionary leader ensures that a culture is firmly embedded that creates ownership, not artificial buy-in as there is a big difference between the two. Simply, any leader must look internally and get its own enterprise in order by creating a culture that is lived and breathed by its employees. Then, and only then, will a company witness the level of employee engagement needed to create innovation, customer loyalty, and sustainable growth. Simply, a culture is a not a by-product of a company’s strategy, brand, or products. Instead, success, including product innovation, customer loyalty, and profitable growth are all byproducts of a company’s culture or lack thereof.
For more on creating a purpose driven culture read HERE. To learn about all 24 best leadership practices read HERE.
Think Culture is Just a Buzzword? Think Again
Culture is perhaps the greatest yet most ignored profit generating engine. Learn (1) "why" culture is vital to success, (2) "what" to do to create an inspired culture, and (3) "how" to implement for success. Read More →
24 Best Leadership Practices
- Series Overview -
The following article is Part 3 of a 24 part series on leadership (see all 24 best leadership practices HERE). To summarize, leadership is everyone’s business. Moreover, leadership abilities are not some innate talent that some were either born with or not but rather is a highly learnable skill. As such, everyone has the potential to become a great leader as long as one embraces a mindset of continuous improvement. Simply, leadership is not so much about inherent gifts and raw talent but rather the emotional awareness, humility, and perseverance to understand that leadership is a lifelong journey that is never mastered. Indeed, aspiring leaders must acquire the endurance of a marathoner, the musculature of a sprinter, and the mental fortitude to embrace that there is never a finish line but rather an unending goal of continuous transformation.
Ultimately, the leadership journey is not about becoming someone else but instead is about becoming one's best self so that in turn one can help others become their best self. And, while there are many facets that go into successful leadership we have identified 24 best leadership practices all of which are grouped into one of three categories, namely (1) inspire, (2) empower, and (3) innovate (see all 24 practices HERE).
- INSPIRE: To inspire action, great leaders appeal to people's hearts more than their minds. Simply, visionary leaders plan with the mind, lead with the heart, and reflect with the soul.
- EMPOWER: Great leaders empower those they are leading while simultaneously creating a collaborative culture that promotes the notion that together we can accomplish anything as long as we don't care who gets the credit.
- INNOVATE: Visionary leaders embrace change and understand that the term "good enough" is used by the lazy to justify inaction. As such, great leaders disrupt themselves and their companies before others do it for them.
Leadership is the greatest race one will ever run – one without a finish line but also one with an exponential ceiling for those that embrace change, growth, and learning. While the level of employee talent may determine the potential of an organization it is the leader that ultimately unlocks that potential and determines the success of both the organization and its people. Although no leader will be a master at each of the proposed 24 leadership practices, awareness is often the greatest agent for change and continuous improvement. As such, we hope the proposed practices will be of service to you in maximizing not only your leadership potential but also the potential of those around you.
ABOUT THE AUTHOR
Joshua Seedman is the founder and chairman of PNI Consulting, a management consulting firm that specializes in global transformations. He has over 20 years of operating and general management experience with expertise in organizational transformations, customer experience, employee engagement, digital transformations, sales & marketing, operational turnarounds, culture/change management, and high-stakes negotiations. His experience includes executive roles within F500 companies, top-tier consulting leadership (McKinsey & Company), over 10 years of global P&L ownership, and corporate lawyer (Davis Polk & Wardwell). He received his MBA from Kellogg School of Management and his Juris Doctor (cum laude) from Northwestern University School of Law.
