Corporate Culture: The Four Ingredients That Are Crucial to Your Company’s Success T his chapter shifts attention from the components of your plan that are considered to be tangible to those parts of your story that may appear at first glance to be intangible. The term corporate culture is used frequently in business language. What makes up cor- porate culture is often in question. Many things can be and should be included in any discussion of an organization’s culture. In this chapter you will develop four products for your story and business plan: 177 CHAPTER 7 1. A set of core values 2. A philosophy statement 3. Operating principles 4. A strategic intent statement The four represent important influences on parts of your culture and must be considered when developing the integrated planning model. The first section on values advises you on how to build a list of values without falling into the sophomoric trap of spending all your time developing and prioritizing a list of meaningless rhetoric. The explanation leads you to developing a set of core value state- ments and their subsequent requirements to put the values into place while accounting for the operational values. The second component of the culture is the philosophy state- ment. This statement of how you intend to do business sets a nec- essary tone. It sends a strong message about what is important to keep your business viable. On the other side is the implication that if you violate this philosophy you jeopardize the health and well- being of your company. The third component of the culture are the operating princi- ples. In this description I outline a number of filters through which you must pass your story for authentication and validation. Adherence to the principles or cross-checking your business plan against the principles provides the consistency of your story. The fourth component, the strategic intent, is a critical restate- ment of where the management team intends to take the organiza- tion. It sends signals to employees and has significant influence on how they react. A military commander always signals strategic intent through the military version called commander’s intent. With this statement the commander gives subordinate unit com- manders advance warning that certain types of operations will fol- low the present tactical plan. When subordinate commanders know the intent they can better prepare to follow it. Different logistical requirements exist if you plan to continue the attack or you plan to Seven Steps to a Successful Business Plan 178 defend the hill. Likewise, business leaders need to tell their organi- zations what they have in mind for the long term. For example, marketing needs to know the strategic intent so it can align its cam- paigns with the company direction. T HE T HREE S TEPS FOR D EVELOPING A L IST OF C ORE V ALUES In previous years we began a planning session with work on the goals. It made sense to decide what you wanted to accomplish. There would have been no discussion of the types of soft issues now included in planning models. To suggest starting with or even dis- cussing values would have been summarily discarded, rejected, and rebuffed. Yet we knew that values played an important part in the behavior of organizations as they moved out of a command-and- control hierarchy toward empowerment, diversity, and a virtual structure. Today we believe core value statements may constitute one of the most important components of your story. They are different from philosophy because values define what’s core to the organiza- tion’s management behavior. They set boundaries on what is acceptable and unacceptable by providing ethical lines you do not cross. A simple definition of values as those things important to you is a start point, but it’s not sufficient. We need to define operational values but spend the bulk of our time on the deeper core values. The danger of introducing values into the business plan is that the concept is overworked, overused, and understated in man- agement language. Usually a discussion around the planning table brings together a list of items such as these: ■ Quality ■ Teamwork ■ Integrity ■ Honesty Corporate Culture 179 Such discussions are not only boring, they’re very superficial. This is traditional list-making. Most planning teams display mild interest, but there’s no astounding breakthrough at the planning session. Implicitly no one in his right mind would sit in front of peers and deny listing teamwork as a value. Not after the chief exec- utive officer just published a newsletter proclaiming this to be the year of company teamwork. I challenge that teamwork may be important but not necessar- ily a core value. It is really a by-product of another value. Likewise, we may have an emotional connection to building customer rela- tions. Again, is this a value or something else? What happens when e-business becomes the norm and the personal component of the customer service relationship is diminished from its present form? While these items are important to the functioning of your business, they are transitory, too. Consider the business emphasis and how it evolves and changes. In the early 1980s, a fellow con- sultant suggested that I change my business cards to read Total Quality Management (TQM). My response was, “Why? What will I do when that fad has passed? Change my card again?” What hap- pens when the level of quality provided is so consistent across prod- ucts and businesses that it is no longer a discriminator? This leads to another level of understanding of the concept of values and their role in the organization’s story. We need to move to another dimension of sophistication to understand values. This new level of emphasis is on core values. I didn’t invent the term; lots of other people use it also. However, I do offer you a different application of values from those usually found in your planning process. The concept of core values means reaching a certain level of understanding of what is more perma- nent. While teamwork and quality are important transitory opera- tional values, they do not reach deep enough into the roots of your story. Core values are those things that probably will not change over time. These are the deep-seated fundamental lines you will not cross in spite of the circumstances. These values define the line over Seven Steps to a Successful Business Plan 180 which you will not step in a situation where it would be easy to look the other way. Defining the list of company values in a planning meeting is not a task to be taken lightly. Identifying your core values is really a gut-wrenching activity. By asking questions of yourself you have to thoroughly scrutinize your baseline for business behavior and determine where limits can be set. Another important function of core values is to provide behav- ioral maps for business decision making. People need to know what is important to the business so they can make informed choices in decision-making situations. Values give an organization a path out of difficult situations. When a crisis occurs, it is the value state- ments that give stability to the chaos. Managers turn to the core values as beacons or, better still, as channel markers to see if their intended responses to the crisis are within accepted norms. Picture a case where a manager, Susan, has reached an impor- tant junction in her project. Two alternatives are available and both are logical, practical, and make good business sense. She chooses alternative A, only to find it difficult to implement. A natural cul- tural resistance seems to be in effect. This is because alternative B was a better fit with the company’s values system. Although alter- native A was correct, it just didn’t fit the norms of the organization. Had Susan known the values, had they been discussed, she could have made the more appropriate selection. Her culturally inappro- priate choice caused wasted effort and lost energy, which eventual- ly shows on the bottom line. For the organization, values play the same role in giving direc- tion in times of crisis. By always falling back on your bedrock beliefs or core values, you are able to be consistent in your story. There is a folk saying: “If you always tell the truth you never have to remem- ber what lie you told to whom.” If you always live your values, you never have to worry about stepping out of the ethical box. If your values are ethically in line with the societal norms of the time you should have no problems. Corporate Culture 181 Step 1: Determine What’s Really Important To capture your values as part of your story, you need to have frank discussions with your team to determine what is really important to you, your team, and your business. From the discussion you need to develop a list of core values. Keep it a short list, say, around four or five items. Too many values on the list seem to dissipate the importance of the list. It becomes a tedious code of conduct for employees to remember. People seem to be able to relate better to a few core values than to a long list. There has been research on the number of values a company should maintain and communicate. James C. Collins and Jerry I. Porras have done extensive analysis of the successful habits of visionary companies. They devote a significant amount of effort defining the role and importance of core values in a visionary com- pany’s culture. Collins and Porras found that “visionary companies tend to have only a few core values, usually between three and six. In fact, we found none of the visionary companies to have more than six core values, and most have less. And, indeed, we should expect this, for only a few values can be truly core—values so fun- damental and deeply held that they will change or be compromised seldom if ever.” 1 The message here is to keep your core values list limited. If your list is of the short-term-importance type, you will spend excessive time arguing the validity of the list. In fact, there may be a direct correlation between the amount of time spent discussing operational values and the length of the list. Don’t spend a lot of time in disagreement over what should be or shouldn’t be on the list. That argument is really not as impor- tant as what honesty means to the team as a core value. Don’t spend any time putting the list into an order of priority. That, too, is a waste of your valuable management time. You will be consider- ing the complete list anyway, so a priority activity is not necessary. Seven Steps to a Successful Business Plan 182 Step 2: Explain How to Put Each Value Into Action Once your core list is complete, describe how you live your values. Little is accomplished in your planning if you only make a list of your value statements. They must be translated into actions or observable behaviors. There is a way to complete the value state- ments by making them more meaningful. Define each statement in action terms. Planners find the following format to be quite effec- tive. Consider the complete examples provided here; they were taken from four different business plans: We Value Profit This means we: 1. Make a reasonable profit on every deal or we don’t contract. 2. Take steps to continually eliminate inefficiencies from our business processes. 3. Spend money wisely for things we need to support our operations. We Value Our Product This means we: 1. Protect its image at all costs. 2. Continuously improve its performance. 3. Sell it for what it is worth. We Value Our Reputation This means we: 1. Safeguard our public image. 2. Require high ethical standards for employees. 3. Take swift, decisive corrective actions in potentially embarrassing situations. Corporate Culture 183 We Value Our Time This means we: 1. Don’t chase contracts. 2. Don’t waste time submitting competing bids. 3. Pull the plug early on bad projects. Follow this format for discussing each of your values. Listing the actions causes your management team to achieve a more com- plete understanding of what the values mean to the company. I don’t know of many planning sessions where this level of sophisti- cation and meaning is attached to value statements. This format further connects the planners with an awareness of what may or may not be happening within their organizations. It is a conscious- ness-raising activity. Step 3: Account for Any Gaps When you are satisfied the list and all the action-oriented state- ments reflect what you want the value proposition to contain, you take still another step. Next is the gap analysis as drawn in Figure 7- 1. Spend time discussing each value in terms of what you say ver- sus what you do. Ask yourself four key questions: 1. Is there a gap between what we say and what we do? 2. If so, is it a large, medium, or small gap to my employees? 3. How important is the gap? 4. Is it critical to our short-term or long-term plan? Which or both? Seven Steps to a Successful Business Plan 184 These are serious questions that must be answered to get you to action planning. All gaps must be accounted for and closed with a definitive action. I call these your “quick fix,” steps you must immediately take to protect your story. These actions are a preemp- tive strike on employees so you are not caught in an inconsistent story. You confess up-front to any shortfalls and present compre- hensive plans to correct the problems. Never ignore or cover up identified gaps. I promise you, it will come back to haunt you one day. Think about it. If you know there is a problem, then so do the employees. And they know you know. In summary, values are a cornerstone to your story. Careful considerations are made to define what are operational values and Corporate Culture 185 Figure 7-1. You lose management credibility when you don’t model your values. what are the true, core values. Separate out the short-term opera- tional items and make them strategies or tactics. For example, team- work may be important, but instead of restating it in the value piece, move it up to the strategies/tactics area. Then dig deep for meaning in four or five core values that drive your business’s very existence. Look for things that are so fundamental to your contin- ued success there is never any thought of violating them. H OW TO P REPARE A C LEAR , W ELL -C RAFTED P HILOSOPHY S TATEMENT Your philosophy is the second important cultural component defined in this chapter. Philosophy determines how you intend to approach your business. It signals who you are and how you will deal with the world around you. Having a well-written and com- municated philosophy statement provides stability in troubled times. Working in conjunction with values, the philosophy becomes a beacon for employees and management to turn toward when the going gets rough. A clear philosophy gives you a frame- work for sorting problems. It also is a strong influence on how you conduct daily business. You may find the roots of your philosophy in the character or uniqueness of your business. Distinctive fea- tures are attributes that cause you to be unique. This is a good starting point to understand business philosophy. An examination of any of the following eight attributes can help you formulate your philosophy: 1. Price. Your philosophy may be to compete on price. Usually this means your products or services have to be priced lower than the competition. You believe you sim- ply underprice the competition every time on every item. This is a difficult factor to manage if you are in a com- modity business, such as a grocery store, that has high vol- umes and low margins. Seven Steps to a Successful Business Plan 186 [...]... to employees in an appropriate manner to prevent a backlash in your story Figure 7-2 The foundation of your story is in danger when a gap exists in your philosophy because your story loses operational alignment 192 Seven Steps to a Successful Business Plan THE SEVEN KEY OPERATING PRINCIPLES THAT GUIDE SUCCESSFUL BUSINESSES Another key piece of the soft side of your story is your principles These are. .. across the counter, grabbed the check from the customer’s hand, and told him to be back at five when the store closed Together they would drive down to pick up the computer Where have all the businesspeople gone, long time passing? The point of the story is simple: Don’t ever let a customer with money out of your sight The Principle of Direction: Know Where Your Organization Is Headed Organizations that. .. They state, The intent translates the vision into very specific terms that can guide your actions In articulating the intent, the leader stretches the organization, both pushing and pulling toward success It is important to understand that intent seldom leads directly to realization of the vision but carries the organization in the direction of the vision.”5 I interpret the last sentence to mean that. .. allocate resources to make sure the future occurs Second, knowing your intentions helps them make personal career decisions To help your management teams better prepare for the future you need to develop a short, succinct statement about what you intend to do This forces you to commit to your plan and your story Not many managers have the courage to stand before the company and declare their intentions... young man approached the lone storekeeper It seemed the potential customer had located a computer he wanted at the New Orleans store and had been able to save the money to pay cash His problem was that he didn’t have a way to drive the eighty-five miles to pick up the computer Did the salesperson think he could have the computer shipped to Baton Rouge? Seemed like a simple request The sales clerk replied,... asked how the company stayed competitive, the answer was startling and frank The company targets the B-grade graduate schools and picks up what the other companies don’t want In both of these examples, the two companies are sending a strong message to their workforce We are content to work with the second string and you are it And because you are second string we don’t have to pay you as much The other... automobiles The one car, one customer, and one deal philosophy was costing a fortune in lost revenue Dealerships had to not only revise their products, they were forced by the economics to rethink their business approach to customers The product was no longer the driving force The customer’s buying capacity became the central focus If a dealer wanted to achieve a multiplier effect with repeat customers,... know what they want to do, communicate that intent to their employees, and proceed in that direction do better than those that follow the Cracker Jack approach The Cracker Jack approach is when you open a box and find a prize at the bottom Some organizations live from day -to- day, digging in the box to find the prize Often the results are cheap novelties and offer no real substance Consider the case... is devoted to this topic The Principle of People: Don’t Ignore the Human Factor Most organizations need human elements to make them work Except in some specific cases, humans are the delivery component of the equations that breathe life into a system Robots can run a production line, but they cannot make business decisions (yet) That s why your businesses need people General Motors tried to get rid... The doctors and professors were totally uninterested in the concepts of managing money They worked hard to get grants, but after that it was back to their classrooms and research labs Discussing how money was to be managed was too pedestrian for their learned minds Often researchers in corporate situations are totally ignorant of the concepts of fiscal responsibility Another of my observations is that . Corporate Culture: The Four Ingredients That Are Crucial to Your Company’s Success T his chapter shifts attention from the components of your plan that. problem, then so do the employees. And they know you know. In summary, values are a cornerstone to your story. Careful considerations are made to define what are