Building a winning culture - Bain & Company

A company¡¯s key to success

is in its heart and soul.

Building a winning culture

By Paul Rogers, Paul Meehan and Scott Tanner

Paul Rogers is a partner with Bain & Company in London and leads

Bain¡¯s Global Organization Practice. Paul Meehan is a Bain partner in

Tokyo and leader of Bain¡¯s Organization Practice in Asia. Scott Tanner

is a partner in Bain¡¯s Melbourne office.

Copyright ? 2006 Bain & Company, Inc. All rights reserved.

Editorial team: Paul Judge and Elaine Cummings

Layout: Global Design

Building a winning culture

A company¡¯s key to

success is in its heart

and soul.

Why has Dell been able to outperform its

competition consistently over the past decade?

Strategy, certainly. Operational discipline,

without a doubt. Talented people, of course.

But when asked in an interview with Harvard

Business Review what best explains the company¡¯s spectacular success over the years, Dell

founder Michael Dell and CEO Kevin Rollins

focused on something else.

¡°While Dell does have a superior business

model,¡± said Rollins, ¡°the key to our success

is years and years of DNA development that

is not replicable outside the company.¡±

Added Michael Dell, ¡°Culture plays a huge role.¡±

They¡¯re hardly alone in their belief that culture is at the heart of competitive advantage,

particularly when it comes to sustaining high

performance. Bain & Company research

found that nearly 70% of business leaders

agree: Culture provides the greatest source

of competitive advantage. In fact, more than

80% believe an organization that lacks a

high-performance culture is doomed to

mediocrity. (See Figure 1.)

At a time when enterprises can stretch

around the globe, culture is the glue that

holds a complex organization together. It

inspires loyalty in employees and makes

them want to be a part of a team. It motivates

people to do the right thing, not just the easy

thing. At companies with winning cultures,

people not only know what they should do,

they know why they should do it.

Yet, while business leaders recognize culture¡¯s

crucial role, our research also indicates that

fewer than 10% of companies succeed in

building a winning culture. According to

a Bain survey of 365 companies in Europe,

Asia and North America, even those firms

that manage to foster high-performance

cultures often find them hard to sustain.

The best companies succeed, we found, on

two dimensions simultaneously. First, every

winning culture has a unique personality

and soul that cannot be invented or imposed.

Based on shared values and heritage, the

company¡¯s character needs to be discovered

from within.

Second, winning cultures usually embody six

high-performance behaviors that are common

to all high performers¡ªbut only to high performers. (See Figure 2, on page 2.)

Figure 1:

Starting point

68%

Leaders who believe their

culture is a source of

competitive advantage

76%

Believe it is changeable

and 65% believe they

need to change it

81%

Believe that an organization

that lacks a highperfor

mance culture is doomed

to mediocrity

10%

But fewer than 10%

succeed in building one

Source: Bain Survey

n = 365 companies in Europe, Asia

and North America

Neither element is enough by itself to sustain

a winning culture. A company can have a

strong personality and soul, but still underperform if it lacks the values and behaviors

that motivate people in the organization to do

the right things. Similarly, high-performance

behaviors pursued independently can shift

an organization into permanent overdrive

and sever the connection that employees feel

with the enterprise. It¡¯s the combination of

both elements that produces a winning culture.

A distinctive personality

The personality of an organization is often

taken for granted. Often the values of the

founder are instilled in the organization and

shape its culture going forward. ¡°We try harder¡±

at Avis, or ¡°Always low prices. Always,¡± at

Wal-Mart are foundational values that have

become ingrained into the very fiber of each

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Building a winning culture

Figure 2: Winning cultures combine two

key elements

High performance

values and behaviors

Unique personality

and soul

Significant similarities exist

across highperforming

companies

Every highperforming

company is unique

High

aspirations

and a desire

to win

External

focus

Passion and

energy

Who we

are/what

we value

Individuals

who team

Think like

owners

Bias to

action

business, informing day-to-day decisions and

behaviors. Procter & Gamble, likewise, has

managed to place the consumer at the heart

of the company¡¯s culture, which keeps employees focused on ¡°touching lives, improving

life¡± in every market in which they participate.

Traditions also count. Rituals, heroes and

language give a company its unique feel.

One of SC Johnson¡¯s defining moments, for

instance, came during a 1927 Christmas Eve

speech by H.F. Johnson Sr., who introduced a

profit-sharing plan, a 40-hour work week and

a pension plan¡ªunusual benefits in those

days. ¡°The goodwill of the people is the only

enduring thing in any business,¡± Johnson

said. Eighty years later, his words still hold

meaning in an organization that proudly calls

itself ¡°a family company.¡±

A distinct personality can help a company

attract people who, in turn, embrace its culture.

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The strongest cultures bind people together

across both hierarchy and geography, guiding

them to make the right decisions and advance

the business without explicit direction. One

Southwest Airlines employee captured that

notion well when he said, ¡°We all work hard,

but to do anything else would be like letting

your family down.¡±

To turn commitment into strong performance, a company¡¯s personality needs to be

complemented by behaviors that motivate

employees to excel over and over again. Bain

research has identified key behaviors that

most winning cultures share. First, they aim

high, so that employees remain fundamentally

dissatisfied with the status quo. Energy gets

focused externally on customers and competitors, rather than internally on issues of

politics or ¡°turf.¡± Employees think and act

like owners, taking personal responsibility

for overall business performance, not just

their slice of it. They also exhibit a clear bias

to action, with little patience for bureaucratic

debate. People in winning cultures are team

players who display high levels of passion

and commitment, which usually includes

hard work. (See sidebar, ¡°Key attributes

of winning cultures¡± on page 9.)

Of course, the actual expression of these

attributes within a company will vary. A consumer products company, for example, may

focus on the customer by blanketing the

offices with lifestyle posters featuring its

particular target customers. A professional

services firm might send out a weekly communication with updates about important

clients. The true test of a winning culture is

whether the expectations of high performance¡ªand the desire to win¡ªare understood

and widely shared.

Building a winning culture

Leading cultural change

Our research indicates that more leaders fail

than succeed at creating a winning culture.

That¡¯s because transforming a culture requires

influencing people¡¯s deepest beliefs and most

habitual behaviors. One company¡¯s culture may

be so sharp in its focus on cost efficiencies

that it stifles a more customer-centric approach

to new-product development. Another may be

built on a reward system that reinforces corporate silos when, instead, collaboration across

departments is the best way to boost results.

Of course, changing cultures is no easy task.

Companies, like the people in them, actively

resist change. The challenge is to ¡°unfreeze¡±

established behaviors and create the motivation

to change so that employees can learn new

behaviors, and then ¡°refreeze¡± those behaviors

over time. That¡¯s why a crisis¡ªwhich focuses

attention on survival and breaks down resistance¡ªcan be such a potent catalyst for cultural

change. Similarly, the shake-up that comes

from new competitors, new technologies or

new regulations can present an opportunity

to break down old, unproductive habits and

instill the kinds of behaviors necessary to get

to the next level of performance.

Compelled by such necessities, companies

can change their cultures, provided leaders

understand that change must start at the top.

Successful cultural change results from having

a clear idea about what type of culture the

business needs, identifying the specific attributes that go along with it, and then focusing

on managing the drivers that shape and

influence culture rather than trying to manage

culture itself. In our experience, building a

winning culture requires five key steps:

1. Set expectations about the necessity

for change, the type of new culture required

and how it will result in success. The organization needs to know what is unique in its

heritage and which performance attributes

are missing.

2. Align the leadership team around

a common vision and required behaviors.

While many factors influence culture, the

single most important is leadership¡ªwhat

leaders do and say, in that order, consistently

over time.

3. Focus the organization on delivering

the business agenda. A culture of account-

ability is best achieved by holding people

accountable for actual delivery, rather than

spending energy on a formal ¡°culture change¡±

program. Culture is a means to an end, not

an end in itself.

4. Manage the culture by managing the

drivers of culture. Encourage the leadership

team to ¡°walk the talk;¡± clarify roles and

accountabilities for key jobs; replace people

where necessary; add performance metrics

or incentives; and change the performance

management or recruiting processes.

5. Communicate and celebrate. Culture

change can be a long journey¡ªand one that

requires tireless leadership. Consistent, sustained communication of the required behaviors

is critical. It¡¯s important to celebrate victories¡ªlarge and small¡ªbut never to declare

victory outright.

Winning cultures are best measured through

the day-to-day activities of the frontline: the

ownership of continuous improvement by

lead operators on the factory floor; the pride

of the deli team merchandising the best quality at the lowest prices; the responsiveness of

a bank manager to a customer¡¯s complaint.

The frontline is where sustained cultural

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