Culture as Competitive Advantage

James Heskett, W. Earl Sasser, Jr., and Joe Wheeler, April 17, 2009

Why is it that many of the same companies appear repeatedly on lists of the best places to work, the best providers of customer service, and the most profitable in their industries? When we talk with the leaders of these organizations, some of who have changed the rules for competing in entire industries, they point to culture as a primary reason for their success. Just as important, culture is an advantage that competitors find hard to duplicate.

What do managers at the best places to work understand that others don't? For one thing, they recognize that culture is anything but the soft, mushy set of platitudes some leaders think it is. They understand that the identification of organization values is meaningless without a determination of the behaviors, measures, and actions that reinforce those values. They know that strong cultures can lead to success or to failure—depending on their capability to foster and deal with change. That may be another reason culture gets a bad rap in some corporate circles.

People like Al Stubblefield, CEO of Baptist Health Care in Pensacola, FL, understand that strong and adaptive cultures can foster innovation, productivity, and a sense of ownership among employees and customer—all important elements in leveraging value over costs. Stubblefield knows that it's possible to develop a strong and adaptive ownership-based culture where one hasn't previously existed.

Owners are employees who go the extra mile to recommend friends and others as potential colleagues. They suggest ways of improving products, services, processes, and relationships. Our research into a group of world-class companies that foster employee ownership reveal four practices that help explain how they got there.

    1. Create a strongly shared sense of purpose, falling just short of that of a cult. Purpose is self-evident in the work of some organizations. Few would question that Baptist Health Care is in the business of saving and improving the quality of lives.
    At Baptist, the quest is to provide superior service to "customers" (not patients) and to "improve the quality of life for people and communities served." To accomplish this goal, hospital employees as well as physicians must exhibit behaviors that are not typical of their professions.
    For example, those who engage customers directly must be able to work in teams, something that is difficult for many medical practitioners, especially doctors who have been placed on a pedestal in the past. Senior management must be willing to spend time on the front lines making the rounds with employees. In short, at Baptist Health Care, quality care and phenomenal levels of patient satisfaction require adherence to unconventional practices.
    Constructing such a culture begins with the creation of a working environment that will attract the most talented employees—those who can establish extended, profitable relationships with targeted customers.
    2. Establish a clear set of values and behaviors that embody a shared purpose. Stubblefield engaged Baptist Health Care's entire organization in establishing a new set of values and behavior. The process began with a two-day meeting for the senior management team, who then spent four months enlisting everyone else to discuss the following three questions:
    • Why do we exist? (What is our mission?)
    • What are we striving to become? (What is our vision?)
    • What guides our everyday behavior? (What are our values?)
    The discussions took place among focus groups throughout the organization, with senior management involvement at several levels. During these meetings, leaders also posed the question, "What makes a great culture?" The employee responses helped outline critical core behaviors: open communication of performance feedback and ideas for doing things better, a "no secrets" environment in which the bad news is shared along with the good, and a "no excuses" environment in which employees are accountable for actions and results. The organization-wide outcome appears in the Baptist Health Care Vision, Values, and Five Pillars of Operational Excellence.
    3. Constant communication of purpose and values through senior management behavior, organization-wide performance metrics, and corrective actions when necessary. Communication is constant and multifaceted at Baptist. Both good and bad news regarding organization performance is regularly posted in the cafeteria. Employee forums, where letters from customers are often read, are videotaped for distribution and later viewing. And the company's intranet is heavily used.
    Communication can take unusual forms. For example, BHC "borrowed" what is known as the Daily Line-Up from the Ritz-Carlton, in which employees participate in a daily lineup at the start of their shifts. During each lineup, managers present one new service initiative or behavior, entertain suggestions, and recognize any employees who have demonstrated outstanding performance. BHC Daily Line-Up works in the same way. Every team convenes for a few minutes a day to share a concept and suggest a training idea.
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