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.
In BHC's Listening and Learning program, managers lead discussions on subjects such as survey results, and they solicit ideas for ways to improve customer service. The resulting "customer snapshot reports" compile all of the employees' observations and ideas for general distribution.
4. Strong leadership that both reinforces the culture and preserves its adaptability. Cultures take shape with or without leadership, but rarely does a competitively superior culture emerge without it. Effective leaders set the tone for an organization through their own behaviors. For example, at Baptist, people at all levels are encouraged to engage in several "Baptist behaviors" that are peculiar to the organization—and sometimes startling to customers—but have a functional purpose. One of these is the custom of picking up trash (something Bill Marriott also does at his company's hotel properties).
Then there is the "Baptist shuffle," in which leaders take the time to erase scuff marks left by shoes on polished floors. Another is walking people in need of direction to their destinations. Everyone, starting with Stubblefield, does these things all the time, in part because they foster a sense of being part of a culture that is something special.
Good leaders reinforce culture by demonstrating accountability for behaviors and results that foster the same attitude among employees. At Baptist, this begins with "Traditions," a two-day orientation. Half the time is focused on BHC's culture. This session is followed by "ServU," a half-day refresher course for employees who are completing six months of service and have had a chance to observe and work in the culture.
ServU focuses almost exclusively on the way employees understand and experience the BHC culture. In particular, the discussion covers the standards of performance for 10 specific behaviors: attitude, appearance, communication, call lights (which all hospital employees are responsible for answering), commitment to coworkers, customer waiting, elevator etiquette, privacy, safety awareness, and sense of ownership. The BHC employee standards team also devises ways of celebrating the "standard of the month" on a rotating basis.
The BHC story shows clearly how a strong culture creates the potential for high performance. We say "potential" because some of our other research has suggested that strong cultures by themselves are not enough to drive long-term success. Leaders who foster a strong ownership culture must also preserve its ability to adapt to a changing environment. They do it by emphasizing practices that help the organization and its people grow: continuous improvement, "best practice" exchange, innovation in products and services, as well as management systems, education for personal development, and—again—communication, communication, communication.
The perils of success
Building and maintaining a winning culture takes work and constant vigilance. By the time we caught up with Stubblefield in late 2006, the organization's dilemma reflected the success of previous years. Baptist's customer satisfaction scores had fallen back to the 98th percentile. Everyone knew about it because the practice of sharing good and bad news involved, among other things, posting scores in the company cafeteria.
As Stubblefield put it, "When we dropped to 98 after seven years at 99, [the employees] panicked. They had a 'back to basics' course—put every employee in the organization through it. Because we fell to the 98th percentile." Notice that it was the employee owners who panicked and got to work to reinforce the culture at BHC.
Indeed, culture may truly represent a source of competitive advantage that most organizations have ignored. No wonder Rackspace CEO Lanham Napier says, "Our culture and the awesome people we have are the things I am most proud of, as well as creating an environment where people get to do what they do best. I would say it's impossible for our competitors to copy. They'd have to start over and build it from scratch."
James L. Heskett and W Earl Sasser, Jr. are both Baker Foundation professors at Harvard Business School. Joe Wheeler is the executive director of the Service Profit Chain Institute. All are co-authors of The Ownership Quotient: Putting the Service Profit Chain to Work for Unbeatable Competitive Advantage.
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