The secret to a great company culture (Hint: It's not happiness or free food)

By Carmel DeAmicis , written on July 12, 2013

From The News Desk

The term "company culture" gets tossed around a lot. It's usually synonymous with the idea of optimizing for happiness and creativity, by shucking traditional corporate values and supporting "hands-on contributor(s)" who "embrace and drive change." Places like Google and Zappos are renowned for their happy employees. Zappos, for an April Fool's prank, once issued a press release claiming it was suing Disney for saying it was the happiest place on earth, which was "clearly false, deceptive, and confusing to the marketplace," because that honor must be bestowed on Zappos. Therefore, the thinking goes, Zappos and Google, with its free food, optional treadmill desks (metaphor alert!) and massages, must have great company cultures.

But company culture (or organizational development, if you will) consultants have a different, more practical definition. To them a "good" culture is one that supports the company's business strategy. So a giant company with a lot of moving pieces might need a much stricter 'culture' where people's roles are defined, there isn't as much room for innovation, and not everyone can have a voice. In contrast, a company where innovation is the heart of its growth would need a culture in which employees are free to create and try new things. Successful company culture isn't about healthy positivity - it's about strategy. For every Zappos and Google, with their touchy-feely workplace environments there's an Oracle or a Microsoft, which may suck to work at but sure make a ton of money.

When those who extol the virtues of company culture sit down with a new potential client, the first thing they do is help that company hone its business goal: how it makes money, what promises it makes to its customers, and what sets it apart from other providers. Only once that's determined can they help them build that culture ("how we do things around here") - who they hire, how they manage, and what work values they inculcate. Consultant Sharon Dye has been doing organizational development consulting for 17 years, advising HP after its merger with Compact (a classic case study of company culture clash in tech), and she's worked with more than 20 lesser-known startups, including Clean Fuel Connection and ITK Solutions.

Dye says one of the big mistakes startups make is thinking they've nailed down their business goals. One such startup that brought Dye in for culture consulting - she recalls that its name was Trazzio, a tile company in Lake Tahoe was bought by another company - wanted its tile available in Home Depot and purchased by environmentally conscious interior decorators. But there was an inherent contradiction: if a person is at an income level high enough to hire decorators, (s)he probably doesn't shop at Home Depot. Once Trazzio conceded its tiles were expensive to manufacture, it re-imagined its company dream, marketing its products to interior decorators in California, who, it hoped, would get to know, love, and recommend its designs.

Only once a clear business goal was determined could Trazzio consider the company culture (and subsequent hiring practices). Since the goal was to get the tiles into the hands of high-income, environmentally conscious users, it invited potential buyers to its showroom and called in interior decorators. Its salesforce had to drive nice cars (because you can't impress an interior decorator in a used Honda Civic) - which, for the cash-strapped startup meant renting a Mercedes the days representatives visited designers. It implemented free beverage service in its showroom - bottled water or wine - because it marked them as a luxury company trying to reach a luxury market.

"But try those things selling to a Home Depot vendor, they're going to call you a snob and walk out," says Dye, comparing the culture split that would have occurred if Trazzio had chosen a different path.

Beyond determining physical culture like what car a salesperson drives, the Trazzio business goals also informed the employee culture: who was hired and why. If the company strategy had remained needlessly broad (selling pretty, recycled glass tiles) then it might have hired anyone who was environmentally conscious. But that would have been a mistake. Once it decided to market to upscale buyers, it needed to hire a narrower sliver of environmentally conscious employees, ones not necessarily apt to be protesting, picketing, getting petitions signed and raising money for Greenpeace.

"The personality that would fit the culture is someone who could step out of a Mercedes looking like they owned it, not like they had rented it," Dye says. Such a distinction would be different than a person it would hire to sell to vendors like Home Depot - or to go to farmer's markets and crafts fairs to show product. In that way, the company strategy defined the culture.

For those consultants who work in the field, company culture is not about employee happiness, business perks, or relaxed managerial style. It's about helping companies do whatever it does best. The cultural attributes are all in service to that larger strategy.

For Microsoft, company culture has to change when their business strategy changed. Bill Schneider has been working in the organizational development world - primarily with corporations - for 40 years. He's written several articles and a book on the subject, and has advised companies ranging from Microsoft to Coors Beer. Schneider used Microsoft as an example for explaining appropriate shifts in company culture. "The culture in the beginning was: work 16 hours a day, brainstorm every possible idea, lots of experimentation…it would really permeate what they were doing." Now, with such a large market share and established products, the company culture focuses on preserving what they've built, through all the things that give them a bad rap: bureaucratic leadership, policies, procedures, and rules.

Microsoft, with its $290 billion market cap, give or take a couple of billion, may be a stodgy corporate beast, but you can't deny that it's still a major software power. 

Schneider says a leader should determine his company strategy by sitting down and asking what the company's promise to a customer is? Is it to create the best product in the business (superiority promise)? To be the predictable, systematic service provider (certainty promise)? Or is it to help people and organizations fulfill their potential (enrichment promise)?

"People," Schneider says, "ask me all the time: is there only just one culture? My answer is: are there 2 different customer promises in your organization? Then have them operate separately. Don't mesh them together."

Where Microsoft has gone astray in its corporate culture is by neglecting to instill pockets of protection. Designers and engineers need to be able to forget about the company's stock price if they're going to create products that could revolutionize industries and meet a superiority promise. But the salesforce or production departments can't forget about stock price. They need to operate based on rules and structure to ensure Microsoft meets its certainty promise to shareholders.

Newish companies, too, struggle with culture. Dan Collett, a partner at consulting firm Spencer, Shenk, Capers, and Associates, which has advised more than 100 businesses, says that startup founders are so focused on getting their products to  market, they don't think about what it will take to sustain their companies as they grow. It's a "cold shower wakeup call" when all of a sudden the startup gains traction and has to hire a workforce, get them aligned behind the product, and sustain its evolution. That's when company culture – policies, norms, procedures, and personalities – really starts to matter for the company's survival.

"A startup is generally somebody's baby," Collett says. "They get reluctant to let anybody else touch their baby, and they suboptimize their growth."

Along with hiring practices, reward systems, and values, companies have to figure out what leadership styles best suit the products or services they produce. In April, a 50-year-old aerospace company called S&H, based in Southern California, acquired a small 20-person aerospace organization called Melkes Precision Products. S&H President David Fisher decided he needed guidance in merging the two company cultures and hired consultant Sharon Dye.

"In the beginning, we're constantly making changes based on the needs of the clients,"  Fisher says. "[Dye] helps our teams roll with the punches." She guides management teams in using democratic, collaborative leaderships styles or systematic top-down leadership styles depending on the needs of a particular product. The flexibility in managerial styles mattered: some aerospace parts needed to be produced quickly, on a hard deadline, to absolute specifications, and the team needed to be run strictly to make sure that happened. Others required a collaborative approach so that the team could build on each others' ideas and work together to solve a problem. 

Organizational developments use the term culture when advising companies like this because culture has to do with "understanding and managing a collective of people,"  Schneider says. "It's the area in my experience that's been predictably and understandably the hardest for business to get their arms around: the people side."