Culture: Other Financial Research

by Ron Potter

Through the years the Denison Organization has continued to perform research on the original model.  One piece of research that caught my eye early in the process looked at six normal measures of performance that most companies look at on a regular basis.  Those six measures included:

  • Profitability
  • Sales/Revenue Growth
  • Market Share
  • Product Development – Innovation
  • Quality of Product or Service
  • Employee Satisfaction

Most Culture Surveys focus on the last of the six measures, Employee Satisfaction.  Research originally done by the Gallup organization indicated that satisfied or engaged employees lead to better organizations.  I’ve looked at several of those surveys as my customers have used them.  I agree that more satisfied/engaged employees do lead to better organizations.  But, it was always difficult for me to figure out what actions lead to more satisfied employees.  The Denison Survey always provided me with more direct and measurable actions that would lead to employee satisfaction.

Four Quadrants

First, let’s remind ourselves what is included in each of the four quadrants.

Mission
Adaptability
Involvement
Consistency

Now, let’s take a look at each of the six measures of success and look at the Quadrants that drive them.

Profitability

  • Mission
  • Involvement

The description of this one given by the Denison organization is “Do we know where we are going?”  If it’s not clear where we’re going, it’s hard to figure out where profits will come from.

The description given to Involvement says “Are our people aligned and engaged?”  Know where you’re headed and engage the people in getting there.  Strength in these two quadrants will lead to profitability.  Notice that profitability requires elements of each of the “four” halves of the chart.  Mission is in the upper right quadrant.  Involvement resides in the lower left quadrant.  Top/Bottom, Left/Right.  Profitability requires a bit of it all.

Sales/Revenue Growth

The two quadrants driving this success factor include:

  • Mission
  • Adaptability

The description given to Adaptability is “Are we listening to the marketplace?”  This means that our Mission is being tweaked along the way to meet the needs of the marketplace.  If we’re listening.

Also notice that both of these quadrants are at the top of the chart.  This is the half that creates an Externally Focused organization.  This type of organization is very focused on the forces in the market place.

Market Share

  • Mission
  • Adaptability

These happen to be the same two as Sales/Revenue Growth.  In hind-site that might be abundantly clear.  But what has been interesting to me (and makes this connection even more powerful) is that even when the industry is trending downward at the moment, companies with strength in these two quadrants tend to perform better than others facing the same difficulties.

Product Development and Innovation

  • Adaptability
  • Involvement

Once you’re familiar with the layout of the survey, this one also becomes abundantly clear.  Both quadrants are on the left side of the chart which creates very flexible organizations.

Quality of Product or Service

  • Mission
  • Involvement
  • Consistency

This is the first of the performance measures that has strength in three areas rather than just two.  It adds Consistency.  People need to know what the Core Values are and the consequences for violating them.  They also require Agreement from everyone plus Coordination and Integration across the organization.  There can be no disagreement on how we do things around here and no piece of the business making decisions that benefit themselves and not the whole company.

Notice it does not include customer focus.  Quality is internally driven, not externally driven.

Employee Satisfaction

  • Mission
  • Involvement
  • Consistency

This is usually the one that is measured by Culture Surveys.  What’s interesting to me is that this one is driven by exactly the same quadrants that drive Quality.   A clear mission, active involvement and consistency drive quality, and satisfaction!

Where do We Start?

One of my colleagues calls this the “So what, Now What?” question.  Now that I know this information, where do I start or what do I do with it?

One way to answer that question is to see how many of the performance maesures are driven by each quadrants.

Mission is involved in five of the six performance measures:
  • Profitability
  • Growth
  • Market Share
  • Quality
  • Employee Satisfaction
Involvement is involved in four of the measures:
  • Profitability
  • Development/Innovation
  • Quality
  • Employee Satisfaction
Adaptability is involved in three:
  • Growth
  • Market Share
  • Development/Innovation
Consistency is involved in two:
  • Quality
  • Employee Satisfaction

I always suggested that you start with Mission, get everyone Involved, increase your Adaptability and change and finally make sure that you’re absolutely consistent in your approach.

Build a Great Culture

Great cultures are absolutely required to build great companies.  Just don’t forget the other two elements of being great:

TLC

Team Leadership and Culture.

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