Brokerage Ops the October 2010 issue

The Great Divide

Company culture separates good from great.
Posted on October 1, 2010

I agree with that sentiment, as far as it goes. The economy, the soft market and then ObamaCare really threw us some curveballs. But I can’t help having some nagging thoughts about problems that are within our control. These are issues of culture, people and accountability that, individually or collectively, prevent many firms from reaching their full potential. Let me suggest how improvement in these key areas can greatly enhance your performance.

Culturing Good into Great 

I believe culture is the foundation of any firm. No matter how good your services, products, employees or people, without a strong culture you will never fully succeed. It is indisputable that culture and performance are closely interwoven, but the two comprise a complicated relationship, and many brilliant leaders overlook this link when gauging why their company’s performance is not as good as their competitors’.

Researchers trying to find the secret of great performance have concluded that the intangible aspects of business—values, beliefs, management philosophy—can make the difference.

I don’t think anybody would fundamentally argue this point. However, I am still surprised, as I travel the country, to see how few firms can really describe their culture or tell me how culture inspires performance. In fact, I would say many firms lack any culture, good or bad.

When I say culture, I don’t mean just writing words down on a piece of paper to spell out company values. And I don’t mean silly words that describe your organization, like a fun place to work. Even powerful words such as trust, respect and integrity have no meaning unless they are ingrained in the day-by-day activities of an organization. What I am talking about is the ability for a company to make its business objectives and its overall vision live and breathe through its employees throughout the organization.

The great companies I’ve worked with have used high-performance values and behaviors to inspire loyalty from employees who want to be part of a great team. They create advocates, and these people become the raving fans about the firm to clients, peers and recruits. They generate commitment to go the extra mile and do the right thing. At these firms, leaders do not take culture for granted, they manage it. This is not a simple task because you must engage employees’ inherent beliefs about the value they place on work, the firm and how they need to share a common vision and work toward common goals.

Reflect on the culture of your own firm and make an honest assessment of whether your culture inspires the behaviors I mentioned above. In the meantime, I will leave you with how one of my all-time favorite clients described culture in its business philosophy and day-to-day activities. Its culture defines not only the work of its leadership but the efforts of every employee and the interactions of every client and vendor. It’s simply evident at every stage.

In a statement called “What Culture Means to Our Agency,” this firm describes its culture as “an intentionally designed, aligned, high-performance organizational culture driven for success.”

Even powerful words such as trust, respect and integrity have no meaning unless they are ingrained in the day-by-day activities of an organization.

Management describes it as a merging of company attributes with great people:

“At the cornerstone of our success is our unique company culture—the shared beliefs, attitudes, and values that characterize our people. It is a culture based on the relentless pursuit of excellence in everything that we do. We recruit carefully for this culture and then teach and coach with a passion. Nothing is left to chance in the development of culture.”

Beyond recruitment, the work of building a culture is an everyday effort for them:

“The ‘intentionality’ of the culture begins with the clear communication of behavioral expectations. It is further supported by a rigorous hiring process that selects only certain types of people. The culture is then taught through an extensive, award-winning ‘integration’ program for new hires. Finally, the culture is reinforced through the daily teaching and coaching of leadership.”

Not Settling for Good Enough

If you’ve been reading my management philosophy for a while, you probably know what I think is the most overused phrase in the insurance industry: “We provide great service.” Along with that, I marvel at how many leaders still think great service is your competitive advantage. That brings me to the intersection of people and culture. My next great peeve is those who say, “We have great people!” Yes, you may have great employees, but how do you really know? How do you measure this? What gets measured gets attention.

Whether you are one of those who believe you have great people or you’re a leader who wishes you had great people, let’s be honest about reality: We live in a “C-” business society where mediocrity has become the norm for many. Look around you, at your people, your competitors, your vendors and at people in general. It is true. In our society, truly excelling is no longer considered a prime value. For most people, good enough is good enough.

But those aren’t the people I want to work with. I have been consulting for many years, and I bring this point home by challenging my clients to adopt what I call a “4/5 culture.” In its simplest form, a 4/5 culture is creating an environment where everyone knows that mediocrity is not accepted. Instead, “outstanding” is the norm. The basics in creating a 4/5 culture are as follows:

  • Initial Ranking: Set a baseline for your firm by ranking all employees on a scale of 1 to 5, with 5 being the best. Keep it simple. Like most firms, you will find you have a couple of 1s and 2s, a few 4s and 5s, and a whole lot of 3s. If you graphed it, you’d see a typical bell-shaped curve.
  • Eliminate: Set a very short timeframe for 1s and 2s to become 3s. If they do not, terminate. Most likely, they will self-select out.
  • Establish Criteria: Now that you are started, set standards for what a 4 or 5 rating requires. Embedded in this are both performance (tangible) and adherence to culture (intangible). This does not need to be black and white. You all know what a 3, 4 and 5 look like.
  • Ongoing Ranking: At least twice annually, you need to evaluate and rank all your employees. Your employees will understand that this is part of your culture and realize that the bar has been set high.
  • Performance Appraisal: Tie the concept of a 4/5 culture into your annual performance appraisal. There is a new sense of urgency about what constitutes a 4 or 5. Pay raises, bonuses and promotions are all tied to achieving a 4 or 5.
  • Reinforce: As leaders, you need to reinforce to your employees in everything you do what the new norm is. No longer will “average” be tolerated. Set the standard yourself, train and mentor, terminate non-performers and reward the 4s and 5s.

Many people have asked me if this is similar to the GE model—its so-called “Rank and Yank” (best to worst) strategy. While it has similar characteristics, it does not require you to terminate the lowest-ranking employees. Yes, 1s and 2s will be gone, but it will mostly happen by attrition, and shame on you if you keep those who do not self-select out of the firm.

What the 4/5 culture does is change behavior. Creating a system like this helps you see how culture overall can create high-performers. Over time, the adoption, implementation and adherence to this strategy will greatly change the behaviors, attitudes and performance of your people and your organization. Your 4/5 culture will define the attitude of your people, and that will be reflected in how your customers and the marketplace regard your firm. It will, in short, build your reputation.

Rating Performance

With great people in place and high performance against the competition, some leaders tell me they think they have developed a great culture. To that, I ask, “How do you measure it?” My belief is that culture is only as good as your employees’ adherence to living that culture day by day. Therefore, just as you evaluate tactical performance, you need to evaluate an employee’s cultural performance. How do you do this? Build your performance appraisal into two parts, and give separate behavior (cultural) and business (tactical) ratings.

When the job performance and culture performance are combined in one rating, it is too easy to give employees a good rating for bad behavior when they are producing good outcomes. Assessing them separately also ensures that you can give a fair behavior rating without obscuring the business results.

In our society, truly excelling is no longer considered a prime value. For most people, good enough is good enough.

Just like in the 4/5 culture approach, tie promotions, raises and bonuses to your employees’ adherence to company culture. This is inward-focused. If you believe as I do in culture, then survey your clients about how they view your adherence to your cultural beliefs, values and fundamentals. It’s a big step to involve your clients in this internal process, but these actions will make you walk the talk.

Finally, I often have heard this about an employee who is not the best cultural fit: “Well, I put up with John Doe because he performs well.” This drives me crazy. What you are essentially saying is that your culture is really not that important. You are saying that you are OK with cracks in your core foundation. A firm should not tolerate any employee who can perform well but not live by the cultural values that you have established. Such employees must first be warned they are not living up to the values established by the firm, and if they don’t change, they will be fired. It’s that simple.

By the way, the benefits of eliminating these individuals will be significant:

  • You will get more from the rest of your team. These employees are productivity and morale killers. When they behave in a way that is against cultural beliefs, everyone around them becomes miserable and resentful and will spend excess time complaining. Eliminate them, and everyone gets on with their work. Creativity and a breath of fresh air arrive instead of the oxygen being sucked out of the room.
  • You will send the right message. Firing these people will send the message that the health and welfare of the team is more important than that of any individual. Most people are motivated by being part of something that’s bigger than themselves.
  • You will save headaches. As hard as it is to let someone go who produces results, you need to look at this as an investment in the long-term success of your firm. What may feel like short-term pain leads to a better, stronger team. As in most difficult situations, get it over quickly. Don’t let bad behavior linger.

The link between high-performance companies and culture, employees and accountability is indisputable. In high-performance cultures, effective leaders clearly articulate a strategic framework of mission, vision and values, strategic goals, and the critical measurable priorities to which all employees are held accountable.

Tie promotions, raises and bonuses to your employees’ adherence to company culture.

So if you attend an event like the Insurance Leadership Forum with the Rocky Mountains as a backdrop, take some time to reflect on your organization and consider how it can be improved by enhancing the link between culture, talent management and accountability. Taking the time to create a culture of high performance is worth the effort. Companies that achieve a high-performance culture will see greater returns and profitability, but everyone—from the receptionist to even you, Mr. CEO—will find it a more exciting, vibrant place to work.

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