“Just don’t screw it up.”
That’s the attitude of most parents when they entrust the business to their kids. But what does this say about the culture those kids are inheriting?
Or for that matter….
- What is culture?
- Does it matter?
- What does it have to do with passing the business on from one generation to the next?
Culture is the environment created by the set of values at play in your company every day. This means that you have a culture, whether you like it or not. There’s no escaping it. Your employees, customers, vendors and family members are breathing it in every day.
When cultures are toxic they sap the energy and enthusiasm of your top performers. Toxic cultures color the experience of almost every customer interaction. They affect your relationships with trade partners and even the terms they will grant you on purchases and warranty claims.
By contrast, when cultures are healthy they spotlight bad attitudes, irresponsibility and unethical behavior. They generate better reviews from customers and more word of mouth referrals. They reduce attrition among employees and help recruit A players.
So, yes, culture does matter. Culture is one of the reasons two companies in the same industry, selling the same product have widely different results.
But most important for our discussion, culture is key in determining whether the second generation moves into leadership fighting a severe headwind or whether they enjoy the benefits of a cultural breeze at their backs.
Our experience is that very few companies think intentionally about their culture. It just sort of develops over time as an unsaid, unseen force that is, at best, little better than the status quo, and at worst, a contributing factor to low morale, low competitive performance and poor financial results.
How DO you work intentionally on your culture? It’s not complicated.
Articulate and define your values
Start by sitting down and thinking of the 3 to 5 words you want employees, customers, vendors, and family members to use to describe your business. Less than three values is too few to fully describe the picture and more than five is too many for people to remember.
Once you have the words it is time to define them. A friend just recently told me he made the mistake of pulling his definitions out of Websters dictionary. Later he realized those definitions failed to capture what HE wanted his values to mean. This is your job as the leader. It’s OK for you to define a particular value differently than everyone else. In fact, the definition is way more important than the word. The word just becomes a proxy for the definition. Over time it will be your definition of the value, consistently applied and repeated that comes to describe the culture. A value without a definition is about as useful as no value at all.
By way of example here are Axiom’s values:
Care - we love those we serve
Truth - we speak the truth even when it is hard to hear or difficult to say
Diligence - we bring the right amount of work to the task
Learning - we read every day and learn to ask better questions
Care may mean one thing to you, but it’s only my definition of care that matters at Axiom. The same goes for the other values. You must give everyone your definition before they can decide to sign up to participate in your culture. Don’t be ambiguous. Name and define your values. Stand up for what you want your company to represent.
Build a plan and start executing it
If all you ever do is come up with a great set of values you will be ahead of most small business owners…on paper. But it won’t mean a thing in the real world. Creating values without working them out in a plan is kind of like buying a monster truck and parking it in your driveway. You’ll never know whether your values mean anything because they will never be tested. People will never use them to do anything meaningful. If you don’t build a plan and work it to completion you are settling for status quo. Why worry about culture in the first place if all you care about is maintaining the status quo.
When you plan you put people on notice about the opportunities that lie ahead and the skills they will need to take advantage of them. As you start executing against the plan WHAT your people do will determine whether we make any progress. But HOW they do it will be governed by your values. That combination of achievement and values is what intentionally creates the culture you want.
As you execute and as your plan starts unfolding not everything can be charted on a scorecard. Values are the tool that allow you to “objectively” measure the difference between two star performers: one who makes you proud and represents the company well and another that keeps you up at night.
Once you put your values up on the wall, once you write them into the plan, and once you start pulling them out to measure performance…expect resistance. A lot of people will wish those pesky values would go away. Some of your leaders will be uncomfortable talking about them with their teams. Some old timers will scoff and cynically dismiss your values as ivory tower BS. Some will try to coopt them as their own and change the definitions. Your most toxic employees will become even more passive aggressive as they try to undermine your efforts. Expect all of this. It’s actually a sign that you are doing something right.
Also, don’t play favorites. Everyone on your leadership team needs to be held accountable to the same set of values. Let’s say you have the following value and it's up on the conference room wall:
Optimism: we strive to see the good in situations and others.
But your sales manager is constantly griping about lazy employees, crooked customers and dishonest prospects and conspiratorial competition. Everyone on your team is going to know that Optimism as a value doesn’t mean squat. Not everyone on the payroll is going to be all-in on every value. But your leadership team needs to be on the same page. If you start making exceptions about which values are not really that important at the top you will wind up doing more harm than good.
Finally, consistency means acknowledging the value champions while also dealing with their lack of performance on the job. It’s not enough to sign up for the company culture if you can’t get the job done. We need both to make a difference and to accomplish the company’s mission. Exemplary values and lackluster performance are not consistent with each-other.
Expect healthy turnover
If you do all of these things there is one guarantee I can make. You will have some turnover, and that is AWESOME! Turnover is a sign that toxic employees are leaving or are being asked to leave (usually it’s the former). It is also an opportunity to escort new A-players into the company who take your values for granted. You will never experience the push back on values or the passive aggressive behavior from new employees like you do from those with tenure.
These two factors, the elimination of toxic employees and the introduction of people who buy-in from day one will turbo charge your cultural growth. It will be hard for months. You will feel like giving up. But all of the sudden one or two toxic elements will leave, a couple of new seeds will be planted and things will take off like you never imaged. I have seen it happen over and over again.
One of the greatest gifts you can give the next generation in your business is the inheritance of a healthy culture. Start building it today and see what happens.