In order to survive the global economic downturn, many companies relied on strategies such as cost- cutting and lay-offs. But in a recent speech at the Conference Board of Canada's Change Management conference, Dave MacKay, President of Ceridian Canada, identified a more fundamental means to survive and thrive: "In today's sluggish economic climate, and in the ever-changing business landscape, it is your culture that will sustain you and contribute to your organization's success." 

Building culture, building success

In order to survive the global economic downturn, many companies relied on strategies such as cost- cutting and lay-offs. But in a recent speech at the Conference Board of Canada's Change Management conference, Dave MacKay, President of Ceridian Canada, identified a more fundamental means to survive and thrive: "In today's sluggish economic climate, and in the ever-changing business landscape, it is your culture that will sustain you and contribute to your organization's success."

Organizational culture is comprised of the shared assumptions, beliefs and norms of behavior that bind an organization together. To many, it may seem odd that this set of ideas -- and not reactionary moves such as downsizing -- increases an organization's survivability and capacity for sustained growth. But successful organizations understand that culture is much more than having a "nice" or "fun" place to work. As Ceridian's MacKay says, "Culture is a collective motivational force for everyone in an organization. It is the all-important foundation for innovation, risk, high performance and achievement."

Organizational culture has a major, direct effect on performance and the bottom line. As observed in The Future of Human Resource Management (ed. Losey, Meisinger and Ulrich), culture not only drives behavior and unites employees, it contributes directly to 46 percent of a business's financial performance. The companies recognized as Waterstone Human Capital as Canada's 10 Most Admired Corporate Cultures in 2009 also demonstrate the impact of culture. The performance of this select group has significantly outpaced the S&P/TSX by an average of over 300 percent in terms of three-year compounded annual revenue growth.

If the Culture Fits... 
Because culture is so important, organizations now look beyond traditional criteria when recruiting, and seek out candidates who are a good match not just to the skills and abilities required by the job, but also for their beliefs and behaviors. They know these individuals will make a contribution sooner, place more value on their new-found job, and remain with their new company longer.

In his article, Hiring to Fit the Culture, Robert Grossman cites the example of HCA, a company based in Nashville, Tennessee, and operating 260 hospitals and outpatient centers in the US and England. HCA incorporated cultural fit in its hiring process nearly 10 years ago by including questions specifically aimed at assessing the cultural match between HCA and candidates. According to John Gering, central group director of HCA, "We have to recruit people who are wired right for us, with behaviors and values that fit our culture." Since adopting this practice, attrition at HCA has fallen by 50 percent in key job categories.

A good cultural fit helps organizations avoid the high cost of recruiting individuals who aren't a good match. Nearly one in three newly-hired employees leaves voluntarily or is let go before the end of their first year-and one of the most frequently cited reasons for this quick turnover is poor cultural fit. 

The price tag for this mismatch is steep. According to the Saratoga Institute, an HR consultancy service of PriceWaterhouseCoopers, the cost is from 50 to 150 percent of the annual salary of the particular role. What's more, there are ongoing costs when an individual stays despite a culture clash. The presence of that unengaged employee results in a major hit to the bottom line due to a decrease in organizational effectiveness, employee morale, creativity and productivity.

The caveat here is that successful hiring for fit depends upon the all-important concept of "knowing thyself". In order for recruiters to be able to do it right, the organization must possess a clear vision and understand its culture well.

Laying the Foundation, Leading and Listening 
If the first misconception about corporate culture is that it doesn't affect the bottom line, the second is that culture is a natural byproduct of business activity. In fact, culture is a living entity which is carefully developed and must be maintained. And as Edgar Schein of the MIT Sloan School of Management says, "Organizational cultures are created by leaders, and one of the most decisive functions of leadership may well be the creation, the management, and, if necessary, the destruction of culture."

Leaders first lay a strong foundation of trust and integrity on which to build their business's culture. As Stephen Covey writes in his article How the Best Leaders Build Trust, smart executives make the creation of trust an explicit objective. "It must become like any other goal that is focused on, measured and improved. It must be communicated that trust matters to management and leadership. It must be expressed that it is the right thing to do and it is the economic thing to do."

Then, smart leaders nurture their culture by leading by example. They believe in their culture, live it, and are open about it. This transparency and integrity builds even greater trust and commitment. Leaders build strong cultures by ensuring that everyone in their organization shares in a single vision and aligns their goals accordingly. This is accomplished most effectively when alignment -- like trust -- is an explicit goal achieved through a well thought-out process.

When culture-building, successful leaders listen. Only by understanding the values and needs of an organization's employees -- and by asking for frequent feedback through formal and informal means -- can leaders build a meaningful culture. Plus, this information will shape all-important elements of the organization's employee value proposition including benefit plans, work schedules, reward and recognition, learning and development, health and wellness, and much more.

Clearly, culture is much more than colorful office furniture and espresso machines; and it results in much more than "feeling good" about work. As Ceridian's MacKay says, "Culture is a springboard for high-performance and achievement, and one of the ways we engage people at a fundamental level. It is palpable. We know it when we feel it. It is living and breathing."

This article first appeared in the June issue of Ceridian Canada's newsletter.