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Strategy

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Finally! A Way To Measure Corporate Culture.

What do they really think?

I tell my management students that executives should focus on one task above all others: developing a positive, supportive corporate culture. When a company has a positive culture, all things are possible. When a company has a negative culture, very few positive outcomes occur.

The problem, of course, is how to assess a culture. How does one know if a culture is positive or negative? It’s perhaps the most important question an executive (or job applicant) can ask. But the answer is murky at best. Further, how can one tell if a culture is getting better or worse? Is the company living up to its professed values? How does one know?

A new company called CultureX may help us solve the problem. Formed in conjunction with MIT’s Sloan School of Management, CultureX uses the millions of employee reviews on Glassdoor to analyze corporate cultures. Along the way, CultureX identifies the most frequent values companies profess, the norms used to promote those values, and how employees view company performance in fulfilling the values.

CultureX uses a range of textual analysis tools to analyze free-form employee comments in Glassdoor reviews. The result is a composite view of what it’s like to work in an organization – from employees’ perspective. As you might expect, employee reviews often highlight what the company actually values as opposed to what it professes to value.

CultureX initially applied its methodology to analyze 1.2 million Glassdoor reviews for some 500 companies. The average Culture 500 company has over 2,000 employee reviews. The analysis identified some 60 “… distinct values that companies listed in their corporate values statements.” From the 60, CultureX researchers winnowed the list down to the Big Nine that were cited most frequently. These are: agility, collaboration, customer, diversity, execution, innovation, integrity, performance, and respect.

CultureX researchers then built an interactive tool which “… provides users a snapshot of how frequently and positively employees … speak about each of the Big Nine values.” Users can see how employees discuss each of the Big Nine – even those that a company doesn’t include in its own values statements.

CultureX uses Amazon as an example of how the tool might be used. Amazon’s employee reviews, for instance, spoke frequently and positively about two specific values: innovation and customer centricity. (Innovation was about two standard deviations above the mean; customer centricity was about one standard deviation above). On the other hand, employees were “much less enthusiastic” about the company’s respect for employees – about 1.5 standard deviations below the mean.

How might one use these data? An Amazon executive might be concerned that employees don’t feel respected. The executive might develop programs to improve the company’s performance. (I’m sure that consultants from CultureX would have some suggestions). The executive could then use changes over time in the “respect” value to monitor progress (or lack of it). Similarly, an executive might compare her own company to any number of other companies – in the same industry or in others – to identify competitive gaps and/or advantages.

But the data are not reserved solely for executives. Want to work for a company that is truly innovative? The CultureX data can help you identify which companies are walking the walk and not just talking the talk. Potential employees can identify companies that match their value set. Companies can identify potential employees whose values match the company’s. With better information, both sides stand to benefit.

CultureX’s work should help us focus more attention on the role of corporate culture in business success. The data set could become a useful platform for investors, executives, employees, and job applicants. So … how’s your company doing?

Don’t Argue In The Past Tense

Why would I want her to be annoyed?

Let’s say that Suellen and I have an argument and I notice that all the verbs are in the past tense. According to Aristotle, the verbs tell us that the argument is about blame. I may think it’s about who left the door unlocked or forgot to pay the mortgage. But it’s really about blame.

Let’s also say that I win that argument. (This is very hypothetical). I’ve successfully pushed the blame away from myself and on to her. It’s not easy to win an argument, so I do a little victory dance. Meanwhile, how does Suellen feel? Probably a mixture of emotions – irritation, annoyance, anger, … perhaps even a desire to get even. Suellen is the woman I love. Why on earth would I want her to feel like that? That’s the problem with arguing in the past tense. Even if you win, you lose.

Arguing in the past tense is generally known as forensic rhetoric. In many legal situations, we do want to lay blame. We want to establish guilt and make sure that the appropriate person is appropriately punished. Most of the testimony in a trial is in the past tense. Similarly, characters in crime dramas speak almost exclusively in the past tense. The goal is to lay blame and Aristotle and others give us rules for how to argue the point.

Outside of the courtroom, however, arguing in the past tense is essentially useless. We can’t do anything about the past. We can’t change it. We can’t enhance it. We can lay blame but, even then, we will argue endlessly about whether we got it right or not. Did we blame the right person? If so, did we blame them for the right reasons? Did we learn the right lessons? Did history teach us anything? Or did it teach us nothing?

The next time you’re in an argument, notice the verbs. If they’re in the past tense, you’re simply trying to blame the other person. Does it do any good to “win” such an argument? Nope. By “winning”, you just give the other side motivation to come back stronger next time. This is how feuds get started. The Stoic philosopher, Epictetus, had it right: “Small-minded people blame others. Average people blame themselves. The wise see all blame as foolishness.”

Segmenting The Body Politic

Where do you stand?

As a marketing executive, I’m accustomed to the process of segmenting markets. My software companies divided markets by company size, SIC code, geography, and installed software. By doing so, we could identify and communicate with companies that were most likely to buy our products and services.

The Pew Research Center has done something similar with America’s body politic. Rather than two major political parties, Pew identifies eight different clusters of political thought and action: four for the Left and four for the Right. Let’s take a look at each. (Click here for the complete report and here for a Q&A on the methodology).

Among Conservatives

Core Conservatives support traditional Republican positions including smaller government and lower taxes. They also believe that the nation’s economic system is fundamentally fair. Core Conservatives generally support globalization, believing that the global economy creates opportunities for American businesses. This segment accounts for approximately 31% of all Republicans and roughly 13% of the American body politic.

Country First Conservatives are deeply concerned about immigration and generally believe that America should withdraw from the world. They strongly believe that the global economy is deeply threatening to American interests. More than any other segment, Country First Conservatives agree with the statement “If America is too open to people from all over the world, we risk losing our identity as a nation.” This segment accounts for 14% of Republicans and 6% of the American public.

Market Skeptic Republicans share many conservative values but are losing faith in the American economic system. They believe the economy unfairly favors powerful interests and are skeptical of banks and other financial institutions. More than any other group, the disagree with the statement “The U.S. economic system is generally fair to most Americans.” This segment accounts for 22% of Republicans and roughly 12% percent of the American public.

New Era Enterprisers form the most optimistic segment of either the Right or the Left. More than any other group they believe that the next generation of Americans will be better off than the current generation. New Era Enterprisers strongly support business and generally believe that immigrants strengthen the country. This segment makes up 17% of Republicans and 11% of the general public.

Adding it up (with some rounding errors), the four Conservative segments account for approximately 42% of the American body politic.

Among Liberals

Solid Liberals have liberal attitudes across the board. They overwhelmingly support government involvement in health insurance and government activism to ensure that blacks have equal rights with whites. They support government regulation of business and don’t believe one needs to be religious to be moral. Solid Liberals account for 16% of the general public 33% of Democrats.

Opportunity Democrats agree on many policy issues with Solid Liberals. They’re more likely, however, to be pro-business and to believe that most people can get ahead if they work hard. They comprise 12% of the general public and roughly 20% of Democrats.

Disaffected Democrats are positive about the Democratic Party but cynical about government in general. This is one of two minority-majority segments. They support activist government programs and believe that we should focus less on problems abroad and more on domestic issues. Disaffected Democrats account for 14% of the general public and 23% of Democrats.

Devout and Diverse is the second minority-majority segment. Like Disaffected Democrats, they face financial hardships. Among all the groups, this segment is the least politically engaged. They resist government regulation and strongly believe that one needs to believe in God to be moral. The Devout and Diverse account for 9% of the public and 11% of Democrats.

Adding it up, the four Liberal segments account for roughly 51% of the American body politic.

So if Conservatives account for 42% and Liberals for 51% of the general public, where are the rest of our voters? According to Pew, roughly 8% of the general public are Bystanders, described as a “relatively young, largely minority group” that is “missing in action politically”.

So where do you stand? Thanks to the Pew Research Center, you can now find out. Pew has published the Political Typology Quiz. Click here, answer a series of questions, and you can figure out which group most closely represents your worldview. I’ll be writing more about this in the future. You may want to know which group you’re in to follow along.

 

Managing Agreement: The Abilene Paradox.

I want to be a team player, but….

I used to think it was difficult to manage conflict. Now I wonder if it isn’t more difficult to manage agreement.

A conflicted organization is fairly easy to analyze. The signs are abundant. You can quickly identify the conflicting groups as well as the members of each. You can identify grievances simply by talking with people. You can figure out who is “us” and who is “them”. Solving the problem may prove challenging but, at the very least, you know two things: 1) there is a problem; 2) its general contours are easy to see.

When an organization is in agreement, on the other hand, you may not even know that a problem exists. Everything floats along smoothly. People may not quiver with enthusiasm but no one is throwing furniture or shouting obscenities. Employees work and things get done.

The problem with an organization in agreement is that many participants actually disagree. But the disagreement doesn’t bubble up and out. There are at least two scenarios in which this happens:

  1. The Abilene Paradox – in the original telling, four members of a family in Coleman, Texas drove 53 miles to Abilene in a car without air conditioning in 104-degree heat to have dinner at a crummy diner. After driving 53 miles back, they ‘fessed up: not one of them had wanted to go. Each person thought the others wanted to go. They agreed to be agreeable. (A variant of this is known as the risky shift).

Similar paradoxes arise in organizations all the time. Each employee wants to be seen as a team player. They may have reservations about a decision but — because everyone else agrees or seems to agree — they keep quiet. Perhaps nobody agrees to a given project but they believe that everyone else does. Perhaps nobody wants to work on Project X. Nevertheless, Project X persists. Unlike a conflicted organization, nobody realizes that a problem exists.

  1. Fear – in organizations where failure is not an option, employees work hard to salvage success even from doomed projects. Admitting that a project has failed invites punishment. Employees happily throw good money after bad, hoping to snatch victory from the jaws of defeat. Employees agree that failure must be delayed or hidden.

The second scenario is perhaps more dangerous but less common. A fear-based culture – if left untreated – will eventually corrupt the entire organization. Employees grow afraid of telling the truth. The remedy is easy to discern but hard to execute: the organization needs to replace executive management and create a new culture.

The Abilene paradox is perhaps less dangerous but far more common. Any organization that strives to “play as a team” or “hire team players” is at risk. Employees learn to go along with the team, even if they believe the team is wrong.

What can be done to overcome the Abilene paradox in an organization? Rosabeth Moss Kanter points out that there are two parts to the problem. First, employees make inaccurate assumptions about what others believe. Second, even though they disagree, they don’t feel comfortable speaking up. A good manager can work on both sides of the problem. Kanter suggests the following:

  • Debates – include an active debate in all decision processes. Choose sides and formally air out the pros and cons of a situation. (I’ve suggested something similar in the decision by trial process).
  • Assign devil’s advocates and give them the time and resources to develop a real position.
  • Encourage organizational graffiti – I think of this as the electronic equivalent of Hyde Park’s Speaker’s Corner – a place where people can get things off their chests.
  • Make confronters into heroes — even if you disagree with the message, reward the process.
  • Develop a culture of pride – build collective self-esteem, not just individual self-esteem. We’re proud of what we have, including the right (or even the obligation) to disagree.

The activities needed to ward off the Abilene paradox are not draconian. Indeed, they’re fairly easy to implement. But you can only implement them if you realize that a problem exists. That’s the hard part.

Debiasing and Corporate Performance

Loss aversion bias? Or maybe I’m just satisficing?

Over the past several years, I’ve written several articles about cognitive biases. I hope I have alerted my readers to the causes and consequences of these biases. My general approach is simple: forewarned is forearmed.

I didn’t realize that I was participating in a more general trend known as debiasing. As Wikipedia notes, “Debiasing is the reduction of bias, particularly with respect to judgment and decision making.” The basic idea is that we can change things to help people and organizations make better decisions.

What can we change? According to A User’s Guide To Debiasing, we can do two things:

  1. Modify the decision maker – we do this by “providing some combination of knowledge and tools to help [people] overcome their limitations and dispositions.”
  2. Modify the environment – we do this by “alter[ing] the setting where judgments are made in a way that … encourages better strategies.”

I’ve been using a Type 1 approach. I’ve aimed at modifying the decision maker by providing information about the source of biases and describing how they skew our perception of reality. We often aren’t aware of the nature of our own perception and judgment. I liken my approach to making the fish aware of the water they’re swimming in. (To review some of my articles in this domain, click here, here, here, and here).

What does a Type 2 approach look like? How do we modify the environment? The general domain is called choice architecture. The idea is that we change the process by which the decision is made. The book Nudge by Richard Thaler and Cass Sunstein is often cited as an exemplar of this type of work. (My article on using a courtroom process to make corporate decisions fits in the same vein).

How important is debiasing in the corporate world? In 2013, McKinsey & Company surveyed 770 corporate board members to determine the characteristics of a high-performing board. The “biggest aspiration” of high-impact boards was “reducing decision biases”. As McKinsey notes, “At the highest level, boards look inward and aspire to more ‘meta’ practices—deliberating about their own processes, for example—to remove biases from decisions.”

More recently, McKinsey has written about the business opportunity in debiasing. They note, for instance, that businesses are least likely to question their core processes. Indeed, they may not even recognize that they are making decisions. In my terminology, they’re not aware of the water they’re swimming in. As a result, McKinsey concludes “…most of the potential bottom-line impact from debiasing remains unaddressed.”

What to do? Being a teacher, I would naturally recommend training and education programs as a first step. McKinsey agrees … but only up to a point. McKinsey notes that many decision biases are so deeply embedded that managers don’t recognize them. They swim blithely along without recognizing how the water shapes and distorts their perception. Or, perhaps more frequently, they conclude, “I’m OK. You’re Biased.”

Precisely because such biases frequently operate in System 1 as opposed to System 2, McKinsey suggests a program consisting of both training and structural changes. In other words, we need to modify both the decision maker and the decision environment. I’ll write more about structural changes in the coming weeks. In the meantime, if you’d like a training program, give me a call.

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