MANUFACTURING EXCELLENCE
Culture: The Greatest Competitive Advantage
By C. Richard Panico
Culture is the most critical component of a company’s transition from good to great.
Businesses, now more than ever, are searching for ways to become more competitive in the global economy, especially those manufacturing domestically. Libraries and book stores spillover with publications on expert, novel approaches to maximize supply chain efficiencies, accelerate data retrieval for accuracy and timeliness; restructure to streamline decisionmaking, create PMOs (project management offices) to ensure project execution, employ the latest technologies, and a myriad of other good ideas. However, none of these approaches to improve operations will have a prayer of producing sustainable results and a lasting competitive advantage without proper cultural nurturing. In researching his book, Good to Great, Jim Collins confirmed time and time again that culture, as opposed to the above-mentioned tactics, is the most critical component of a company’s transition from good to great. A chapter specifically addresses technology and states, “80 percent of the good-to-great executives we interviewed didn’t even mention technology as one of the top five factors in the transition” (from good to great). Rather, Mr. Collins identifies several additional organizational characteristics and components that are key to attaining and sustaining performance and a competitive advantage, or in other words, becoming a great company. These include: unwavering faith and passion; rigorous discipline and focus; clearly communicated and practiced core values and timeless principles; modest leadership; strong work ethics and choosing individuals with the “right” character traits, among others. These characteristics and others form what we refer to as a company’s culture. My focus to the critical nature of culture does not intend to undermine the importance of market knowledge, technology, intellectual property management, etc. It seeks to point out that these should be viewed as commodities that can, in most cases, be readily replicated and, therefore, are a less sustainable competitive advantage. While many leaders concede culture is a powerful influence that can create and sustain organizational performance, few afford it the time and attention it deserves. Why? I contend that the reasons lie in complexity (psychological, social, and practical), and duration (time required to transform). Transforming a culture requires relentless commitment from top management, a commitment that cannot be delegated or outsourced. To understand this requires viewing the organization for what it is, a society or extended family that is bound by more than its work processes. Webster’s defines culture as: “the ideas, customs, skills, arts, etc. of a people or group that are transferred, communicated, or passed along, as in or to succeeding generations.” Dale Primer, co-author of Investment Leadership, Building a Winning Culture for Long-Term Success, defines organizational culture as: “Values, beliefs, and behaviors that differentiate one organization from another.” A simple, practical way of defining culture is “the environment in which we work, that is, members’ behaviors, attitudes, beliefs, skills, perspectives, habits, and prejudices.” Most of these attributes have been sculpted by past leaders (good and bad) through years of indoctrination, influence, and reinforcement. Fact is, leaders of organizations are totally responsible for the climates they create. There are opposing opinions on whether a wellestablished culture can be changed and how long it takes to modify values, beliefs, and behaviors for a positive impact. Some leaders argue that it cannot be done. I believe that it can and must be
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done if we are to retain our economic position in a world market. Competition will intensify as information and technology becomes more affordable and accessible to a greater number who choose to enter the competitive arena. It’s inevitable. Therefore, the influence of culture, that is, the ability of people to collaborate in harmony to accomplish research, manufacturing, marketing, etc. will become increasingly important. In some cases, it will be the only, yet dramatic, competitive advantage. And, sorry to say, it’s the one asset you can’t buy! Unheeded message Despite the growing number of leaders acknowledging the importance of culture, its value is still misunderstood and underestimated. We have plenty of examples of companies that, because of their misunderstanding of what influences culture, look for quick fixes. You have heard the stories of companies relocating entire operations only to replicate the same old cultural encumbrances in a new landscape! In these cases, the leaders misjudge the power and transferability of their own misguided influence and reputation. In other words, these leaders fail to see themselves as the primary influence to culture and, therefore, recreate the same poor tendencies, regardless of location. The bottom line is that it takes leaders years of unwavering attention through leadership example and enforcement to transform an organization’s culture. Conversely, great cultures can be destroyed overnight. Like a good reputation that takes a lifetime of effort, cultures can be destroyed in a moment of indiscretion. So what makes for a good culture? The following same characteristics appear consistently in high performing organizations: ú values are clearly communicated, defined, understood, and practiced; ú the enterprise vision is clear, that is, everyone knows where the ship is headed; ú the reason for being, the business purpose, is clear and extends beyond profitability; ú strategic priorities/milestones are unambiguous and few; ú organizational performance and progress is regularly measured and communicated (positive or negative); ú individual responsibility and accountability are accepted and expected; ú standards of performance are absolute; ú contributions (collective and individual) are rewarded;
ú personnel development is a priority; ú fun and work are synonymous; ú individuals at all levels treat each other with dignity and respect; ú human resources are managed as the company’s most important asset; ú trust reigns supreme; and ú the future is as important as the present. Although this is far from a comprehensive list, it establishes a baseline for my references to a good culture. If culture is such a pronounced competitive advantage, why isn’t there a greater focus to address cultural deficiencies? I mentioned complexity and duration. Add to the reasons lack of patience and fortitude. Too many leaders do not envision themselves retiring from the organizations that they are directing, living with the consequences of their decisions, or willingly waiting for their personal rewards. This does not hold promise for improving a poor culture, especially one that is currently generating reasonably good profits. To further complicate matters, investors in publicly traded companies have developed a similar short-term mentality and in many cases, are less interested in the manner by which an organization is generating profits than they are in reaping immediate, personal financial benefits. One factor that is far and beyond the most crucial in determining whether a leadership team can ultimately be successful in transforming a culture is trust. A leadership team whose behavior and conduct have generated mistrust cannot possibly drive positive cultural change. As Henry Ford aptly stated, “you can’t build a reputation on what you are going to do” and intelligent, values-driven top performers don’t respond to “do as I say, not as I do.” Like it or not, transforming a culture means getting rid of individuals throughout the organization who do not subscribe to the values, operating principles, and standards of performance adopted by the leadership team, regardless of their socalled talents. Too often leaders offer supposedly good reasons (excuses) for not getting rid of these individuals. If a leadership team wants to destroy its credibility quickly it needs only to ignore its own doctrines (communicated beliefs). With the recent elections, there has been much attention focused to our ability as a nation to
compete in manufacturing. At one end of the spectrum lies protectionism in various forms. At the other end of the spectrum is educational reform, that is, better preparing American workers for the jobs of the future. There are rational elements in each perspective. However, ultimately what will determine whether the United States will command a leadership position in manufacturing or any endeavor lies primarily in our ability to reestablish company cultures with a greater sense of values and common purpose, one that is fueled by selfless leadership, the ability to distinguish between that which is unmistakably good and that which is packaged to look good to serve short-term, greedy objectives. Within companies and within our society, too often leaders focus on those characteristics and beliefs that separate rather than unite. This has become a common theme, a theme that creates factions that, as a consequence, need some level of leadership. The proliferation of high level positions, complex organizational structures, and departmental silos that characterized so many of our companies through the 60’s, 70’s, and 80’s was in part driven by individual desires to build empires within empires rather than focus on developing the optimum collaborative environment and competitive organizational profile. Had it not been for the introduction of formidable competitors into many of our major markets, the trend would have likely continued repeatedly, eroding organizational performance and, consequently, competitiveness. Few business leaders would debate the merits and powerful impact of good cultures. However, how many are willing to forego the immediate gratification, wealth, and recognition that apparently come with making the short term numbers? Our hope of a sustainable, strong economy undoubtedly lies in the hands of those values-driven leaders with the integrity, insight, foresight, fortitude, and unselfish drive who are willing to cultivate the tremendous potential that lies within the human spirit, a spirit that can be stifled or inspired by culture. As published in the December 2004 Global Cosmetic Industry Magazine C. Richard Panico is president of Integrated Project Management Company, Inc. (IPM), a professional project management firm in Burr Ridge, Illinois. IPM plans and leads execution on client objectives, helping companies meet them faster and more effectively.