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Developing a Performance Culture, by Richard Nelson and Kate Harrad

February 1, 2010 - In Managing Performance - No comments yet

“Employees who believe in what their company is doing will want to perform well.” 

The two main components of organizational culture are: the espoused or ‘official’ culture and the underlying culture, which is the larger of the two. The espoused culture is articulated in the annual report, the documented strategies, the organisation charts and job descriptions. The underlying culture consists of such factors as individual personalities, alliances and rivalries, gossip, assumptions and interpretations of ‘official’ culture. 

For an organisation to be effective and maximise results in the competitive external environment, it needs to sufficiently align the espoused culture and the underlying culture in pursuit of high performance. In making this alignment effective in practice, the organisation also needs to infuse its perceived culture – how the outside world sees it – with a reputation for performance.

The espoused culture is more likely to be performance-oriented than the underlying culture. However, some ‘official’ structures can be detrimental to performance. An over-rigid hierarchy may mean that not everyone will be recognised and praised for their achievements. In these cultures compliance with the hierarchy is emphasised more than taking the initiative and being innovative, often in spite of statements to the contrary by leading executives.
The management of performance can be arbitrary and send out the wrong signals. When performance reviews are endlessly postponed, or conducted in a perfunctory manner, employees will assume that high performance is not important and may react accordingly.

Setting tough performance objectives without providing the necessary context and resources can cause managers to lose credibility. An employee or a middle manager is likely to become disgruntled if they are expected to achieve results that are in fact impossible because they do not have enough resources to achieve success, or because the lines of communication or arrangements with other functions are unclear.

So for the espoused culture to be performance-focused, a variety of structures and behaviours need to be in place: communication between all layers and departments needs to be clear and honest; messages from the company leaders must be consistent; those who perform well should be rewarded in a timely and appropriate way. And equally, those who do not perform well should be offered advice and help very early on, and if they do not improve, they should not be allowed to continue performing badly, but moved to somewhere that is a better fit with their skills, or moved out of the company altogether. Poor performers are often left in place, generally because their manager has failed to address their poor performance for some reason.

The bedrock of company culture is the company’s values. It should be clear what those values are, and they should be reflected in both the espoused and the underlying culture. The leading executives need to ensure that high performance is included among the values. Crucially, the management process must demonstrate those values: e.g. providing honest, regular performance feedback shows that the company values its employees’ achievements, will help them to overcome difficulties, and is aware of their individual strengths and weaknesses. Studies have shown that productivity improves when employees feel that they are being paid attention to.

The process of managing performance should not just examine performance averages across the company, but focus on local variations – a lot depends on individual management and local teamwork.* This also shows employees that the company is aware of the different challenges people have to overcome in different areas of the business.

Built to Last (James C Collins and Jerry I Porras, 1994) examines ‘cult-like cultures’, which indoctrinate employees with the company’s core values. The successful combination, they conclude, is to find or create employees who buy into the core values, and then allow them autonomy within the context framed by those values. In other words, people who are effectively informed and motivated are likely to perform well without constant supervision. Employees who believe in what their company is doing will want to perform well. When the core values become part of the perceived culture, the reputation of the company will attract people who should already be a good fit.

By its nature, the underlying culture will be much harder to control, and more likely to be occupied with issues such as interpersonal relationships and interdepartmental rivalries than with performance. However, if the espoused culture is successfully designed and implemented, the underlying culture will respond by respecting and acknowledging good performance.

Ultimately, in order to perform well, people must be motivated not just by material rewards such as pay rises and promotions, but by getting satisfaction out of achievement itself, either through enjoying the work, or through knowing their effort is seen and appreciated, or ideally both. From a management perspective, this means paying close attention to individual performance, offering consistent feedback, picking up on problems before they occur, and providing an environment in which successful and efficient working is possible, desirable, respected and recognised by managers and colleagues.

Performance cultures develop from an organization’s people approaching their work in a purposeful and results-oriented manner. Those responsible for ensuring that the organisation is effectively designed will make sure that the business goals and performance measures are reflected in accountabilities at executive and managerial levels. The values and core behaviours that fashion how people will approach their work and apply their knowledge, skills and behaviours will be part of the overall management process and underpin people development.

The performance management process itself will form a critical part of the means by which the organisation is led and managed. Executive development will focus on the importance of enabling success and high achievement and embrace the necessary skills to help new managers be successful in enabling high performance among their people.

*See “Managing the Human Sigma” by John H Fleming, Curt Coffman and James K Harter in Harvard Business Review July/August 2005

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