SAN FRANCISCO (Business 2.0) -
Whenever I teach executive seminars on the importance of building a great company culture, I spend most of the time, strangely, listening to reasons the participants are so reluctant to give it a try: Changing the culture takes too long. People don't like change. It requires too much time from top management. Seems risky -- I don't see the payoff.
None of these, of course, stands up to scrutiny. First of all, cultural change isn't a long-term proposition.
As Gordon Bethune pointed out in his book "From Worst to First," the profound turnaround in employee attitude and operations at Continental Airlines (CAL: Research, Estimates) -- which went from last in on-time performance to first, and made serious upgrades in customer service and baggage handling -- took all of one year. Continental rewarded employees for better on-time performance, listened to their ideas about how to improve operations, and, most important, stopped warring with workers and signaled that they were a valued part of the company.
In the late 1980s, Magma Copper went from being beset by labor troubles and almost bankrupt to being recognized for its success on the cover of IndustryWeek in about two years. Its CEO, J. Burgess Winter, met both with union leaders in formal meetings and with the workforce in bars after work, appointed a committee charged with creating a place where people wanted to work, and changed the fundamental relationship between the company and its (unionized) workforce. He fired managers who continued to behave in the old adversarial and autocratic ways.
The notion that workers resist change is just as silly. Employees will always change when the change makes them and their companies more successful and is consistent with a more enjoyable work experience. Do you think people actually enjoy working at companies with lousy customer service, where they are treated badly?
Cultural overhauls also don't rely on top execs to make them work; plenty of plant managers in the auto industry have built exceptional operations even as senior management dawdled.
And finally, given the importance of culture to success, as documented in many books and studies, I don't see the risk in building high-performing cultures. But I do see a risk in not doing so.
Why the reluctance?
So what makes most CEOs so culturephobic? Simple: They've become technology addicts. Most executives today seem content to spend a fortune on frequently unsuccessful and stressful efforts to change their technological infrastructures with software applications.
An example: After spending $33 million in the 1990s on a failed implementation of Oracle's (ORCL: Research, Estimates) financial accounting system, Stanford University is now laboring through a new one, with CFO Randy Livingston admitting in the campus newspaper that "the first 12 to 18 months after initial launch is a struggle." A special e-mail from the president's office begged for patience during expected delays and system glitches.
But they aren't nearly as interested in changing their human infrastructures -- a process that's actually easier and arguably far more beneficial.
Erik Brynjolfsson, a professor at MIT's Sloan School of Management, has conducted research on the effects of computerization and organizational arrangements on productivity.
His conclusion: Companies that have great information technology and great management practices do wonderfully. Companies that have lots of IT and bad management do the worst -- because, Brynjolfsson found, the strength of an organization greatly magnifies the return it gets from capital investments in IT.
Some lessons
There are a few oft-ignored lessons in all of this. First, before you throw a lot of money into computer systems, fix your company's human systems.
Toyota follows this rule better than anyone -- it trains and gets people working effectively before introducing technology.
Second, don't succumb to the easy excuses. If you can put your employees through hell installing and using some ERP system, you can certainly delight them by building a culture that encourages them to do their best and treats them with respect and dignity.
And you just might get a much larger payout if you have less reverence for the artificial intelligence of computer systems and more respect for the real intelligence -- and experience -- of all the brains behind the keyboards.
Business 2.0 columnist Jeffrey Pfeffer is the Thomas D. Dee II Professor of Organizational Behavior at Stanford University's Graduate School of Business.
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