Where Culture is King

Despite size, scope or industry, the Most Admired Companies for HR share a commitment to culture centered on values every employee lives by.

Thursday, December 6, 2012
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When it's good, you can feel it when you walk in the door.

Corporate culture is not about great brand messaging (think Apple) or a consistent customer experience anywhere you go around the world (think McDonald's), though these can contribute to a unified purpose for employees. Corporate culture is more of an internal focus; it's at the core of how employees conduct business. It's the way they interact, make decisions, take actions and plan for the future. It's how they honor the successful business model of their organizations' founders while moving toward the cutting edge.

Since 2005, Human Resource Executive® magazine has teamed up with Philadelphia-based Hay Group to identify organizations among Fortune magazine's Most Admired Companies that typify best HR practices. This year, we looked for lessons about promoting a great corporate culture from three of the top 50 companies. (See sidebar for more on how the HRE list was determined.)

"Don't tell me; show me" is how Hay Group's Melvyn Stark describes the manifestation of a corporate culture.

"Culture is not the kind of thing that companies would herald publicly," says Stark, Hay's vice president and regional reward practice leader located just outside New York City. "Rather, they would try to ingrain it so that people have an experience without having a label on it. I've often said that just because you have defined it or legislated it doesn't mean it's showing up in practice."

HR plays a significant role in defining and promulgating that culture, says Stark, who worked with Hay Group's Mark Royal and Jeffrey Shiraki on Fortune's Most Admired Companies list and re-examined the findings to identify the companies with the best HR reputations. The top 50 companies share high marks from their external peers on management quality, product/service quality, innovation and people management.

McDonald's (No. 7), Caterpillar (No. 16) and Accenture (No. 33) were in the top 5 percent of the 700 organizations studied in the overall (non-HR-specific) Fortune list. Although they are different types of companies with widely varying histories, customer bases, and products and services, they share some best practices about their success.

Not surprisingly, all three have aspects of customer focus and teamwork as cornerstones of their culture.

After McDonald's phenomenal growth in the 1960s and 1970s, and its survival of the famous Burger King wars in the 1980s, the late 1990s became some tough economic and competitive years for the company. In the early 2000s, reorganization and a refocus on values harkened back to founder Ray Kroc's "Quality, Service, Cleanliness and Value." As a result, the fast-food giant's values are still squarely centered on teamwork, humility, rewards based on merit, entrepreneurship and diversity. Even though McDonald's has 400,000 company employees in 119 countries, "you can feel the culture when you walk in the door," says Executive Vice President and Chief Human Resources Officer Richard Floersch, based in McDonald's headquarters in Oakbrook, Ill.

For Accenture, Chief Human Resources Officer Jill Smart says her global consulting company has "zero tolerance for not living our core values," which include client value creation, one global network, respect for the individual, the best people, integrity and stewardship. The last is Smart's favorite.

"My mentors [sometimes] made decisions that maybe were not the best decisions personally," says Smart, who is based in New York. "I asked them why and they answered that it's all about stewardship, about Accenture being a better place when I leave than when I got there."

Caterpillar -- with its roots going back to the 19th century, 130,000 employees in more than 500 locations and customers in some 108 countries -- has a strong set of values centered on integrity, excellence, teamwork and commitment.

Kimberly Hauer, chief HR officer and a vice president of the Peoria, Ill.-based company, says there is "not a facility or business unit that I [visit] anywhere around the world where I don't see our values in action. It's not just a sign on the wall."

Over the years, the company has faced many challenges, from overseas competition to cyclical sales cycles to labor-relations ordeals, but in the face of it all, it started addressing corporate culture early. The first nepotism rule was established in 1925 and a code of conduct was implemented in 1944.

Living the values especially applies when things go bad. For example, the economic crash of 2008-2009 led to Caterpillar's workforce reductions around the world and the rescinding of job offers to college students. Rather than just saying "thanks but no thanks," the company followed up with phone calls to explain the situation and to keep the door open if the situation changed --  which it later did. To honor the commitment Caterpillar had made but had to pull back on, the company decided to send the graduates checks of a couple thousand dollars apiece to apologize for the inconvenience.

Values in Action

Caterpillar's HR response was an example of values applied to policies.

Successful companies embed their business' cultural values throughout the lifecycle of employee management, "from attracting and hiring through to onboarding and training, and onto performance management and rewards," says Jeff Shiraki, a vice president with Hay Group.

The first step in the life cycle is hiring the perfect candidate for the job and for the culture. At McDonald's, that means being a team player, no matter which level of the operation a person is hired for.

"People with big egos will get screened out in the interview process or will be squeezed out later," says Floersch.

In addition to McDonald's famous Hamburger University training programs, values are also included in the structure of incentive and rewards programs.

For staff employees, if a team doesn't meet the previous year's threshold of operating income, members get no reward. If the team meets or exceeds the threshold, they are in the game -- their individual performance becomes either a multiplier or a detractor on their final total. If the team achieves 120 percent of the threshold, the top performers could get as much as 120 percent to 150 percent of the baseline reward, while people who didn't perform as well could get only 70 percent to 80 percent.

"That's a great way to demonstrate about our culture -- it's team first and then the individual second," says Floersch.

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The second critical piece is having leadership onboard with the culture, from the CEO to vice presidents to front-line supervisors.

"What we find over and over again," says Hay Group's Shiraki (who's based in Washington), "is that leadership is going to be one of the key determinants of either a strong and aligned culture or the creation of an organization that has a culture ... contrary to the business strategy."

Caterpillar's new Leadership Excellence in Accountability and Development program has been built over the last two years to develop leaders from emerging supervisors all the way up to the executive level.

"We came out of the downturn with a commitment to the leadership program," says Hauer. "An integral part is 'leaders as teachers.' Everyone is expected to teach."

Although they collaborate with outside organizations to provide training as well -- particularly with Disney in Caterpillar's Paving the Road to Success program (designed to help high-potential managers increase their knowledge and capabilities by networking with executive leaders and peers) and Stanford University's contribution to Caterpillar's Digging Deep program (consisting of five week-long modules held worldwide to prepare leaders for executive-level positions) -- using as many teachers from within as possible guarantees sustainability of the program during down times. "We take real pride in that," she says.

Going Global

The challenge for a global company is in figuring out how to hold a culture together when its employees are scattered all over the world. Accenture, which has no physical headquarters, has tackled that problem with extensive online training and sophisticated teleconferencing so national borders now mean nothing.

Smart, who has been at the consulting firm for 32 years, says, "Somebody once said that culture is how people act when nobody is looking. For us, it's the way we do things here."

Collaboration is a must since teams are made up of people from different parts of the organization and different geographies.

"A lot of our people could not survive in an environment that is about me and not about us," she adds.

That focus is what Smart terms "the Accenture Way," which describes the company's methodology. It is built into a matrixed operating model as well as Accenture's approach to training.

In 2011, the company invested more than $800 million in training, averaging more than 50 hours per person each year. The customized training curriculum is mobile and online as well as in classrooms with a global student base. Leadership development, a critical part of building culture, is conducted virtually across organizational boundaries using collaborative technologies such as Jabber, Cisco's Telepresence and Adobe Connect.

"You can have a meeting with people from Chicago and Amsterdam and you feel like you're right there with them," says Smart.

Whether global or local, a consumer or business-to-business brand, or a company with a long-standing culture as opposed to one that is evolving as it expands globally, corporate culture still has a critical strategic impact that HR can help mold.

Floersch of McDonald's sums it up nicely: "Strategy can change, talent can change, but culture should be something that is carefully held onto and nurtured."


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