Why Some Companies Have Consistent Success - The Secret Formula of Organizational Culture

Do you want to know the secret behind the consistent success of some companies while others struggle to survive? The answer is simple: organizational culture. According to studies, companies with a positive and strong organizational culture have a 28% higher profitability compared to those that don't (Deloitte, 2018). But is that all? Productivity increases by 21% (Gallup, 2016), employee engagement is 37% higher, and staff turnover decreases by 50% (Great Place to Work, 2019).

Let's start by highlighting that organizational culture is the way things are done in an organization, encompassing everything from how people communicate and relate to how decisions are made, leadership styles, work organization, and employee recognition. These behaviors reflect the beliefs, values, and principles shared by the company's members.

An optimal organizational culture would be one where leaders lead by example and inspire their employees to grow and be creative. Communication is clear and transparent. A safe and healthy work environment is fostered, where excellent performance and employee contributions are valued and rewarded.

The formula that guarantees this optimal organizational culture can be summarized as follows:

Organizational culture is the result of the sum of leadership, communication, and initiative. These elements have been squared to represent that they should be empowered by organizations, and they have been divided for recognition to ensure the existence of a solid recognition and reward system, but managed with care to avoid generating undesired effects.

Let's make an analogy with a soccer team to understand the formula. In this sense, leadership is like the coach who guides and directs the team towards the common goal. Initiative represents the players who take the initiative to score goals and win the match. Communication is the game system that allows the players to work together effectively. Lastly, recognition is the reward given to the champion team that celebrates hard work and success.

This metaphor shows us the importance of each element in achieving the final goal and how any imbalance directly impacts organizational culture.

Imagine a team where:

• The coach doesn't make decisions or establish a strategy to win the match and the championship.

• The coach stays in their office and never visits the field.

• The coach arrives late and has no knowledge of soccer.

• The coach doesn't provide feedback on what was done well or needs improvement during training sessions and after matches.

• The coach blames others every time the team loses a match instead of conducting a failure analysis.

While this may seem unthinkable in a soccer team, it is quite common to see it in organizations. Closed-door bosses isolated in their offices, bosses who don't consider it important to share the business strategy with their employees, bosses who don't have time to provide feedback, or bosses who blame others every time a mistake is made.

We can see that if leadership fails in the formula, the team may lack clear guidance and strategic direction, which can lead to a lack of motivation and focus on work, negatively affecting team performance, communication, and initiative.

On the other hand, if there is an imbalance in the initiative, we would have:

• Players who remain stationary, waiting for orders before taking action on the field.

• Players who don't suggest strategies or tactics to improve their team's performance because new ideas are not welcome.

• Players who have become spectators of problems on the field because they have no influence and have become accustomed to living with them in a "couldn't care less" attitude.

• Players who evade responsibility for the match results, arguing that they were just following orders.

It is common to find in organizations a fear of proposing new ideas and making decisions because these cultures punish mistakes and adhere to the "the captain is in charge, not the sailors" mentality.

Initiative is essential in a strong organizational culture because it fosters proactive thinking, critical thinking, creative and innovative thinking, as well as helping employees feel more involved and committed to their work and the organization. When employees have the freedom and support for initiatives, they are more likely to propose new ideas and solutions, which can lead to increased efficiency, motivation, and productivity in the company.

Now let's imagine an imbalance in communication, that is, in the game system according to our analogy:

• Disorganization on the field: Players may appear confused, unaware of the rules, there may be no goal markers, no knowledge of their position in the championship, where they should be on the field, and how to work together. There may be too many players in one area of the field and not enough in other parts, defensive errors, abandoned goalposts, or unmarked players.

• Lack of synchronization: If players are not working together effectively, they are likely to be unsynchronized in their movements. This can lead to obstructing each other and failing to create scoring opportunities.

• Lack of cohesion: If the team does not have a clear game system, the players are unlikely to be united behind a common goal. Instead, they may be working individually, each trying to make their own move.

• Difficulty in maintaining ball possession: If the team does not have a clear game system, it can be difficult for players to maintain ball possession and build offensive plays. Instead, they may frequently lose the ball and fail to create scoring opportunities.

It is common to observe in organizations that employees are unaware of policies, what other colleagues or departments are doing, business objectives, competition, or the business strategy because it is ultra-secret, yet despite everything being confidential, it becomes the talk of the cafeteria.

Definitely, communication failure would affect the clarity of team goals and objectives, which in turn can lead to a lack of cohesion, difficulty working together towards a common goal, lack of commitment, and absence of motivation.

The formula is based on the idea that a positive, optimal, and strong organizational culture is built upon the combination of these factors, which must be balanced and harmonious with each other to achieve the best result.

For example, in an organization where leadership is exemplary and values are clearly defined and shared by all members, communication is bidirectional, and employees have the opportunity to participate in important decisions, it can be calculated that their organizational culture is strong.

On the contrary, in an organization with a lack of leadership, poor communication, and little employee involvement, it can be calculated that their organizational culture is weak.

Now let's analyze the second part of the formula, recognition. This is essential in organizational culture because it helps motivate and retain employees, increase job satisfaction, and promote productivity.

However, it is not enough to simply have recognition. It must be provided fairly and equitably, based on actual performance and contributions of each individual. It should be provided immediately and considering individual needs and preferences.

When recognition does not meet these criteria, it can have a negative effect.

• Lack of equity and fairness in the distribution of recognition can generate frustration and discontent among employees. This can happen when there are no clear criteria for reward allocation or when they are exclusive to certain levels.

• Excessive or constant recognition can diminish its value and become expected or boring, reducing its positive impact on employee performance and motivation.

• An excessive focus on material rewards can trigger dependence on them as the only form of motivation. When these rewards are not available, motivation can disappear. Moreover, they can lead to inappropriate behavior, unethical decision-making, lack of teamwork, information hiding, unfair competition, etc.

• Recognition without adequate feedback has a short-term focus and does not significantly contribute to the continuous improvement of employee performance.

In conclusion, recognition can have a boomerang effect, and instead of motivating, it can generate demotivation. That's why in the formula, it is represented with a division. All the effort made can crumble due to the absence or mishandling of recognition.

The harmony and balance of all the elements in the formula help us achieve a strong organizational culture.

How to foster a strong organizational culture:

• Foster dialogue and open communication between employees and organizational leaders.

• Establish a system of recognition and rewards for employees who show initiative and contribute positively to the organizational culture.

• Provide continuous training and development for employees to help them develop valuable skills and knowledge.

• Establish a transparent and ethical leadership system in which leaders set an example and promote positive values and principles.

• Create a collaborative and team-oriented work environment where employees support each other and work together to achieve common goals.

• Foster a culture of innovation and creativity by encouraging employees to propose new ideas and approaches.

• Establish a feedback system to gather employees' opinions on the organizational culture and use this information to continuously improve.

I invite you to apply the organizational culture formula, reflect on how to implement these ideas in your own organizations, and share your experiences.