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CHAPTER 1 A New Given: Culture Is Strategy

       “I came to see, in my time at IBM, that culture isn't just one aspect of the game, it is the game. In the end, an organization is nothing more than the collective capacity of its people to create value.”

       —Louis V. Gerstner, Jr., former Chairman and CEO, IBM

Leaders must put character at the center of everything they do.

      Today, peak performance requires a dual focus on culture and strategy, especially in this new era of doing business. We are in a unique environment marked by instant gratification, pervasive social media influence, and fast-changing global political and economic forces that require every business to be agile and ready to shift at a moment's notice. In addition, the forces of digital transformation and disruption are exerting tremendous pressure on entire industries—and the executives who lead them.

      On top of all that, we've all witnessed the tremendously negative impact the COVID-19 pandemic has had on people, businesses, and the global economy—surpassing the downturn of 2008. While many companies have recovered from the severe and unexpected disruptions to their business operations, many others have gone bankrupt or have closed their doors permanently. Major companies filing for bankruptcy during the COVID-19 pandemic include Neiman Marcus, JCPenney, Virgin Atlantic, Hertz, 24 Hour Fitness, Pier 1 Imports, Brooks Brothers, Stein Mart, Sur La Table, and even the Cirque du Soleil circus arts live entertainment company. The list goes on.

And, as I write these words, mortgage delinquencies are the highest they have been in a decade,¹ American Airlines announced that it is going to cut 19,000 jobs,² and it was reported that 54 percent of San Francisco storefronts—the local lunch spots, neighborhood grocery stores, fitness studios, and other small businesses that we at Anaplan headquarters regularly frequented before the pandemic—are no longer in business.³ Internationally, according to Roberto Azevêdo, Director-General of the World Trade Organization, “The unavoidable declines in trade and output will have painful consequences for households and businesses, on top of the human suffering caused by the disease itself.”⁴

Clearly, the aftereffects of COVID-19 will leave lasting ripples on how businesses are run and how leaders prepare their companies for the future, perhaps for decades to come. These ripples won't be felt just in the United States, but all around the globe. Every CEO I know is considering flexible new ways of working that put less focus on having people on-site in traditional offices, and more focus on outcomes. And so are employees. According to one survey of more than 750,000 employees working in more than 100 global enterprises—representing every major industry—in early April 2020, 33 percent of those surveyed said they wanted to return to the physical workplace full time post-COVID-19. At the end of June 2020, only 4 percent of those surveyed said they wanted to return to the physical workplace full time post-COVID-19.⁵

      It seems that change is all around us.

      Leaders intuitively know a great culture enables great business results, and a significant amount of research confirms this. However, that same research shows that most organizations are falling short when it comes to culture.

      According to Gallup, which has been regularly surveying the state of employee engagement for almost two decades:

Culture is a critical part of an organization's identity. Culture is created through the experiences that employees have with the corporation and, just as importantly, with each other—the everyday interactions with peers, managers and executives.⁶

When employees identify with and are aligned with a company's culture, they feel they belong to an organization that is inspiring, purposeful, and truly values their contributions to the team. They feel connected. And this connection flows right to the bottom line. A 10-year review of more than 111,000 employee surveys conducted by Aon Hewitt and Queen's Centre for Business Venturing (QCBV) revealed that organizations whose employees have the highest levels of engagement achieve:

This is all good news for businesses with great cultures, but there's a hitch. According to a 2018 PwC survey of more than 2,000 people in 50 countries, although company leaders tend to think their companies have great cultures, their employees don't necessarily agree. While 63 percent of C-suite and board members surveyed reported that their organizations have strong cultures, only 41 percent of employees responded that this is the case. In addition, 80 percent of respondents said that in order to succeed, grow, and retain the best people, their organization's culture needs to evolve within the next five years. Compare this to just 51 percent of respondents in 2013 who said that their organization's culture needs to evolve.⁸

As the Aon Hewitt/QCBV study demonstrates, a corporate culture that is lacking correlates to lower levels of employee engagement, productivity, and business results, along with higher levels of turnover and absenteeism. However, it gets even worse. Gallup also found that 51 percent of employees surveyed are actively looking for a new job or watching for openings at any given time—in many cases because they are convinced that “the grass is greener” in a different organization.⁹ Unfortunately, this group of people may very well include your best employees—some of whom may leave before they realize their full potential in your organization.

      In 2019, job and recruiting site Glassdoor published the results of its latest Mission and Culture Survey. This survey asked a simple question: What makes employees around the world satisfied at work? According to the results of the survey, the top three drivers of employee satisfaction are: