Why has Dell been able to outperform its competition consistently over the past decade?
Strategy, certainly. Operational discipline, without a doubt. Talented people, of course.But when asked in an interview with Harvard Business Review what best explains the company’sspectacular success over the years, Dell founder Michael Dell and CEO Kevin Rollins focused on something else.“While Dell does have a superior business model,” said Rollins, “the key to our success is years and years of DNA development that is not replicable outside the company.” Added Michael Dell, “Culture plays a huge role.”
They’re hardly alone in their belief that culture is at the heart of competitive advantage, particularly when it comes to sustaining high performance. Bain & Company research found that nearly 70% of business leaders agree: Culture provides the greatest source of competitive advantage. In fact, more than 80% believe an organization that lacks a high-performance culture is doomed to mediocrity. At a time when enterprises can stretch around the globe, culture is the glue that holds a complex organization together. It inspires loyalty in employees and makes them want to be a part of a team. It motivates people to do the right thing, not just the easy thing. At companies with winning cultures, people not only know what they should do, they know why they should do it.
Yet, while business leaders recognize culture’s crucial role, research also indicates that fewer than 10% of companies succeed in building a winning culture.
The best companies succeed, we found, on two dimensions simultaneously. First, every winning culture has a unique personality and soul that cannot be invented or imposed. Based on shared values and heritage, the company’s character needs to be discovered from within.Second, winning cultures usually embody six high-performance behaviours that are common to all high performers—but only to high performers. Neither element is enough by itself to sustaina winning culture. A company can have astrong personality and soul, but still underperformif it lacks the values and behavioursthat motivate people in the organization to dothe right things. Similarly, high-performancebehaviourspursued independently can shiftan organization into permanent overdriveand sever the connection that employees feelwith the enterprise. It’s the combination ofboth elements that produces a winning culture.
The personality of an organization is oftentaken for granted. Often the values of thefounder are instilled in the organization andshape its culture going forward. “We try harder”at Avis, or “Always low prices. Always,” atWal-Mart are foundational values that havebecome ingrained into the very fibre of each business, informing day-to-day decisions and behaviours.
The strongest cultures bind peopletogether across both hierarchy and geography, guidingthem to make the right decisions and advancethe business without explicit direction. OneSouthwest Airlines employee captured thatnotion well when he said, “We all work hard,but to do anything else would be like lettingyour family down.”
In the case of McKinsey, it states “Our mission is to help our clients make distinctive, lasting, and substantial improvements in their performance and to build a great firm that attracts, develops, excites, and retains exceptional people.”
Bower began to carefully shape the firm into its present form by insisting on a few core values:
• Client interests must be placed before those of the firm.
• Engagements should only be undertaken when the value to the client was expected to exceed the firm's fees.
• The firm's ownership should be restricted to active partners.
• Firm members must be professionals trained and motivated to do outstanding work and make a permanent career with the firm.
As seen in exhibit 2, the core values exhibited by McKinsey are as follows:
In McKinsey, there is a continuing dedication to the set of core values, first articulated by Marvin Bower and his colleagues in the Firm’s earliest years. These are still the bed rock of what the firm stood in 2013 and appeared on every PC in the firm.
Out of the two dimensions that are part of every high performance culture organization, McKinsey performs well on both.
One, a unique personality and soul that cannot be invented or imposed. It initiated the idea of “Value Billing”. Ignoring the time sheets, McKinsey started billing clients on “What it thought was of value to the clients”. It termed itself as “High price, high volume consulting firm that involved great professional obligation to the client, a promise to be met. High fees are a warranty on the impact needed to justify them.”
Two, with regard to the high performance behaviours,
• High aspirations – Expanded to 102 offices around the world in 2013.
• External focus – There is an unrelenting focus on clients, as quoted by the values. For e.g., the evaluation of a director was based on questions such as: “What is the quality of your client relationships? Are we doing good work for these clients? Are we changing the directions of the client’s business in a positive way?” Also, the firm viewed its 26000 alumni as a strategic asset and developed a large and sustained effort to maintain connections with its alumni.
• Individuals who team – Offices were judged in relation to the level of internal collaboration, teamwork with other offices, and the importance of office to its local community.
• Passion and energy – The work was rewarding though there were long hours and lot of travel.