Culture Drives Performance

An ownership culture balances opportunity-seeking with accountability, and stimulates more value creation over time.

- Greg Milano And Michael Chew

Getting culture right is likely to be as critical to long-term success as anything a CEO does. But too often, talk of corporate culture is filled with empty platitudes, subjective buzzwords, and meaningless warm fuzzies. In contrast, an ownership culture fosters a result-oriented environment, where the pursuit of opportunity and acceptance of accountability rule the day.

An ownership culture better aligns the motivations of employees and owners. An owner-manager would not say, ‘that is not my job’, ‘it is good enough’, or ‘we will worry about that next year’. But these types of sentiments can lead to chronic underperformance, and are common examples of the motivational gaps that often result with employee-managers.

Owners have strong incentives to seek performance improvements since their success is tied to that of the company. They are willing to pursue initiatives that are risky or take time to pan out, when the reward seems worth the risk. And owners care more about results than variances to negotiated budgets. But in most employee-led organisations, it does not matter how much performance improves or declines, as long as it was budgeted.

Indeed, these days many corporate leaders are more concerned with avoiding failure than creating value. In the wake of such shocking scandals as Enron and Worldcom, this is perhaps understandable. But many managers have become so risk-averse that they pass up on countless profitable investments. The fact is, in many organisations, risk-taking can result in punishment, and playing it safe may well be the better choice. The problem is not the employee; it is a culture that provides little incentive for experimentation and innovation—and potentially failure.