Part one for three in a series where Silicon Valley’s longest serving CEO chats with Professor Jennifer Chatman, a Distinguished Professor of Management and the Associate Dean for Learning Strategies at the Haas School of Business at UC Berkeley.
Professor Chatman is also the Director of the Berkeley Culture Initiative, a program with the goal of identifying the most promising opportunities and challenges facing leaders who harness organizational culture as a strategic resource.
Guy Smith: Hello again, and welcome to another episode of the Tough Things First podcast and this is the first of a very, very special three-part series of Tough Things First where with the help of a particular expert and the experience of Silicon Valley’s longest serving CEO, we’re going to explore the topic of corporate culture; what it is, how you shape it, how it facilitates innovation performance, and quite a bit more. For this three-part series, we’re joined by professor Jennifer Chapman, distinguished professor of management and the associate dean for learning strategies at the Haas School of Business at UC Berkeley in California. Professor Chapman is also the director of the Berkeley Culture Initiative, sorry about that, a program that has the distinct goal of identifying the most promising opportunities and the biggest challenges facing leaders who harness organizational culture as a strategic resource.
Now, Professor Chapman’s CV goes on for quite literally 27 pages. Just her list of publications alone, take up five pages, so rather than recite more of that, let’s instead get started with today’s podcast. First off, welcome, Professor Chapman. Thank you so much for being here today.
Professor Chatman: Thanks, Guy. Nice to be here.
Guy Smith: Of course, on the other side, we have Silicon Valley’s longest serving CEO, a man who is no stranger to shaping positive corporate cultures himself, Mr. Ray Zinn. Hello again, Ray.
Ray Zinn: Hello, Guy and hello, Jenny. So happy to be with both of you.
Guy Smith: I think this is going to be an exceptional three-part series of podcast. I’m going to step back and let the big brains have a discussion about today’s topic, but to go ahead and get started, we’re going to put the question on the table, the question we’re exploring today. Professor, let’s start off with you. How can leaders create a strategically aligned, execution-based culture in their teams or perhaps in their entire organizations?
Professor Chatman: Well, that’s a great question, Guy. Let me start by putting together an argument for why it’s so important to pay attention to culture and then we can talk about to do it. The basic idea here is that no matter what you do or don’t do as a leader, a culture will form. That’s not the question. The question is whether the culture that forms is one that helps you execute on your strategic objectives or worst case scenario, a culture that actually precludes you from achieving your strategic objectives. It’s really not a question of how to create a culture. It’s really a question of how to shape the culture that has developed in your organization and how to ensure that that culture is actually aligned with your strategic priorities. That’s the first piece.
Let’s talk a little bit about what that means. Throughout my career, I’ve conducted research and consulted with organizations, taught courses about how to cultivate an effective culture. We’ve identified three specific criteria for using culture as a leadership tool. The first criterion is that a culture must be strategically relevant. What we mean by that is that the behaviors and decisions and priorities of your members half match with your strategic priorities. For example, if you’re competing based on customer service like an organization such as Southwest Airlines, customer service, and low price, then employee behaviors have to prioritize everything having to do with customer service and everything having to do with keeping cost low so that you can deliver on that strategic promise. In other words, the culture alignment can be seen throughout the organization in terms of consistently prioritizing the things that matter for strategic success.
This sounds easy and straightforward, but think of all the times you’ve encountered competing priorities. One question is, do you serve customers even if it gets really expensive to do so? Or do you lower cost even if, at some point, you’re going to lose money on some routes if you’re Southwest Airlines? These conflicting priorities are what makes it very, very hard for most organizations to consistently focus on the behaviors, allow them to fully deliver on their strategic promise. That’s the first criterion.
The second one is to ask the question of whether your culture is strong. What we mean by strong culture is two distinct factors. One, people agree about what’s important. Could you ask five people in the organization and would they say the same thing about what’s important within the culture? The second to mention is intensity around those cultural priorities.
I’m a professor. We delve in the world of two by two contingency tables. You can imagine in your head the two by two that you’d set up for culture agreement and culture intensity, right? It’s easy think about the high, high and low, low quadrants, right? You have a high intensity, high agreement is what we call a strong culture. Low on both of those would be a weak culture, but then we have interesting combinations.
So some organizations have high agreement with low intensity, what we call a vacuous culture. Some organizations have high-intensity but low agreement on culture, and we call that bring factions. One thing that leaders can do is scan their organization to see these quadrants they fall into. What we know from our research is that the most prevalent of those four possibilities is vacuous beliefs. We have high levels of agreement, but no real intensity behind upholding those norms. It makes sense because often what we’re asking people to agree about is pretty good stuff, right? “Hey, we want to be the best in quality”, right? And employees are going to say, “sure, we love quality. We agree with that. That’s a great thing to emphasize.” But there’s no real intensity behind it. And that means that you’re not going to deliver on your strategic promise systematically. What we know about strong cultural organizations is that they upgrade in terms of delivering on their strategic promise.
Ray Zinn: So let me jump in here, Jenny, because you hit a key note for me because having run my company, a semiconductor company in the Silicon Valley for 37 years, culture was extremely important. So the name of my company was MICREL, M-I-C-R-E-L, which stands for microservice at a reliable. If you look at, then that we’re talking about quality again, that became our brand. Whereas we didn’t necessarily promote low price, that wasn’t our brand. Our brand was high quality, high reliability. I had to set up a culture that would support that sort of a thinking. So going along with what you’re saying, if I just waved arms at it and just let it happen, it wouldn’t be structured. So we had to have a structured culture. I think going along just to give you an example of the culture we had at MICREL, the quality and reliability goes along with honesty and integrity.
We really promoted heavily being honest and having high integrity. We set up a plan to do that. So that the company, the employees fully understood what those terms mean. Honesty means you’re truthful. Integrity means you do what’s right when no one’s watching, which goes into building in the quality, rather than testing in the quality, you have to build it in. And then of course dignity and respect for every individual, which means we didn’t allow any swearing or vulgarity at the company. The last was doing whatever it takes, no excuses, meaning you’re going to put forth your best effort, making it no harm, no foul to the company, even if you make a mistake. So that’s how we inbred the brand of making semiconductors that were, were high quality and high reliability. So I just wanted to kind of interject that, Jenny, as we talk about the importance of having a strategic culture that you can actually execute.
Professor Chatman: Great illustrations, Ray, of these two criteria for having a strong culture. People can see that there’s a clear strategic alignment between what you’re emphasizing in your culture and how you’re differentiating the company strategically, this notion of reliability and quality. So that’s a great illustration of the connection between strategy and culture. Second thing you illustrate was the kind of level of consistency and intensity throughout the culture. It sounds like people didn’t just agree, but that there was enough consistency and comprehensiveness in the practices that there was an intensity behind what you were prioritizing in an organization. Most organizations who are deliberately focused on leveraging their culture like you were, and I would say that given when you started your company, you were way ahead of your time because culture is something that organizations have really just started to take seriously, I would say, within the last 10 or 15 years, and as your company predates that faddish orientation by some number of years, so that’s really incredible.
But many organizations you can actually look within the organization, even within my business school. I’m a professor at the Haas School of Business at UC Berkeley, and we’ve embarked on a cultural emphasis. In fact, we’re known as the top 20… Among the top 10 business schools, we’re known as the one that is most differentiated by our culture. What you see is that there are at least 180 different processes and decision orientations that have our culture embedded within them. That consistency really shows employees that you’re serious. That’s really the only way to convince people that it’s actually meaningful is through a kind of consistency and comprehensiveness in the practices that you develop. So those are the two things that take from your comment there, Ray.
Ray Zinn: Well, I appreciate that because it goes to a thought that I have. And again, it’s something that we practice heavily at Micrel. If it’s not executable, in other words, if you just have a culture, but it’s not executable, then it doesn’t become very strategic. So I liken the culture of a company to the heart. If you think about the heart is the key to the body of the company, it’s like a body of water such as like in the ocean, which it’s tossed to and fro by the elements so that the ocean doesn’t have a heart. So it just goes back and forth, up and down, whatever the elements force it to do. So I really believe that the culture is the heart of the company. It’s the brand of the company. It’s who the company is. If that heart stops beating, then of course, the company is just going to go into fibrillation and not perform very well.
So we know of companies that have a decent product, a great product idea, but their culture isn’t very stable. So therefore, when the heart beats it’s going to be irregular and not properly in tune. So that’s kind of what I see is the value of the culture really becomes the heart of who the company is.
When I wrote my book, Tough Things First, we actually wrote it around the human body, the mind, the heart, the functions of the body. I’m very keen on culture. Culture really was the heartbeat of MICREL. This has been a very fruitful topic, so in closing, I just want to emphasize how important it is to have a good culture, a functioning culture, an executable culture, and one that strategically aligns itself with who the company is. We talk about HP and HP way because it became the mantra of HP that quality was an important aspect of who HP was. Now, that’s changed over time, but anyway, the whole concept of culture is that it be strategically aligned and be executable at all costs. So thank you again, Jenny, we really appreciate you coming.
Guy Smith: Well, thank you both for being here. As the fly on the wall for this episode of the Tough Things First podcast, what I learned was that it is that alignment between the mission, the court for differentiation and the consistency of the application that drives or sculpts the culture to be what it needs to be in order to be executable. So thank you, professor Chapman. Thank you, Ray, and thank you to the listeners who have tuned in. And while you have your phone in your hand, do make sure to rate and review the Tough Things First podcast and share it with your friends. We have been rated on two top 10 Silicon Valley podcasts lists and a third one on the top 25 Silicon Valley podcasts. So your friends there in Silicon Valley or any other tech hub around the world need to be tuned in every week. And speaking of which, episode number two of this special trilogy with professor Chapman will come on the air next week so join us then.