Shaping the Unseen Force of Culture
James Heskett, author of "The Culture Cycle", shares four key culture shaping components.
Discussions about pharma organizations wanting to embrace patient-centricity inevitably include the topic of culture change - a topic at the core of eyeforpharma's recently published Whitepaper, Patient-Centered Culture by Design. However, according to James Heskett, Baker Foundation Professor Emeritus at the Harvard Business School, many discussions about organizational culture cover only the “soft” benefits to the work environment, or those that are intangible and difficult to measure. He says, “Such talk is useful, but it leaves culture low on the to-do list of leaders.”
Heskett is the author of ‘The Culture Cycle: How to Shape the Unseen Force that Transforms Performance.’ In his book, he offers a conceptual framework, referred to as the ‘culture cycle,’ that explains how an effective culture, which includes a focus on the customer, can contribute to almost half of profitability. The culture cycle demonstrates how less visible causes such as values, mission, expected behaviors, expectations, and trust can determine the more visible effects such as productivity, profitability, innovation and organizational learning, and how such learnings can be fed back to the organization to improve the mission and values.
Culture: an unseen force
Culture cannot simply be hacked or replicated because it is intangible, subtle and often difficult to describe. For this reason, Heskett refers to it as an “unseen force” that often flies under the radar and is only taken notice of once cultural malpractices have become so entrenched they begin to manifest themselves as newsworthy business mistakes.
Effective cultures facilitate the kind of collaboration that supports innovation and learning.
Despite being unseen, most organization leaders will agree that culture is powerful and a major driver in organizational performance. “Effective cultures facilitate the kind of collaboration that supports innovation and learning. They support the management of change, whether the change is one of strategy or something else. They foster the trust that is so essential to delegation, accountability, and getting things done fast. They facilitate execution, making leadership easier in an age in which change is demanded more often and with greater speed than in the past,” explains Heskett.
The values and behaviors of employees and leaders become embedded in the culture, whether intentionally or not. Heskett says that if left unattended, culture will shape itself and the final product might not be in line with the organization’s mission and purpose. He identifies four key components in culture shaping: describing what exists; hiring people with shared values; a foundation of trust in and by leadership; and weeding out the disruptors.
Component 1: Describing what exists
First is establishing a baseline of where the organization currently is and where it sees itself in terms of shared values, behaviors, measures, and actions. “The process of shaping a culture begins by describing what exists as opposed to what is desired,” says Heskett. He suggests first identifying the beliefs that are being shared in the organization, the behaviors employees actually have and the actions that leaders take when they observe dysfunctional behaviors among employees.The answers gathered from this become the basis for determining the shared values and behaviors necessary in achieving a company’s mission, but are currently amiss. According to Heskett, leaders should specifically discuss and define the standards against which behaviors will be measured and the methods to be used to measure them.
For pharma, Heskett cites the example of Baptist Health Care CEO, Al Stubblefield, who led the institution in its journey towards excellence by raising the organization’s patient satisfaction rating among peer hospitals from the 18th percentile to higher than the 75th percentile in a span of nine months.
Stubblefield took on the role of CEO in 1999 and had the goal of making Baptist Health Care the best in terms of service excellence in America. In 2003, the institution won the prestigious Malcolm Baldrige National Quality Award. It was also included in Fortune Magazine’s list of “Top 100 Companies to Work for” six years in a row. For the last decade or so, Baptist Health Care has also consistently been ranked within the top 1 to 3% in terms of patient satisfaction.
We would not have achieved what we have here in the last 8-10 years had we not turned our culture upside down and realized that we had to engage every single employee.
Baptist Health Care adheres to its “five pillars of excellence,” which are people, quality, service, financials, and growth. It’s a four-hospital system linked to other health centers and physician institutes found in different locations within Northwest Florida and Southern Alabama to cater to different communities in need of health services. Top management ensures that there is high employee engagement and a strong desire for service excellence at all levels of the organization. Stubblefield was once quoted as saying, “We would not have achieved what we have here in the last 8-10 years had we not turned our culture upside down and realized that we had to engage every single employee in this organization; not just to show up for work and fill a shift, but to be a part of helping us achieve a noble and worthwhile mission.”
Component 2: Hiring people with shared values
The second key component to culture shaping proposed by Heskett is hiring people who buy into the values and responsibilities they imply. In order to maintain the alignment of strategies, as well as the transparency of any problems or failures in performance, “It is important to hire people who subscribe to a set of shared values and behaviors,” says Heskett. These people more easily find the organization an attractive place to work in, which encourages employee loyalty, engagement, and sense of ownership in the company; subsequently, they can greatly improve turnover rates and productivity.
When employees are more productive, there is also a greater rate of business development and better client loyalty. According to Heskett, cultures that engage employees foster innovation and are more open to dealing with diversity in the workplace, which is increasingly becoming a reality for various organizations.
Components 3 and 4: A foundation of trust in, and by, leadership and weeding out disruptors
Having the right people running the show is essential. Heskett’s final two key components to culture shaping are encouraging leaders starting from the top to act out the values and behaviors (third) and weeding out those who don’t buy into the values and the managerial behaviors they imply (fourth).
Expectations go both ways – what leaders expect from employees and what employees can expect in return - and meeting these expectations creates a climate of trust. “If expectations aren’t surfaced and met by leaders, then the culture-shaping process will not succeed,” says Heskett. He calls this the “no surprises” kind of leadership where trust is the foundation that facilitates the exchange of ideas, learning and innovation in the organization. For Heskett, trust also makes strategy implementation more efficient.
The success of shaping or maintaining an effective culture also depends on the quality of execution among leaders. Top executives have the power to ensure the selection of culturally fit employees and monitor that human resource practices reflect the values and behaviors of the organization. Despite having the liberty of enlisting the help of consultants, the implementation of culture change is thus the primary responsibility of leaders.
Culture can be measured
In his book, Heskett discusses the “Four Rs”of retention (employee loyalty), referrals (customer loyalty), returns to labor (productivity and attractiveness to the work), and relationships with customers. Although he recognizes that the cause-and-effect relationship between the Four R’s and customer-centricity are not yet specifically documented, he also points out that these factors are found to exist in the same organizations.
The impact of the Four R’s on revenue and operating income is also quantifiable. Heskett cites the example of costs incurred when an employee leaves the company, such as loss in productivity, idle time spent waiting for and training a replacement, and possible severed customer relationships. “For senior members of an organization, this set of costs represents 250% of the annual compensation of the departing individual. Taken as a whole and applied to the experiences of a large organization providing professional services, as I have done, the influence of the Four R’s can account for up to half of the differences in operating income of two organizations engaged in the same business activity,” he says.
Culture shaping in pharma
The Four R’s could be of great help in measuring the impact of a patient-centric culture to an organization’s performance. Customer-centricity can encourage, and, therefore, be measured through patient retention and doctor retention strategies, says Heskett. Its economic significance is also strongly reflected through referrals by, and relationships with, patients.
Heskett observes that patient-centricity is not the norm in healthcare in the United States, but cites the Mayo Clinic as an exception. Eighty-five per cent of Mayo Clinic’s patients have referred at least one other patient to the hospital. One factor that has possibly contributed to such a positive referral rate is the design systems - scheduling routines, staffing, and facilities - that revolve around patients, not doctors or other care providers. Another factor is how the clinic schedules work to provide more effective and efficient clinical experiences for patients.
Returns to labor can also drive down costs that in the end benefit the patient. If productivity isn’t optimized, it can also drive down customer experience, especially in personal services such as medicine.When it comes to productivity, Heskett explains that, “The secret is in the design of processes that include the right amount of human effort and the right amount of technology, the enlistment of the patient in self-providing care as in self-medication, and staffing to ensure that personal care is provided where it is most important rather than to some uniform level that over-delivers expensive care to many patients who don’t need it.”
Heskett adds that a key component to having a productive and patient-centric culture is having a group of professionals who genuinely adhere to the concepts of patient-centricity and place the needs of the patients as first priority. The Mayo Clinic recruits and hires physicians who, Heskett says, don’t feel the need to be “stars” in their profession to gain satisfaction from it. The clinic also compensates professionals based on salary, with modest incentives that are performance-based.
Organizations that first establish profit goals rather than strategies for hiring, training, and promoting the right people are doomed to failure. The most successful culture change efforts emphasize neither sales nor customers.
Heskett considers the combined product of the Mayo Clinic’s design systems and the collective services of its health professionals as a remarkable example that other health organizations should aim for. With improved medical outcomes, high patient loyalty and referrals, a documented continual flow of financial support from former patients with little or no marketing expenditures, the Mayo Clinic proves that placing the patient at the center can indeed bring quantifiable benefits.
Start with the employees
Culture shaping and putting the focus on the patient can improve performance and the bottom line. Before patient-centricity can be achieved, however, Heskett provides a reminder for health organizations: “Organizations that first establish profit goals rather than strategies for hiring, training, and promoting the right people are doomed to failure. The most successful culture change efforts emphasize neither sales nor customers. They always start with the employees who influence customers who determine sales growth and profitability.” Clearly, the process of culture shaping should begin with the less visible drivers of performance that are internal to the organization such as sharing values, setting behaviors, meeting expectations, and putting the right people and leaders in place.
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