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Cultural Capital: The New Frontier Of Competitive Advantage
- By Ray Adler
True differentiation continues to elude many banks today. Given most banks offer similar products and services, banking remains very much a commodity business. Banks are able to gain some distinction in the marketplace by offering an attractive rate on a CD, or a favorable teaser rate on a business LOC, but it is very short lived. The competition, given enough motivation, can duplicate or worse, beat the rate, terms or fee structure you offer. The bottom line is that your products and services seldom create lasting distinction in the marketplace.
The one factor your competition can not easily duplicate is your employees. Referred to as “Cultural Capital” by leading management experts, a bank’s employees represent vast untapped potential and the strongest variable to achieving impressive long term financial performance.
Three Major Organizational Trends In Business Today:
As competition increases, banks are learning – like their corporate brethren - that their competitive advantage lies in tapping the deepest levels of creativity and the highest levels of productivity of their employees. In the 1920’s, Walt Disney placed such a high value on creativity within his company that he paid his creative team more than he paid himself. Today, we see more and more organizations substantiate what Walt Disney inherently knew, organizational performance is directly related to employee fulfillment and this is evident in the three major organizational trends in business today.
Trend #1: Focus On Employee Fulfillment
Corporate performance and financial success is strongly correlated to employee fulfillment. Research conducted by The Wilson Learning Corporation involving 25,000 employees, documented that up to 39% of the variability in corporate performance is attributable to the personal fulfillment of employees. There are many aspects to employee fulfillment. A few include how your employees feel about the competitiveness of their compensation and benefits, their work environment, and the degree to which their work environment is one of cooperation, team work, open communication and appreciation. Employees value opportunities for learning and expressing personal creativity and, finally, to know that their work has purpose and meaning.
Trend #2: Developing The Leadership Skills And Emotional Intelligence Of Managers
Employee fulfillment is strongly correlated with the leadership skills and emotional intelligence of managers. Up to 69% of the variability in employee fulfillment is attributable to the leadership qualities and interpersonal skills of every manager and supervisor. Recent research by Dr. Dan Goleman has shown that emotional intelligence is twice as important for outstanding performance as technical skills or intellectual acumen. Some of the more important emotional intelligence skills include: effective interpersonal communication, giving and receiving feedback, handling conflicts and conflict resolution, facilitating responsibility and accountability and empowering and coaching employees. In banking, it is common to find people who have been promoted into positions of leadership due to their technical expertise and years of experience, yet who lack the leadership and emotional intelligence skills needed to maximize employee performance.
John P. Kotter, in his book What Leaders Really Do, states “that most organizations lack the leadership they need - often by as much as 200% to 400%.
Trend #3: Development Of An Adaptive Culture That Fosters And Supports Creativity And Innovation
History shows us that the most successful species on the planet have been those groups that have been able to continuously adapt to their changing environment. Since corporate cultures closely reflect the personalities of the Chief Executive, Senior Management Team and /or the Company Founder, a shift in culture necessitates a shift in the personality of the leader and the leadership team. Simply said, organizations don’t change, people change. As leaders, we must be on high alert to quickly spot and eliminate the behaviors and conditions that contribute to excessive employee turnover and that kill teamwork, morale, productivity, creativity and innovation. Those include territorial behavior, excessive control, excessive bureaucracy, micro-management, power struggles, grandiose egos, intimidation, and employees feeling unappreciated and unacknowledged. Research shows that employees respond well to a corporate culture void of these situations and are up to 127% more productive and creative when they work in a healthy, supportive environment.
The Undeniable Linkage Between People And Profits
In their book Corporate Culture and Performance, authors Kotter and Heskett document that companies with strong adaptive cultures that emphasize leadership development and employee fulfillment, outperform other companies by a significant margin. On average, these companies grew 4 times faster, had stock prices that grew 12 times faster and profit performance that was 750 times higher than companies focused on other more traditional corporate objectives. In the words of famed AlliedSignal CEO, Larry Bossidy “at the end of the day, you bet on people, not on strategies.” Going forward, the path is clear. Victory will go to those banks that maximize the capabilities of their “Cultural Capital”.