Shared beliefs for the future

In researching companies that have consistently performed well from a bottom-line perspective, Peters and Waterman identified several themes they consider crucial to developing a culture that will move a company forward. The service companies in the United States they felt exemplified success are: Delta Airlines, Marriott, McDonald's, American Airlines, and Disney Productions.

Successful companies, it was found, are characterized first by organizational fluidity. Communications are informal. This goes beyond an open-door policy to mean that management is visible by walking or wandering around. Hotel managers of quality, according to the American Hotel and Motel Association, walk around their properties at least once a day.

This is carried over to design. Some companies have installed escalators rather than elevators in order to encourage more face-to-face contact.

Peer review is found to be a very powerful motivator. Employees have been found to respond to an informal peer review over the more formal paper-laden procedure laid down by management. The key is to provide positive reinforcement for any action that benefits the company.

An important factor is the amount of experimentation. McDonald's is constantly trying different menu items, restaurant formats, and pricing options. Holiday Inns have numerous test sites where new operational wrinkles are tried out. It seems the key is to start out small, focusing on tangible results, and build on success. If room occupancy is down, identify one time period that is important and develop a campaign to improve the situation.

The analogy of learning to play golf can be used. We traditionally teach people to play golf by lining them up on the tee, pointing to the hole somewhere in the distance, and letting people swing. The first lesson is concentrating on how to drive. After the inevitable slice, it may take many minutes to reach the green and longer still to hole the ball, presumably the object of the exercise.

Compare that to a teaching method that lines the ball up several inches from the hole. The novice putts into the hole; then the ball is moved back slightly. It is a little more difficult but, perhaps after a miss or two, the golfer sinks the ball. In this second method we are building on success. The golfer knows right away what it feels like to get the ball into the hole. That feeling will sustain the golfer through many hooks from the tee.

The same is true in any endeavor. Select a small problem and move toward achieving some tangible measure of success in solving it. Use that as a springboard to action for another.

Companies that perform well focus on the creation of revenue rather than the cutting of costs. This is particularly important in the hospitality industry, where so many of the costs are fixed. Beyond a certain point, costs cannot be cut without closing down the operation. Once that break-even point is reached, fixed costs have been covered and the difference between revenue and variable costs flows right to the bottom line. This does not mean that management should not be concerned with controlling costs; it does mean that the focus should be on the revenue side of the equation.

Increased revenue comes in part from listening to the customer to determine unmet needs and wants. This requires active involvement on the part of top management, an orientation that stresses people (both customers and employees), and a high degree of measurement and feedback. The philosophy set at the top is toward service and quality. A service orientation will lead to profitability; an accent on profits alone may not lead to service to the customer. A profit objective is also less likely to get employees involved. More employees can relate to the externally focused objective of service or quality rather than to the internally focused goal of profits, unless they are directly involved through profit sharing—and most are not.

This aspect of corporate culture is practiced in a variety of ways. Disney has an annual week-long program in which executives leave their desks, put on a costume, and literally get close to the customer. In addition, employees are called cast members; personnel is referred to as casting. Eight hours of training are required before ticket takers are allowed to go "on stage". Marriott is obsessed with its Guest Satisfaction Index. It is said that up until his death, Bill Marriott personally read every complaint letter than came to the head office. (Whether or not this is true is not as important as the perception by Marriott employees that it was true.) McDonald's personifies this as Quality, Service, Cleanliness, and Value (QSCV). To that company, QSCV leads to profits. Few companies include a customer impact section in employee job descriptions, yet this inclusion would stress to all employees—especially back-of-the-house ones—the importance of the guest.

Entrepreneurship—or intrapreneurship— is the ability to be big and act small at the same time. As people climb their career ladder or as companies embark into the marketplace, they take certain risks along the way. They try new things. Much of their success may be due to this tendency. There are few constraints to acting this way because the individual or the company has little to lose. It is easy to take chances. As the individual and the company grow and become more successful, they gain the material benefits of their success: new car, house, sales, profits. Now they become more conservative in their decision making. The reason? Now they have more to lose. A wrong decision here could mean a loss of position, either in the corporate hierarchy or in the marketplace. This can induce the tendency to make few if any decisions, to take few if any chances. The behavior that developed their success is changed in order to maintain that success. The result is often a decline in personal and business fortune.

The key is to encourage new ideas. Being willing to encourage ideas also means being willing to tolerate mistakes and failure. Mistakes should not be accepted or condoned; however, they must be tolerated. This may seem contradictory, but the point is that if the culture is such that employees are unwilling to try or suggest new ideas for fear they will fail and be ridiculed, the company will stagnate.

The food and beverage manager of a pier in the south of England introduced a snack menu of hot dogs and soda during the intermission of a wrestling match held weekly on the facility. Never in the years of the attraction had such a thing been tried. The first night the idea was so successful the team ran out of everything. The next morning the young manager reported to his superior that everything had sold out. Instead of giving compliments, the superior berated the food and beverage manager for lousy forecasting!

The realization that results are achieved through and by people is critical. This involves showing and meaning respect for the individual. It means the company has to be willing to spend time and money in selecting the right kind of people, training them in how best to perform, setting clear and reasonable expectations, and giving them sufficient autonomy that they can contribute to the job.

People orientation functions in several ways. First is the language that is used. Crew members work at McDonald's, cast members at Disney. Second, people-oriented companies view themselves as an extended family, which includes the employees' families. We have previously mentioned a Chicago, Illinois (US) restaurateur who, recognizing the importance of the family to his Hispanic employees, encouraged them to bring their families to visit the workplace. Marriott approaches the problem of employee theft not only through a control system, but also by encouraging a feeling of family such that employees would not steal from each other. A third point concerns the chain of command. While the formal chain of command is used for major decisions, informality marks day-to-day communication.

Training is intensive at people-oriented companies. A well-constructed training program tells the employee that the job being performed is important enough to require extensive employee preparation, and in turn that the employee chosen to perform it also must be important. The reverse, of course, is also true. When a new employee is merely told to "observe Fred" for two hours as the extent of the training program, we are giving signals about the unimportance of the job and the person performing it.

Training begins with the selection and socialization of new employees. The intensity of the recruitment process indicates to new employees how important they and the job they perform are to the company.

People orientation also manifests itself in the amount of information shared by management. Typically, employees are excluded from receiving information on the company's financial condition. In part this is due to the competitive nature of US society. If financial information is given to employees, the figures may end up in the hands of the competition. Another reason is that if we tell the employees how well we are doing and how much they contribute to that, they will want to share in the rewards! (Of course, if they really do contribute all that much to the success of the property, perhaps they should share in its success.) The companies that have tried sharing information feel that any loss of information to the competition is more than compensated for by the increased employee loyalty that comes from feeling trusted.

Information is not given to employees to berate them for doing a poor job. Control comes from peer pressure. It is fairly easy to shield poor performance from the boss—but not from one's peers. Internal competition for results is encouraged. A danger lies in that too much internal competition can result in a situation in which an individual schemes to look good at the expense of the operation. The key is to identify very carefully what is to be used to measure success.

Top companies figure out what they stand for, communicate that to their public, and live it. All policies and actions are based on this set of beliefs or values. Companies that performed better financially had values that were qualitative and less precise, rather than quantitative and exact.

The Peters and Waterman research identified common characteristics of these company values. First, profit comes from doing certain things well, rather than being an end in itself.

The values chosen also are successfully aimed at inspiring employees in the lower ranks of the organization.

It is further noted that businesses are a combination of contradictions. At any one time, there are pressures to provide service while cutting costs, to be operations oriented but also innovative, to be formal while encouraging informality, and to exhibit control while stressing the importance of people. The values that seem to work best are those where management comes down strongly on one side of these contradictions. Narrow in scope, these values include a belief:

Restaurant Services Inc, a Seattle-based restaurant company in the US state of Washington, took out a two-page newspaper ad, signed by its employees, managers, and purveyors, to let the public know what its values were. They were expressed as Our Tenets of Excellence:

This is significant in that the company is going on record as stating its values to employees and customers alike. Such a public display not only helps convince the public that the company is serious, but also puts pressure on management to live up to them.

Values tend to be laid down by and through the personality and actions of a leader.

The more successful operations expand into areas related to their basic expertise. "A business is a business is a business" is not true. Many conglomerates have found, to their distress, that moving into an area they know little about can court disaster. This was the case when Heublein acquired Kentucky Fried Chicken, an American fast food chain. They found that the liquor business, in which product quality can be controlled at the factory, is very different from the restaurant business, in which quality control is important at each of the "mini-factories" where the food is produced and consumed.

A successful culture depends in part on a relatively simple organization with a small corporate staff. Authority is pushed down to the operating level, where the action is. IBM (International Business Machines) located in the United States, has a policy of a three-year staff rotation. Those in staff positions know that very soon they will be out in the field working under the policies they helped develop. This has turned out to be a marvelous system of checks and balances.

To meet the needs for efficiency around the basics, regular innovation, and response to major threats, Peters and Waterman suggest a three-pillar approach to organizational design. The pillar of stability seeks to establish a simple form and develop broad, underlying values for the company.

The second pillar, entrepreneurship, focuses on developing new activities into new, self-contained divisions.

The so-called habit-breaking pillar seeks to encourage a willingness to reorganize regularly on a temporary basis to take advantage of trends in the marketplace or particular management strengths.

The future-oriented company culture exhibits at one and the same time a tight central direction while maximizing individual autonomy. Certain things are controlled very rigidly. These include the values the company lives by, an action focus, regular communication with rapid feedback, peer pressure, concise paperwork, and a focus on the outside—on the customer.

Holding firm to these ideas allows the organization to encourage, if not demand, looseness in other areas. Experimentation is encouraged, as is informal communication. Positive reinforcement is given and maximum individual autonomy sought.

Being both loose and tight means knowing what to control and what to let go. This framework, which provides employees with security, also gives them the confidence to become innovative and help move the company forward.