The best executive coaching lesson I ever received came at an unexpected time.  One morning while I was sitting at my desk, a new supervisor knocked on my door.  I had charged this supervisor with the task of developing a new department in our manufacturing facility.  His department was going to be a key to our growth going forward.

This supervisor had the following request:  He wanted to terminate a long-term employee in his area.  I listened intently as he described an employee with incredible talent, who worked daily to undermine what he was trying to do with a bad attitude and bad ideas.

I called Human Resources and asked to see this employee’s file. I took out the most recent performance review which had been delivered to the employee only three weeks earlier.  I flipped to the back page of the document and saw the rating “Meeting Expectations.”  Perfect!  I was ready with Supervisor Training 101:  “Why are we telling an employee that they are meeting expectations, when you are asking to terminate him 3 weeks later?”

Instead, I got a humbling lesson as the leader of our organization.  The supervisor took the review, flipped through the scores and showed me numerous ratings of 1 on a 5 point scale.  Teamwork, On-Boarding New Employees, Attitude, Willingness to Accept Change and Initiative, all rated 1’s.  I looked at the back page again and the overall score was 3.09 – Meeting Expectations.

How was this possible?  Our organization was using performance review software that was telling an employee they were Meeting Expectations when they clearly weren’t?

I apologized to the supervisor for putting him in a situation that was unexplainable.  I told him that we weren’t going to terminate the employee today, but something clearly had to change.  I needed some time to think.

I felt that had failed, but I was about to discover the single most important thing I would ever learn about management, leading people and building culture.

Things Looked Good….. On the Surface

I had been the 9th employee hired at our company when it was doing $900,000 in annual revenue.  I started in equipment maintenance and ended up spending most of my first 11 years in sales.  It was an awesome time for everyone involved in our organization.  We grew to nearly 80 employees and almost $11 million in sales.  I worked with great people and everyone was contributing to our success.  I spent a lot of nights in hotels around the mid-west, while the folks back at the plant consistently made good on the promises I gave to clients.

As I transitioned from the position of Sales Manager to the duties of President, the culture at our company was starting to feel off to me.   Things were great on the surface.  We were moving into a new facility, we were hiring, growing sales and hitting earnings out of the park… but long-term employees were telling me things I didn’t like hearing.  “There is a growing lack of accountability.”  “Work wasn’t as fun as it used to be.”  “Weren’t things great at the beginning, back when we were a smaller group?”  I sensed these changes too, but thought they were just part of getting bigger.

My Mistake

After my supervisor left my office I asked our Human Resources manager to see performance reviews for every person in the entire company.  Sure enough, every single review said “Meeting Expectations.”

As I thought about each individual person in our organization, I knew that wasn’t true. We had some outstanding employees that I couldn’t live without and some that needed to improve their results.  We had hired some skilled people along the way that did not fit with the core values of our company.  We had promoted some long-time employees to new roles and they weren’t getting the job done.

When we were a smaller company, we had a great core group of employees that naturally produced accountability, purpose and unity.  Our core values existed in each of us and we lived them every day in how we conducted ourselves at work and treated each other.  Everyone produced results in their positions.  If you didn’t it was on display and there was no way you were going to let everyone down.

As we grew, our focus had turned to hiring rapidly, new equipment purchases, insurance plans, and managing growth.  Our core values had moved to our conference room wall and weren’t being effectively communicated to new employees who came from different organizations.  We weren’t consistently holding everyone accountable to the results required by their positions.

To address these situations we were developing new policies and procedures.  We were applying them to the entire organization, even though most people were doing a great job.  We improved our employee benefits, focused on team building and increased the number of company events.  We had an awesome holiday party, a massive picnic, trips to water and amusement parks, football tickets and shifted to a more flexible schedule.  As President I had an open door policy.  I spent plenty of time out of my office and on the plant floor.

Despite all our efforts our culture was slipping.

The Solution

The changes we could feel in our culture hadn’t happened overnight.  They had been building for a couple of years.  All of the comments I was hearing about accountability, wanting to go back to what we were and not feeling like a family anymore all started to make perfect sense.

I realized that the health of any organization’s culture was not determined by employee benefits, company events or team building exercises.  The health of a culture is determined by how well people are living the organization’s core values and how well each person is producing results.

To fix our culture we needed to return to what made us successful in the beginning.  We needed every single person in our company to be doing both things:

1. Working with the core values of our organization in mind

2. Producing the results required by their position

Culture Reviews

We junked our performance review software the next day and we built a new system for culture reviews.  Culture reviews are based on the idea that every person should be rated on their contribution to culture.

To be successful in our organization going forward you had to make a positive contribution to culture by living our core values and producing results.  If you weren’t doing both things, you were hurting our culture and were told exactly what needed to change.

The employees that were making positive contributions to culture were rewarded and over time became the leaders in their areas.  The employees that were damaging our culture either made changes or left our organization.  We started hiring people based on their cultural fit.  Our culture was clearly defined and our expectations were no longer ambiguous.

8 Years Later

During the next 8 years our company navigated through two recessions, including the 2008 financial crisis.  Our manufacturing technology became a commodity process and we were forced to evolve in to a contract manufacturer of steel products.  Over 50 companies in the small state of Iowa were offering our exact services.  Our competitors had comparable facilities, bought the same manufacturing equipment, offered comparable pay and competitive benefits packages.

Yet, our company didn’t produce commodity results.  Our revenue grew from $11 million to $35 million.  We were in the top 1% for our industry in profitability and sales per employee according to RMA.  We hired over 100 new employees and kept turnover at less than 2% annually (vs. over 35% at our local competitors).  We were ranked as the #1 overall supplier by two Fortune 100 companies.

Our culture was the reason for our success.  With everyone living our core values and producing results we formed a bond that could not be copied or defeated.  When we stopped reviewing performance and started rewarding culture our business took care of itself.

Your Culture

The foundation of executive coaching is how to build your organizational culture.  There is nothing you can do that will have a larger impact on your long-term success as an executive, the health of your organization and the happiness of your employees.

You know what you want your organization’s culture to look like.  Start taking action today to move your organization towards your best culture.

We offer a talk unlike anything your team has ever heard called the Best Culture Wins. Learn more!