E-business Eats Up Culture

Firms' soft skills predict hard performance facts.

Six months ago, officials at Charles Schwab & Co. Inc. decided to crack the shell of an amorphous nut called corporate culture. Employees were plunked in front of a Web-based survey and grilled on why they liked working for the financial services giant. When the survey results were in, 2,900 IT staffers were sat down again at a brown-bag lunch, stuffed full of cookies and given the chance to examine managers as if they were bonbons being tested for their fillings.

It was Michelle Swenson, senior vice president of Schwabs technology division, who brought the cookies, but it was the IT pros who brought the sandwiches and questions. "We felt that if we just sent out the results, it would be hard to understand," Swenson said. "And we want everybody to understand our corporate culture: what we do, where were going and how were going to get there."

Why does Schwab care so much? Because Swenson and other managers there know that the once-hazy concept of corporate style, formerly associated mostly with things such as on-site foosball, is actually a chief predictor of e-business success. According to research from InMomentum Inc., a consultancy in Palo Alto, Calif., companies that display specific facets of corporate culture (see chart) grow 10 times faster than companies that dont. The average net sales growth for so-called high-culture companies is 141 percent, compared with 9 percent growth at "low-culture" companies, according to Lynne Waldera, CEO and president of InMomentum.

Consider the culture at Adobe Systems Inc., where Chairman and CEO John Warnock visits customer chat rooms every day, then drops by Adobes internal idea studios, where employees raise business ideas and proposals for products they want to develop. "Hes translating his direct customer experience back to the development process," Waldera said. And that culture of exchange, driven from the top, translates to financial success for the PC software maker, which had sales growth of 25 percent over the past year.

Such results, experts say, illustrate that corporate culture can either foster or kill one crucial survival trait: agility. "As we see business models and marketplaces changing so quickly, corporate culture is a very important indicator to whether a company that has the best idea in the world will be able to execute on it," said Audrey Apfel, an analyst at Gartner Group Inc., in Stamford, Conn.

By building strong loyalties among staff and customers and by having strong fiscal policies, companies with the strongest cultures are more likely to not drop as far and rebound faster during economic doldrums, Waldera said.

Thats the thinking at Schwab, where executives hope a strong corporate culture can help the company weather stormy economic times. Because of sluggish investor activity recently, Schwab officials considered and then abandoned plans to require nearly half of the companys 26,000 employees to take vacations earlier in the year to save money.

Corporate culture, as Co-CEO David Pottruck often says, is what holds a company together in tough times such as these. And Schwab does continue to grow, reporting $5.79 billion in revenue at the end of last year, up from $4.49 billion in 1999. The keys to success such as that lie in fundamentally different ways of organizing and leading a company, Waldera said.

Dynamic leadership and encouraging new ideas are two of five core philosophies that Walderas research indicates are crucial for success in the new economy.

Good companies also have to delight their employees. So San Francisco-based Schwab has quarterly and annual excellence awards, surveys, reviews of employee and customer retention rates, town hall-type forums, and regular e-meetings with Co-CEOs Schwab and Pottruck.

Last September, Schwabs all-IT-workers meeting illustrated another corporate credo: Share information. "They get straight answers back, and theyre told why decisions have been made," Swenson said. "Theres a real desire to be honest and open with employees. Its part of the culture."