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Structure drives culture in your business

Recently I heard a statement that gave me pause. It was spoken by a man named Safi Bahcall, a second-generation physicist, biotech entrepreneur, and author. Bahcall said:

Structure drives culture.

The subject of culture is ubiquitous in the workplace these days, and yet it’s not always clearly defined, and often we can find examples of where behaviors are not aligned with a stated culture.

In the context of a workplace, the best definition of culture that I have found is:

…the set of shared attitudes, values, goals, and practices that characterizes an institution or organization.

I can still remember when I first came to Keller Williams, and the culture was palpable. Shared attitudes, values, goals and practices. I saw this in the language of the agents and leadership, the continual reiteration of certain concepts and practices, and the general tenor of the people throughout the organization.

And I assumed that what make Keller Williams what it is had to do with this culture. And I assumed that it was because of who these people are.

From those assumptions, I extrapolated that only a certain kind of person will thrive in this environment. In other words, you must be of the culture in order to fit with the culture.

Today I realized that I was at least partly (if not mostly) incorrect on this.

People act on incentives

If I ask you to pack up my house for me in preparation for a move, what are the odds that you’ll tell me you’re busy and can’t do it?

(In addition to possibly wondering what kind of jerk I am that I can’t pack up my own dang house?)

Yet if I tell you that I’ll pay you $5,000 to pack up my house into the POD sitting out front, perhaps you’d be more inclined to consider it? Especially if you needed money?

People act on incentives.

This is not to say that nobody ever does anything out the of the goodness of their heart – certainly lots of us do, yet at the end of the day, we are also very incentive-driven.

In the interview with Safi Bahcall, Tim Ferriss told a story about some woman who went to an event where a “mentalist” was curing people of their phobias. She went up on stage with him to be cured of her phobia of heights. The specialist did his thing with her, and then brought out a big ladder and had her climb to the top and back down, which she did.

When she had completed that, he asked her how she felt. And her reply was:

I feel great! My husband told me he’d give me $100 if I climbed to the top of that ladder!

Incentives matter.

Structure drives culture

When we look at the culture of an organization, attitudes, values, goals and practices, what shows up most clearly is the practices. That is to say, peoples behaviors. Attitudes, values and goals all lead up to the way that people in a group behave. But this behavior is ALSO driven by the incentive structure of the organization.

Bahcall told a story of a small design office which is part of a larger, international firm:

This particular office has three vice presidents and thirty associates. It is determined that a new vice president role will be added, and someone from the associate pool will likely be promoted into this role.

There are two ways this process could go.

One:

The three vice presidents are responsible for hiring for the new role.

What happens in this case?

The associates who want the promotion are going spend their time sucking up to the vice presidents, possibly backstabbing their colleagues, and basically jockeying for the role.

Two:

Leaders from the larger organization decide that the vice presidents will not do the hiring. Instead, they fly someone in from Denmark who spends two weeks interviewing everyone – the vice presidents, the associates, the associates clients, both internal and external, and developing an overall picture of who the best candidates are, and then making a selection.

What are the differences in outcomes in these two cases?

In the first case, the political behavior of the associates represents lost productivity, effectiveness and possibly lowered morale in the office. I would suspect also that the effectiveness of whoever is selected will also be degraded as a result.

In the second case, the associates will each work hard (or harder) to serve their clients and their colleagues well, because all of these people will be interviewed with an eye toward painting the most accurate picture of an associates’ capabilities and leadership.

Which is better for the company?

Clearly number two.

Pay attention to the incentive structure

In evaluating the culture of an organization, we must look at the attitudes, values, goals and behaviors, AND ask ourselves how the structure of incentives is driving this framework.

At Keller Williams, a principle incentive structure is the matter of profit share. When you (as a member of the organization) bring someone into our company AND that person contributes to the profitability of the office, the owner of that office shares a part of that profit with you. This incentive causes many people in our company to behave in ways that grow the businesses. It’s a win-win.

If you own a business or lead an organization, have you thought about how your incentive structure drives your business culture?

It’s got to be more than just words on a wall. The way you incentivize your people will either drive them to participate in the growth of your business, or drive them to compete internally for control, or, at worst, drive them away when they find something else that incentivizes them more.

How will your structure drive your culture?

 

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