Supply Chain Culture Counts

As supply chain CEOs, we are responsible not only for the financial success of our operations, but also for our company’s long-term sustainability. Successful leaders understand that a company’s culture is just as important to the bottom line as warehouse technology, distribution tools and operations systems. A strong culture results in measurable improvements like increased productivity, better service quality, decreased workplace injuries and lower employee turnover.

Labor represents two-thirds of the cost of operating a warehouse. While processes and systems are critical to a warehouse and supply chain operation, the employees and their work environment should be of equal consideration. Culture starts at the top with the core values of the CEO and company leadership, and works its way across the organization, and ultimately drives performance. What better way to invest in your company than to strengthen your company culture?

Bottom-Line Impact

Culture has a significant impact on the bottom line. A 2013 Gallup Report showed that “when organizations successfully engage their customers and their employees, they experience a 240% boost in performance-related business outcomes compared with an organization with neither engaged employees nor engaged customers.” (Source: 2013 Gallup Report: State of the American Workplace: Employee Engagement Insights for U.S. Business Leaders.)

Direct results from an engaged workforce can include improved service quality, increased productivity decreased on-the-job injuries, and improved employee retention levels.

Further, organizations with an average of 9.3 engaged employees for every actively disengaged employee experienced 147% higher earnings per share (EPS) compared with their competition in 2011-2012. In contrast, those with an average of 2.6 engaged employees for every actively disengaged employee experienced 2% lower EPS compared with their competition during that same time period. Gallup estimates that active disengagement costs the U.S. $450 billion to $550 billion per year.

A values-based company culture creates a sustainable platform for long-term performance. In fact, a recent internal study directly correlates a healthy culture to specific performance measures including a 79% increase in overall safety, 20% increase in productivity, 18% cost savings, and 10% decreased turnover rate. (Source: Statistics from recent cultural assessment of LEGACY facility operations over a four-year period.)

As a foundation for improved performance, a strong company culture results in a workforce that is engaged, productive, empowered, and proactive. Culture also determines how well employees interact with each other and outside vendors, whether they are adaptive or resistant to change, and improves the likelihood they will go above and beyond for their customers.

Culture is not just a philosophy; it is a structured system that can be purposefully implemented and analytically evaluated.

Here’s how:

1. Define & Communicate Core Values

 Core values are a set of beliefs fundamental to the company’s mission. These beliefs set the professional tone and general attitudes for how employees make decisions and behave. These values should be known by every employee, and are the basis of a culture that will drive performance. This is achieved in a cascade effect from the top down, through leadership communications and actions across the entire organization.

2. Align & Reinforce Core Values

Most, if not all companies have core values. The successful ones embrace them as the principles that guide behavior. Values will establish the culture of your company — culture that is reflected in specific behaviors, and trickles down into workplace attitude, work ethic, and daily routine, ultimately resulting in a higher productivity and increased job satisfaction.

Values-based culture drives performance.

Core values and behaviors can be incorporated into the daily activities of all employees, and built into employee performance programs. Reinforcing core values also extends outside the organization to potential clients and vendors. It is important to choose an outsourcing partner or client whose values and culture align with your own.

This results in higher engagement and lower entropy (in a supply chain context, entropy refers to the waste, or disorder, in an inefficient process). Having engaged employees and value-aligned partners ensures all stakeholders are working toward common goals- along the way achieving more streamlined processes, reduction of wasted energy and resources, and improvement of overall productivity — and ultimately lower supply chain costs.

3. Measure the Integration

The key to building company culture is specific and measurable behaviors. A cultural assessment will look at cultural variables including entropy, engagement and leadership; operationally, it may be measured by picks per hour, productivity and accuracy.

Measurement illustrates opportunity for improvement. By evaluating cultural and operational metrics, you are able to correlate employee behavior and supply chain performance. When employees have clarity on what is expected, and visibility to their performance, they are empowered to make positive changes.

4. Build Action Plans

Building a values-based culture requires taking action. Adherence to consistent metrics reveals best practices that help shape effective action plans. Plans must clearly define expectations, accountability and metrics for success.

By taking definitive action around the results of your assessments, you will reinforce a commitment to your values and cultivate a culture of performance. It is essential to hold regular meetings with leadership and teams to communicate issues and track performance.

Investing resources to manage the overall process and evaluate the metrics will prove the results of your values-based, performance-driven culture.

Finding Success Through a Values-based Culture Model

Workplace culture is more than bullet points on a company T-shirt. In strong companies, it is a discipline that is highly structured and repeatedly measured. By aligning core values to behaviors, measuring the integration and building action plans, you will see a direct correlation to improving your bottom line.

Ron Cain is chief executive officer and chairman of the board for LEGACY Supply Chain Services. He has over 30 years of experience in high-performing logistics management, particularly in building successful, performance-driven workforces. Cain received a bachelor degree in business from Northeastern University, and an executive master of business administration degree from the Harvard Business School.  Cain also holds a supply chain logistics certification from the Sloan School of Management at the Massachusetts Institute of Technology and a certification in logistics network planning from Pennsylvania State University.