This CEO Explains How Culture Can Make Or Break A Business Strategy

“It’s March of 2015, I’ve just been named CEO of a $4 billion company, and I’m out there talking to Wall Street. The company was viewed as underperforming relative to pure growth, and we were below industry levels of profitability and customer satisfaction. The investors all asked me, ‘What’s your number one priority?’ My answer was that I wanted to fix aspects of the company’s culture. As soon as I said the word’ culture,’ the Wall Street folks looked at me like I had two heads. I knew they weren’t happy, but as I tried to explain, of course, we’re going to have a new strategy, but it’s the culture that will make that strategy a reality. We have the talent; we’re just not harnessing the talent the right way.”

That’s how Mike McMullen, CEO of Agilent, opened our recent conversation. Agilent is a global leader in life sciences, diagnostics and applied markets, with revenues of $6.85 billion and approximately 18,000 employees. They spun off from Hewlett-Packard in 1999, and inspired by William Hewlett and David Packard’s legendary culture building, McMullen has spent the past eight years vigilantly building the One Agilent Culture.

As he shared with me, however, when he took over as CEO, Wall Street was skeptical of this culture stuff. “I took it on faith that this will work,” he told me. “I spent three decades at Hewlett-Packard, and I know Bill and Dave built the company with an iconic culture. I know that if we go back to some of the roots of what made Hewlett-Packard such a great company at the time and really emphasized the importance of strategy, team, and culture, we would win.”

These days, Agilent has the financials to back up the CEO’s approach. When McMullen took over as CEO in 2015, Agilent’s market cap was around $13 billion. In May of 2023, that number is over $38 billion. In 2015, their net income per share was $1.20, and now, it’s over $4. But as McMullen told me, “In 2015, all I had was a story.”

There’s a lesson for Wall Street in those numbers that culture building ultimately shows up in the financials. However, there’s also a lesson for chief executives; building a culture takes time and effort.

For instance, Leadership IQ’s study, “Why Company Values Are Falling Short,” finds employees are 115% more engaged when their organization has a well-defined set of company values, but only 33% of people believe their direct manager holds people accountable to those values. And the landmark Hiring For Attitude study discovered that a meager one-out-of-five employees feels their company always hires people who fit the company’s values.

Saying that culture is important is a far cry from exerting the effort to actually build a culture. And, as McMullen says, “You’re never done working on your culture. As proud as I am of how people feel about the company, it’s a continual effort to make sure your culture is relevant and up-to-date.”

That may mean, as Agilent discovered, that the fantastic culture you’ve built needs some updating. Says McMullen, “We had such an emphasis on our core values of trust, teamwork, respect for one another, and innovation, that I started wondering if we were almost too nice to one another.”

The only way to find out something like that is, of course, to go ask the employees living within the culture. McMullen asked 35 culture ambassadors across Agilent, “What do you like about this culture, and what would you like to see done differently?” He told me they said, “It’s been such a joy to see how differently we work together, but we could even move faster because there’s sometimes a reluctance to bring up an issue that could make someone upset.”

“So we’ve added a new value,” he notes. “We call it speaking up. We built this culture on a foundation of trust, and as long as you’re not attacking somebody personally or being disrespectful, it’s in the company’s best interest to get issues out on the table and talk them through immediately.”

Parenthetically, Agilent’s “speaking up” value is one that many more companies should adopt. A study on the risk of ignoring employee feedback discovered that only 24% of employees say that their leader always encourages and recognizes suggestions for improvement. Yet if someone works for a manager who does take those suggestions, they’re about 12 times more likely to recommend the company as a great employer.

Culture may seem fuzzy, especially to investors, but as McMullen tells me, “We’re not sitting around the table holding hands and singing Kumbaya. We’re a publicly traded company, and we have to deliver results. The issue is that there’s a way you deliver the results. And we now have the proof in our results to support that thesis.”

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