Why Corporate Culture Matters
What is corporate culture, really?
If the old intelligence was WHAT you did (strategy, technology, products); the new intelligence is HOW you do what you do. In a knowledge-based economy, the simplest definition of culture is how you get things done … or more to the point, how you get things done that either accelerates – or hinders – achievement of your strategy and creates competitive advantage.
In the past, corporate culture lived in the realm of “morale” and feel-good fluff. Even today, many leaders who believe in its importance still view it as a “bolt-on” activity best done by HR. Or maybe you’re one of the leaders who see it as a really important element of the business, but lack a clear process and link to performance. Thus, it never elevates to top priority for your stakeholders. You may get it. But when times are tough, it’s one of those ‘nice to have’ line items … aka, cut.
Why do senior executives have the least accurate view of culture?
Most senior leaders are insulated from day to day operations and customer interactions in their organization. The culture takes place in the way decisions are made and problems are solve, on the front lines, every day. As leaders ascend to the top of the organization, they are responsible for a bigger landscape and broader view: More strategic, longer term focus. By necessity, they are often preoccupied with issues and conversations that have little to do with what’s happening in the business right now. In our experience performing corporate culture assessments, the senior executive team is usually able to pinpoint the broadest issues the organization is struggling with, but often are not in touch with the true “culture pulse” – the issues that keep people from performing their best work every day.
Why is corporate culture such a critical asset?
As the world moves from the “industrial age” to the “knowledge age” and everything goes global, the rules of business have changed. The intangible elements in organizations are the final frontier — knowledge, people, teams. How they are organized, solve problems, and empowered to make decisions. We’ve outgrown the structures and systems that worked in the Industrial Age: Efficiency in operations doesn’t come from great technology. It comes from how people work together across the business to align themselves, serve customers, and act with greater speed and efficiency.
In the complex arena of business today, culture change is the new reengineering. Leaving it to chance is a dangerously naïve and outdated viewpoint. You need only to turn to dozens of examples of winners vs. losers in the same industry – where the playing field is level but one company goes beyond luck and strategy to leverage the intangibles: Walmart didn’t beat Kmart only on low-cost strategy. Southwest Airlines may be one of the most famous examples of the power of culture: Yes, they have a great strategy and business model … but the big airlines can’t begin to compete with the power of that corporate culture even while they’re trying to copy the efficient, effective business model. And fuel hedging aside, they
Why is corporate culture important to me?
Your corporate culture is either helping or hindering your business outcomes.
The question is not whether corporate culture is important, or even whether it’s good.
The question is whether your business culture is being managed consciously and effectively to align with your strategy.
Creating cost efficiencies and streamlining operations remains a top priority for senior executives. But this is only one side of the equation – being efficient alone does not drive growth. According to a global study by Mercer-Delta Consulting top concern of 223 leaders surveyed in 2005 are “increased competitive pressures” (83%) “responding to rapidly changing market conditions (67%), “failure to innovate” (60%), and “satisfying customer expectations” (52%). They further go on to report that today’s organizations are not investing in developing multi-skilled leaders who can effectively adapt to these changes in globalization and increased competitive pressure.
Here are a few CEO views on organizational culture:
Dick Clark, CEO, Merck:
“Culture eats strategy for lunch.”
Jack Welch, after he masterminded GE’s corporate transformation:
“No company can sustain high productivity without culture change.”
[resulting in stock price growth of 30% for 20+ years]
Dave Roberts, Barclays:
Culture and capability is the only source of sustainable corporate advantage.”
Sam Palmisano, IBM
“In the end, whether or not you have a values-driven culture is what makes you a winner or a loser.”
What does “aligning culture” mean versus culture change?
Aligning corporate culture to strategy and linking it to business performance is easier to explain to your stakeholders, more straightforward, and higher payoff than trying to sell a culture change process to an executive team who have never done it.
Further, culture change has been viewed as changing the organization’s DNA – a painful and often impossible process. Aligning culture with strategy makes it feel more actionable – and this is the key to balancing seemingly impossible paradoxes in your business:
- Short-term performance v. long-term sustainability;
- Centralized command v. employee engagement;
- Being adaptive and flexible vs. being consistent;
- Quality, speed, value, and price.
How am I supposed to work on “corporate culture change” along with my existing priorities?
Culture change is not a “bolt-on” project, it’s about ensuring HOW you work is in alignment with the behaviors that are most conducive to change and growth. Most of our clients find significant gains in productivity, freeing up time, energy and resources in this alignment process. Ultimately, most companies need to NARROW to fewer areas of focus that have a bigger impact – that’s the outcome of aligning corporate culture with the vision and strategy.
How can building an adaptive corporate culture help people be more productive?
If you are serious about culture change, you need to develop a cadre of leaders, change agents, and supporters who become “culture champions” for the new ways of working. These people serve as a daily reminder and role model to help the organization see what’s possible, change outdated habits, and build excitement toward a common vision and strategy. In most of the organizations we work with, there is lack of clarity about strategy, the pathway to achieving it, and the priorities leadership is committed to in getting there. Applying our methodology will make it easier for you to know what to focus on and create a more balanced skill base in your people to get you there.
What is the “magic formula” for improving corporate culture?
The answer lies not in complicated theories or a one-size-fits-all prescription that works for everyone. The answer lives in a simple but profound truth we have discovered in 20 years of experience:
People don’t resist change. They resist being changed.
There are three important steps for enabling better growth through corporate culture:
- Measure it – there are sophisticated assessment tools available today that allow you to measure your culturein direct relationship to how it is driving the key performance measures in your business:
- Return on Equity, ROA, ROI
- Sales Growth and Market Value
- Customer Satisfaction
- Product and service innovation
- Employee satisfaction
- Identify What to Change – Pinpoint behaviors that are supporting or hindering your strategy – this is how you preserve the cultural DNA that is part of who you are should not change, versus the behaviors and systems for how people work that no longer serve your needs and goals.
- Make Culture a Strategy – like any strategic focus, culture needs to be seen as a business process for it to become an accelerator for your strategy. If you make it a visible part of your management team’s conversation, it receives the proper attention and weight.
What is the single most critical success factor? We have spent our entire careers successfully teaching organizations and leaders how to implement culture change. What makes or breaks it – every single time – is whether there is a committed leader at the top who understands the importance of corporate culture, will learn their role as a steward of it, and spends time reinforcing the culture they want to see – versus expecting change to happen through a quick speech or hand-off to HR.
How does culture actually impact business performance?
See “Culture Link to Performance”
Especially during periods of change, your corporate culture may be the single most important leverage point in your business. It is the foundation on which everything takes hold and sticks” – or doesn’t – whether that’s product innovation, operational efficiency, customer/relationship management, implementation of technology, or global expansion.
If you don’t believe culture matters, wait to see if your competition figures it out first.
How is Your Culture Doing? Some Free Resources …
FREE Culture Self-Assessment
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