Organizational culture matters! It can make or break your company
An organization’s culture may be one of its strongest assets or its biggest liability. In fact, it has been argued that organizations that have a rare and hard-to-imitate culture enjoy a competitive advantage. Worldwide business leaders identified corporate culture to be as important as corporate strategy for business success. This comes as no surprise to leaders of successful businesses, who are quick to attribute their company’s success to their organization’s culture.
Here are quotes from a few business leaders of successful companies:
“Everything I do is a reinforcement, or not, of what we want to have happen culturally. …You cannot delegate culture.” - Steve Ballmer, Former-Microsoft CEO
“If you get the culture right, most of the other stuff will just take care of itself.” - Tony Hsieh, Founder and CEO of Zappos.com
“If you don’t maintain Southwest’s culture, you don’t have anything special.” - Colleen Barrett, Former President Southwest Airlines
“Fixing the culture is the most critical and most difficult part of corporate transformation.” – Lou Gerstner, retired CEO of IBM
So, what is this fuzzy “culture thing,” really?
An organization’s culture is – its self-sustaining patterns of behaving, feeling, thinking, and believing – that determine “how we do things around here.” Self-sustaining because culture has inertia – without a really strong persistent force, it won’t change its course. Patterns because, it is ingrained, repetitive elements that make up culture. Feeling, thinking, and believing because, both emotional as well as the rational side matter. Behaving because, what people feel, think and believe is reflected in – and shaped by – their daily behaviors.
Culture & business performance
Culture is a potential “asset” of all organizations. Studies have shown that culture correlates with high performance. It develops whether intended or unintended, actively directed, or left to happenstance. At its best, culture can be an asset that enables, energizes, and enhances human behavior – and when wisely utilized, it can accelerate and sustain business results. At its worst, culture can be a drag on productivity and emotional commitment. It can lead to underperformance and undermine long-term success. In either case, an organization’s culture can be consciously steered and influenced to either enhance the impact it has on performance or reduce the resistance it can have on behavioral change.
Company culture is at the heart of competitive advantage, because it determines how things are done and how people behave; it is the hardest thing for competitors to copy. High performers create an environment with a unique personality and soul, and with a passion for performance—so that people make the right decisions and do the right thing wherever they are in the business. Six organizational outcomes are key to high performance. High-performing organizations are:
Aligned with the company’s strategy
Capable of executing strategy with the right talent, processes and tools
Effective at making and executing critical decisions
Adaptable in the face of rapid change
Efficient in realizing the benefits of scale and scope
Engaged to go the extra mile
The first three outcomes (being aligned, capable and effective) serve as the foundation of strong business performance. Very few companies that weren’t above average or better along these dimensions demonstrated consistent business performance leadership. The last three (being adaptable, efficient and engaged) serve as accelerators, giving companies a true competitive edge, provided they put in place a solid foundation.
Culture plays a vital role in performance. Winning cultures treat performance as an explicit output and foster an environment that is conducive to generating the best possible results — not just for employees, but for customers, suppliers, and, yes, even shareholders.
Culture is just as critical as strategy and organization
How a company wins in the market is dependent on how the strategy, organization and culture are in alignment with each other. Having a coherent business strategy dictates how the company will compete in the market. Value creation choices are articulated in mission, vision, targets, and business objectives. A company’s products, services, brands, and customer relationships are part of how it will compete. They all need to be centered on a coherent set of capabilities. The company’s organization dictates how the company will “run the business?” The organization includes its structural breakdown between corporate, BU’s and support functions, roles, responsibilities, decision-rights across groups, performance measures, critical systems and processes. And finally, culture dictates how the company will energize its people, with behavioral norms, long-standing attitudes, and beliefs, lived values, accepted styles and approach, common understanding, and symbols – that are visual identifiers and stories.
Elements of a winning culture
In today’s business environment, winning cultures are comprised of two interrelated and reinforcing elements. First, every high-performing company has a unique identity—distinctive characteristics that set it apart from other organizations. These characteristics give employees a sense of meaning just from being part of the company. They also create passion for what the company does. Culture is more than just a unique identity, however. Second, the best performing companies typically display a set of performance attributes that align with the company’s strategy and reinforce the right employee behaviors. Seven such performance attributes include:
Honest. There is high integrity in all interactions, with employees, customers, suppliers, and other stakeholders;
Performance-focused. Rewards, development, and other talent-management practices are in sync with the underlying drivers of performance;
Accountable and owner-like. Roles, responsibilities, and authority all reinforce ownership over work and results;
Collaborative. There’s a recognition that the best ideas come from the exchange and sharing of ideas between individuals and teams;
Agile and adaptive. The organization is able to turn on a dime when necessary and adapt to changes in the external environment;
Innovative. Employees push the envelope in terms of new ways of thinking; and
Oriented toward winning. There is strong ambition focused on objective measures of success, either versus the competition or against some absolute standard of excellence.
Few organizations exhibit all seven of these attributes. But high-performing organizations typically spike on the three or four that are most critical to their success.
Typical culture traps and realities
Getting at the right culture is hard – and many traps must be avoided. Some of them include:
Trap 1: “The devil made me do it” – where a culture becomes the primary, all-purpose excuse for performance shortfall.
“Our process culture makes us unresponsive and inhibits innovation”
“Our engineering culture makes us over-analyze everything”
“Our bureaucratic culture derails decisions and slows execution”
The reality: Culture is rarely the only “villain,” though it is often a “partial conspirator.”
Trap 2: “Culture is the soft side of organization” – where culture change becomes mostly about persuading people to change attitudes and beliefs.
“It’s all about how people feel and how to change those feelings”
“Compelling and consistent communication will change individual values, beliefs, and actions”
“Cultural efforts are the province of HR”
The reality: You cannot delegate a cultural evolution program to HR.
Trap 3: “Blame the leader” – where the Board assumes that replacing and getting the right top leader can make everything happen.
“’We have to change the CEO”
“Bringing an outsider to shake things up is the only plan”
“Culture is the primary job of the CEO”
The reality: It takes more than a clairvoyant CEO.
Trap 4: “Black cloud to white cloud” – where changing the culture is viewed as an “all or nothing” game.
“Our culture will take at least 5 years to change”
“We need a major crisis to make that happen”
“Nothing significant can change until we change the culture (completely)”
The reality: Most situations cannot wait 5 or more years for results; key changes must often happen sooner.
Creating and maintaining the right culture is challenging, but it can be done. Leadership is key. Cultural change won't happen unless leaders themselves model the behaviors and values that define the new culture. The culture inspires people to go the extra mile–to make and execute good decisions even when nobody's looking. But fewer than 10 percent of companies actually succeed in building a winning culture, and even the ones that do so may find it hard to maintain.