While we all have an understanding of the leader’s role in setting direction and strategy development, but the complex role of culture, which is equally important, is much more elusive. Strategy is set in motion by the leader and is the formal logic for the company’s goals. It provides clarity and focus for collective action and decision-making. It relies on plans and sets of choices to mobilize people.
Culture is more elusive because it is the tacit order of an organization: it shapes people’s attitudes and behaviors in wide-ranging and durable ways. Cultural norms define what is encouraged, discouraged, accepted or rejected within the groups.
In their article on corporate culture, “The Leader’s Guide to Corporate Culture: How to Manage the Eight Critical Elements of Organizational Life” (Harvard Business Review, January/February, 2018), Groysberg, Lee, Price, and Cheng identified four attributes of culture. Culture is:
- Shared: culture is a group phenomenon
- Pervasive: culture permeates multiple levels and applies broadly
- Enduring: culture can direct people’s thoughts and actions over the long term
- Implicit: culture acts as a silent knowledge; people recognize and respond to it.
But why does culture matter so much? Culture is critical to building emotional support and buy-in to accomplishing corporate direction, and it is particularly important when direction, strategy and culture all need to change. The business literature is filled with examples of how organizations with uninformed leaderships have, failed miserably on major change initiatives because senior management misread the importance of culture.
A hypothetical example illustrates the point. Company “X” has had a magical run for the last 25 years. Although every year hasn’t been successful most of them have. The company has a culture of hiring bright people who are pleasant, have good interpersonal skills, are collegial, and work hard in a 9-to-5 fashion (no weekend work). Staff members are concerned about developing new products and lines of business and they know there is a long ramp-up time because high quality has always been one of the company’s hallmarks. There has also been a long tradition of voluntarism among the staff and a history of a maximum of ½ day during the business week for volunteering. In this culture people have been hired and remain for long periods of time. Compensation and retirement benefits have always been plentiful.
Unfortunately, over time foreign competition has begun to intervene and it is now a serious threat. The old senior staff have been eased into retirement and a new, aggressive, senior management has been hired. It has been made clear that the company’s strategy will change as will working conditions. The new philosophy calls for products that are cheaper, quicker to produce, and less quality oriented. Some downsizing has occurred and the pressure to do more with less has taken hold. An announcement has been made that bonuses will be frozen and employees will have to pay for a greater portion of their benefit package. All directives are coming from the top down and there is no effort to take time with staff to discuss the reasons this is all happening. This is what can happen with a new management that isn’t aware, or doesn’t care, about the power and dynamics of company culture. Revolt comes silently when key staff members retire or leave, leadership voids cause slippage at all levels, staff members give less effort than previously because they’re not committed, and some people are openly hostile. Then, as word is spread through social media, the complaints from customers begin. Bad press directly impacts results.
The best leaders are aware of the importance of culture to success. They understand that, when aligned with strategy and leadership, culture drives positive results. The first step good management takes before making any significant change to strategy or direction is to gain a clear understanding of the current culture. This is true for current management as well as new management. The authors suggest one way of studying culture: Look at the following eight culture characteristics and ask each person to rank order the top 3 or 4. Typically, melding the top 3 or 4 characteristics will incorporate the major aspects of your culture. As employees at all levels of the organization are asked for their opinions a consensus is drawn. The greater the consistency of responses the greater your confidence in the outcome. The eight key culture characteristics are:
- Caring: Focuses on warm, sincere, relationships and mutual trust–work environments are warm, collaborative, and welcoming places where people help and support one another (Example: Disney)
- Purpose: Exemplified by idealism and altruism–work environments are tolerant, compassionate places where people try to do good for the long-term future of the world (Example: Red Cross)
- Learning: Characterized by exploration, expansiveness and creativity–work environments are inventive and open-minded places where people spark new ideas and explore alternatives (Example: Tesla)
- Enjoyment: Expressed through fun and excitement–work environments are light-hearted places where people tend to do what makes them happy (Example: Zappos)
- Results: Characterized by achievement and winning–work environments are outcome-oriented and merit-based places where people aspire to achieve top performance (Example: Goldman Sachs)
- Authority: Defined by strength, decisiveness and boldness–work environments are competitive places where people strive to gain personal advantage-leadership emphasizes confidence and dominance (Example: Huawei Technologies)
- Safety: Defined by planning, caution, and preparedness–work environments are predictable places where people are risk-conscious and think things through carefully (Example: Lloyd’s of London)
- Order: Focused on respect, structure, and shared norms–work environments are methodical places where people tend to play by the rules and want to fit in (Example: Security and Exchange Commission).
Once a clear picture of the current culture is identified, senior management will be in a position to determine whether changes are needed for future success. In today’s fast paced business climate there are few companies that do not need some degree of change. If management determines that changes in direction, strategy and culture are needed for short or long-term success, then realistic goals and timelines need to be established. One of the hardest things to remember is that changes in direction and strategy can take time but changes in culture, involving the emotional and social dynamics of people in the organization, will take longer.
The authors suggest four practices that lead to successful culture change. They are:
- Articulate the aspiration: Creating a new culture should begin with a framework for discussing the current culture and the need for change. Leaders must understand what outcomes the culture produces and how it does or doesn’t align with current and anticipated market and business conditions. Change might be framed in terms of real and present business challenges and opportunities as well as aspirations and trends. Tangible problems help people better understand and connect to the need for change.
- Select and develop leaders who align with the target culture: Incumbent leaders who are unsupportive of desired change can be engaged and re-energized through training and education. Culture change can, and does, lead to turnover. Candidates for recruitment should be evaluated on their alignment with the target.
- Use organizational conversations about culture to underscore the importance of change: To shift the shared norms, beliefs, and implicit understandings within an organization, colleagues can talk one another through the change. Various kinds of organizational conversations, such as road shows, listening tours, and structured group discussion, can support change.
- Reinforce the desired change through organizational design: When a company’s structures, systems, and processes are aligned and support the aspirational culture and strategy, instigating new culture styles and behaviors will become far easier.
In summary, when aligned with strategy and leadership, a strong culture drives positive organizational outcome. Leaders should always be aware of the culture that operates in their organization—whether that organization is a Fortune 500 company—or a department within a larger entity. Then when change is needed, the leader can define an aspirational target culture, and then implement the four practices that lead to successful culture change.