We’ve all heard the old adage erroneously attributed to management guru Peter Drucker that “culture eats strategy for breakfast.” In fact, many studies do show a direct correlation between organizational culture and business performance. But if culture is more important than strategy, why are so many resources expended creating strategy while relatively few are spent on organizational culture? If organizational culture is the ‘secret sauce’ of successful businesses like Southwest, Starbucks, Nordstrom, and Ritz Carlton, why aren’t more companies investing in their culture?
One hypothesis is that since culture isn’t measured on financial statements, it’s not considered important. You could argue that goodwill on the balance sheet is a way to measure culture; however this metric only tends to be important when valuing a company for sale. If you’re not interested in buying or selling companies, this metric is largely ignored. Strategy isn’t measured on the financial statements either but a lot time, effort and money goes into strategy development.
So, why do many companies focus (and spend money) on business strategy over organizational culture? I think the answer is relatively simple; to effectively address strategy, a leader needs the right tools, metrics and information. But to effectively address culture, a leader needs to confront personal, intimate and delicate subjects like personality, psychology, values and behaviors.
There are many definitions of organizational culture, but the one I find most compelling is the one proffered by Harvard Business School’s John Kotter: “Culture consists of group norms of behavior and the underlying shared values that help keep those norms in place.” Whether they do so intentionally or not, the top leaders of an organization determine these behavioral norms and values. They determine them, not by articulating a set of values they post on office walls and websites, but by their own personal leadership styles – a term used to encapsulate behaviors like how they treat others, react to information, communicate and show emotion.
The incumbent leaders’ behaviors set the tone, and therefore the culture of their organization. To be clear, even when an organizational culture is attributed to the mores and conduct of the company’s founders, these founding values are activated and sustained by the current leadership team (who were likely chosen as leaders because their values and behaviors aligned with those of the founders and prior leaders). When culture negatively impacts business performance, the fastest and most effective way to change culture is to change leadership.
I’ve worked with many leaders who attributed organizational problems like poor customer service and inefficient processes to organizational culture issues, and became motivated to change it. Yet, I advised them not to spend money on costly culture assessments, employee focus groups and culture change programs unless they were willing to hold a mirror up to themselves, commit to changing their behavior and openly sharing their desire and intent to change with their employees. When leaders are serious about addressing organizational culture, they frankly have no choice but to get serious about changing leadership behavior – their own and others. This requires introspection, humility and vulnerability – not the characteristics we typically associate with titans of industry.
For leaders who are ready and willing to make a change in their leadership style, I recommend:
• Get to know yourself through data. There are many diagnostic assessments available to help leaders understand their leadership styles and how others view them. One of the best is the Herrmann Brain Dominance Instrument (HBDI). Developed by a GE executive, HBDI builds on Roger Sperry’s ‘right brain, left brain’ research by identifying four distinct thinking preferences that influence our decision-making, communication, relationships, interests and problem solving techniques.
• Get to know your leadership team. Since business is a team sport, it’s not enough to focus on yourself. One must also understand the leadership styles of their direct reports and run large parts of the organization. In our consulting projects, we often recommend that entire leadership teams take the HBDI to assess and address their own team culture, which drives the culture of the entire organization.
• Go public. One of the most powerful examples of culture change leadership I’ve seen in my career was a group of executives that agreed to be videotaped discussing how they needed to personally change their leadership style to successfully execute a merger integration plan. They broadcast the video so every person in the organization could witness the commitments they were making to change their behaviors. They asked managers and employees to help keep them accountable and challenged everyone in the merging companies to identify how they personally needed to change to make the merger work.
• Align culture with business strategy. The organizational culture must drive behaviors that support what the business wants to accomplish in the marketplace. If you want to be known as an innovator in the marketplace, you have to foster creativity and innovation in the workplace – this requires a more visionary, imaginative, integrative leadership style and less planned, detailed and analytical behavior from leaders. Culture and strategy must be addressed together, with the business strategy providing the direction and the culture providing the fuel required to achieve results.
When leaders understand the link between their personal leadership styles and the organizational culture they foster, there’s an amazing opportunity for organizational transformation and personal growth. Those leaders who have the courage to make and communicate their personal change journey with others find it liberating, contagious and profitable. Those who don’t typically move on to other positions where they can focus solely on corporate strategy.
Craig Berkowitch is ArchPoint’s Vice President of Operations and Consulting Partner who specializes in organizational transformation, change management and culture. He can be reached at craig.berkowitch@archpointgroup.com