“Culture eats strategy for breakfast”. It’s a quote never quite satisfactorily attributed or explained. The great Peter Drucker is often mentioned as the source, but that is widely disputed and the interpretation ranges between extremes. At one end, it could imply culture is far more important than strategy in driving corporate performance. At the other extreme, it suggests that culture can actually constrain or suffocate the strategic agenda.
WHERE STANDS CORPORATE CULTURE
There is little doubt that culture, that deeply shared and connected web of values and behavioral protocols amongst people in an organization, can make an important contribution to organizational performance. It can induce motivation and alignment, reduce frictional costs of conflicting and inappropriate behavior, and empower people to take appropriate action without guidance or instruction.
That much is intuitively obvious.
For many years the gold standard in business school teaching was the potential reputation-breaking case in the USA of Tylenol, the market leading analgesic made by Johnson and Johnson. Back in the 1980’s, seven people in the Chicago area died after taking Tylenol tablets which somehow had been laced with cyanide poison. The way J & J leaders handled the crisis with transparency and humility, even when the cause and perpetrator were unknown, remains an object lesson. The company’s chairman, James Burke, gave the credit to J & J’s “Credo” – the values and beliefs which are highly visible and meaningful. He said that in the midst of the crisis, employees just “knew what to do, and did it.”
Students of methodology, however, are taught that something may be a necessary but not sufficient condition. Culture may be a critical factor, but other things matter too. In the often-messy fields of social sciences it can be hard to separate cause and effect, causation and correlation. HR and business leaders need more than “intuitively obvious” as a guide to specific action.
PUTTING CONTEXT INTO CULTURE:
At a recent business conference on the topics of “Purpose, Passion and Performance” many speakers took these to be “intuitively obvious” features of successful enterprises. In his keynote speech, however, Gordon Hewitt sounded a note of caution. Context matters critically.
Drawing on many of the themes in our first three Blogs in this series he argued that a strong corporate “purpose” deeply embodied in corporate culture, but which is built on an “old game strategic agenda” and out of touch with “new game competitive realities” could be counterproductive; that a driving and unifying “passion” to execute the wrong value-creating agenda could accelerate the journey to “corporate hell”; and that a “performance -based” culture based on an increasingly irrelevant strategic scorecard could end up enabling the organization to “become more efficient at the wrong competitive game”, and rewarding dysfunctional behaviors.
For example, there is plenty of evidence to show that strong cultures can promote innovative activity. But what kind? And to what competitive end?
If cultural strength leads to innovative products and features, that may be insufficient in a game-changing market environment demanding innovation in business model architecture, new market creation, and the unlocking of new customer experiences. And if leadership and organizational development processes do not expose executives to these challenges, will that dilute the impact of “strong cultures”?
It is time for both HR and business leaders to get competitive context and the demands of new competitive games into the driving seat of corporate culture.
COMPETITIVE CONTEXT AND CORPORATE CULTURE
Here are five ways to get companies on a “context-rich culture” agenda and to understand why there may be a growing difference between “organizational effectiveness” and “organizational competitiveness”:-
1.CLEARLY DEFINE CORPORATE INTENT AND IT’S KEY IMPLICATIONS
Many traditional electronics companies express the intent to become a “leader in digital entertainment experiences”. These words, however, require at least a first level translation. They are capable of both old and new game interpretations. The competitive capability and cultural components which the company will need to succeed in the digital economy need highlighted in behavioural terms. Further, since the competitive environment will continue to reshape and update the specifics of digitized entertainment, this translation process must be ongoing rather than a one-time event. Digital experiences are not a fixed mathematical performance point like six sigma quality.
2. LEVERAGE DATA AND ANALYTICS
HR sits in an extremely unique situation with the ability to drive the social agenda within an organization through insightful data and smart analytics. HR leaders can contribute to the “thinking” process by leveraging external analytics that take account of the mega trends of mass customization, consumerization, speed of change and bring insights and patterns to the agenda. Modern day analytics can throw light on culture. For example if you have a culture that “takes care of people” how does this sit with the new entrants to the workplace that want to take risk and fail fast in order to learn big.
3. AVOID BEHAVIORAL GENERICS
Culture statements which stress the importance of being “customer centric” often fail to distinguish that concept from being “customer focused”. In a digital, internet savvy world they are very different concepts and demand different behaviors and values. “Customer focus” implies all employees in the firm putting the customer at the centre of everything they do. Customer centricity in a new game digital context involves getting the customer to put the firm at the centre of everything they do. This implies behaviour and values very different from customer focus on steroids.
4. ADMIT THE LIMITS OF ALL-EMBRACING CULTURE STATEMENTS
So many global companies, or ones with global aspirations have a cultural norm to be “one company”. But it depends on what you want to be one “on”. For several years outstanding research has been done on the impact of national cultural norms on executive values and behavior. The same word can have widely different meaning in different national contexts. HR and business leaders have a joint interest in facing these realities especially when different businesses in a corporate portfolio have headquarters in different geographical regions.
If a company is “global” by geographical spread of sales and assets but “multi-domestic” by strategic mind set and operations, the true meaning and limits of global values and behaviors need to be confronted. Which values truly span national frontiers?
5. ADAPT CULTURAL ANALYSIS AND AUDITS TO NEW GAME ORGANIZATIONAL REALITIES
Most strategic analysis focuses on the “how to compete” question. But it often skips over the issue of “what is the organizational unit of competition”? This is critically important to both business and HR leaders. The traditional assumption has been that the self-contained “business unit” within a corporation is the appropriate unit of analysis and action. After all the basic chemistry of competition – markets, customers, competitors, suppliers, regulators, etc – differ across the portfolio. In recent years, however, there has been much more focus on the entire enterprise as a unit of competition, and also joint ventures/strategic alliances as methods of accessing specific challenges and opportunities.However in a growing number of global industries the emergence of complex ecosystems – as opposed to conventional supply chains – is becoming a major unit of competition and value creation. This significantly different type of “extended enterprise” poses new challenges for the implanting of institutional cultures.
TO LEAVE YOU WITH
Traditional analysis of shared values and behavior usually occurs within the organizational boundaries of the firm. Of course, thoughtful firms have always tried to bring customers and suppliers into the discussion.
So what are the cultural prerequisites of a successful competitive ecosystem? Whose task is it to audit, measure, control, adapt, maneouvre the values and behavioural norms across a range of different institutions?
Disruptive competition puts even more pressure on HR and business leaders to provide a clear contextual and definitional guide to the purpose, role, meaning, measurement and scorecard of corporate culture. It’s likely that it will always contain a struggle between the elements of corporate savior and problem child, no matter how “intuitively obvious” its importance is.
The continuing danger is that the elements of corporate culture remain the “words on the wall”.
One of the tasks of leadership is to bring clarity to complex challenges, and help get the words off the wall and into context based behavior.
Otherwise, as in the lyrics of Mike Oldfield’s mystical song, they will remain the “shadow on the wall”.
Audrey and Gordon together deliver Executive Briefing Sessions and Strategy Workshops with CEOs and HR Leaders on New Game Strategy Development and Execution. Message Gordon at [email protected] or Audrey at [email protected].
Gordon Hewitt is one of the world’s most sought-after executive educators and advisors and has been on the faculty at the Ross School of Business, University of Michigan, for over two decades also consults and teaches on top corporate programmes at the Said Business School, University of Oxford. As a consultant, he has extensive experience for over 25 years of working at CEO and Board level with many global corporations.
Audrey McGuckin works with a broad spectrum of clients to solve their toughest and most complex talent and leadership challenges. Her unique background enables her to help clients realize their strategic human capital ambitions in a practical, ‘no nonsense’ way. She has an uncanny ability to interpret business strategies and unbundle these into actionable HR and Talent Strategies that deliver tangible results for her clients.