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Cultivating a Strong Company Culture Corporate culture is a key variable in the quest for business success. Research makes clear the link between top financial performance and a strong culture. Culture is also an increasingly important attribute in recruiting and retaining employees. Your firm's ability to grow and improve is inescapably connected to your culture. So what is it really, and how do you strengthen it? Is culture something management creates or does it evolve at the grassroots level? Can you change your culture? These are all complex questions, but let me attempt to shed a little light on the answers. Defining Culture There are various definitions in the literature, but here's a simple one that I prefer:
The bedrock of culture is shared values. These aren't necessarily the "company values" that you post on the wall, but a set of widely held, often informal, beliefs, attitudes, and principles that guide behavior in the firm. Consistent, reinforced behaviors evolve into habits. And habits are a powerful force in defining how employees do their work. Rules in this definition are those policies and procedures that are generally respected and followed within the organization. All these factors combine to influence "how things are done around here." While a strong culture is typically associated with positive performance, this isn't always the case. In fact, a strong culture can be a significant impediment to making needed changes and improvements in the organization. In these situations, you need to make a concerted effort to amend the culture. Intentional or Accidental? Every firm has a characteristic culture. Some are well defined, the product of intentional design. Others have evolved more or less accidentally, resulting from a variety of mostly random factors. The firm's leadership obviously exerts strong influence on its culture. In fact, the culture often reflects some degree of the personality and values of the firm's leaders. The strongest corporate cultures, as you would expect, are shaped intentionally by management and employees working together. As a firm grows or changes, its culture is also subject to change. This change can be slow and subtle, yet become very significant over time. Common examples are firms that have undergone substantial growth or turnover, or have gone through a merger or acquisition. Old-timers (often management) may still perceive the historic firm culture, but in reality it has become something quite different—perhaps a loose collection of subcultures associated with new managers or a recently acquired firm. During such times of change, it is especially important for firm leaders to take steps to preserve or create the kind of culture they want for the reconstituted organization. The Power of Culture Harvard business professors John Kotter and John Heskett conducted some of the most extensive research on corporate culture. They found that firms with a strong culture built upon a foundation of shared values outperformed other firms by a large margin:
Other studies have reached similar conclusions. Interestingly, the research suggests that the positive results don't necessarily favor a specific value or set of values. The primary factor is the strength of conviction found in the firm around a "core ideology." There is no single formula for success when it comes to values and culture, except the degree of buy-in among management and employees (although clearly certain enduring principles such as integrity, involvement, quality, client service, respect, and learning are invariably emphasized in the most successful firms). The Importance of Organizational Alignment Corporate culture is particularly enabled as a strategic asset when there is consistency across the organization in values, policies, practices, and strategies. Donald Tosti and Stephanie Jackson describe two prevalent forces shaping corporate activity and results: (1) strategy and (2) culture, as illustrated below.
The strategy path defines what needs to be done; the culture path emphasizes how things are normally done. The best firms maintain an alignment between the two paths. On the other hand, I've worked with several firms where alignment was lacking. For example, many firms attempt to bring more discipline to project management and quality control by implementing detailed new policies and procedures. Yet such rigor runs counter to their laissez faire cultures (in fact, the star performers in many firms openly disdain the imposition of any new rules, and without consequence). I've labeled the culture path the "driving path" because in my experience culture exerts far more influence on what gets done in an organization than strategy. This means you either need to align strategy with your culture (which, as in the example above, may be undesirable) or take deliberate steps to bring culture into alignment with your chosen strategy. It's not easy, but can be done. And often it's necessary to move the company forward. Strengthening Your Culture Wholesale cultural shifts are impractical and undesirable. The goal is to purposefully shape your culture over time, building on the attributes of your current culture that you want to retain. The following strategies have been shown effective in guiding firms through this process: Assess your current culture. As noted earlier, managers may lack an accurate view of their firm's culture as seen through the eyes of their employees. This may be the result of organizational changes, the presence of several subcultures within different departments or offices, or simply management's failure to give much heed to the matter. Before attempting to strengthen your culture, there is good reason to carefully assess what you currently have. This is best done through some form of employee feedback. This might involve a formal survey or informal dialogue. Be thorough. Seek feedback from multiple layers, departments, and locations within the organization. Look for both the strengths and weaknesses of your culture. Also look into the degree of clarity about what the firm's culture is. If little consensus emerges concerning your culture, that is telling. By the way, I should mention that having different subcultures associated with different departments and offices is not necessarily a bad thing. You should, in fact, expect some measure of this and it can bring added vitality to those operating units. But there should be some consistent threads between all units, particularly with regard to shared values—one of which would be a commitment to the welfare of the entire organization. Fortify your company values. Most firms have formally identified a set of core values. But there are wide differences in the degree to which these espoused values actually impact their respective organizations. Since shared values constitute the foundation of your culture, this is an important step to strengthening your culture. You have to go beyond merely posting them on the wall or talking about them; you have to live them. Management sets the tone. Is everyone expected to uphold the firm's values? Do managers and principals of the firm model these values? Are there consequences for repeatedly violating the firm's values? For more on this topic, see the article "Values and Intolerance." Another important strategy: Reward and promote those who embody your firm's core values. Few things will undermine culture more than having managers and other key players who fail to operate by the firm's values. Demonstrate that the firm gives priority to its values and culture by rewarding those who exemplify those qualities. Align strategy with your culture—or visa versa. As mentioned above, strong cultures exhibit alignment with corporate strategy and actions. This easiest path to alignment is to set strategy that conforms to your culture. If your culture values individualism and creativity, there's little point in trying to implement rigid standards and procedures. Remember, culture ultimately determines what gets done. If there's inconsistency between strategy and culture, culture invariably wins out. But, as we also noted earlier, there is often good reason to select strategy that is counter-cultural. This requires, however, a commitment to modify aspects of your current culture to bring it into alignment with the desired strategy. One of my clients successfully created a strong safety culture, which involved an administrative rigor and strict enforcement quite in contrast to the firm's historic corporate culture. It was hard work at first, but eventually it became a natural part of the way the firm approached all aspects of its work. The firm's overall culture still reflects it's characteristic disdain for much structure or standards— except where it comes to safety! Commit to regular communication. Communication is the mortar in building a strong firm culture. Focus first on communication between management and staff. In firms with a weak culture and poor performance, this is inevitably a problem. Invest in regular meetings, conference calls, emails, postings on the company intranet, whatever means of communication works best in your firm. Likewise, promote an environment where people are encouraged to speak up, ask questions, and seek clarification to avoid misunderstandings. Remind everyone that good communication is shared responsibility. But beware of overwhelming communication channels (e.g., email) with too much information. This causes people to stop paying attention. Take steps to promote a sense of community. Strong cultures impart a sense of belonging to something bigger than the sum of individual members. It's community. Strengthen community in your firm by creating opportunities to forge relationships beyond mere work-related associations. This can involve activities such as celebrating birthdays, holding potluck lunches, organizing fantasy football leagues, sponsoring city league teams for employees, or engaging in community service projects. These things help form bonds that will strengthen working relationships. Likewise, be sure to promote and reward teamwork. Firms sometimes place too much stress on individual performance, and to the detriment of meeting group performance objectives. Since we perform our work in teams, this is a natural avenue for community building. Recognize and support those who excel at leading or contributing to the team. Hire for cultural fit. Managers in our business often are blinded by impressive resumes listing qualifications and experience. But don't overlook the candidate's personality, values, and work habits. In the interview, ask questions that will bring these issues to light. Rather than focusing on what skills and experience the candidate has, ask about how he or she works with others, responds to challenges, prioritizes the use of his or her time, promotes teamwork, deals with sticky ethical situations. For a helpful interview form that addresses these kinds of issues, check out my Consultant's Toolbox. Obviously, cultural fit should also be an important issue in considering a merger or acquisition. Make this a crucial part of your due diligence. Probably more mergers and acquisitions have failed due to poor cultural fit than poor performance relative to the usual business parameters that we usually concentrate on. Even when the two parties are a good match in terms of culture, there is still much work to do after the deal is done to ensure that a strong corporate culture is preserved. Copyright © 2005, The Business Edge, all rights reserved
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