“Culture eats strategy for breakfast.” Peter Drucker
“If you get the culture right, most of the other stuff will just take care of itself.” Tony Hsieh CEO of Zappos.com
“Culture can become a ‘secret weapon’ that makes extraordinary things happen.” John Katzenbach, Booz&Co
“A strong, distinct Organisational Culture can improve organisational performance by 20% to 30% compared to an unremarkable, weak culture.” (Heskett)
In todays sophisticated world we think we know that culture in any organisation is important; that it can be the main differentiator; that a competitor can copy ones strategy but not ones culture. But are leaders confident enough in their abilities to nurture a distinct culture?
Recently we discussed this very important principle of culture on our Leadership Platform CliffCentral show. (Listen to the podcast here)
During our conversation Prof Veldsman emphasised that culture must be shared by members of the organisation – if not it isn’t culture.
“Culture is also how an organisation sees the world – as a threat or an opportunity. And how we interpret the world,” explained Veldsman. He summarised:
“Culture is a shared way of seeing, interpreting and acting upon the world as a group of people in an organisation – the glue holding the organisation together.”
Karl Kumbier CEO Mercantile Bank was our special guest because he and his team have been working consciously on building their culture. He shared some of his views: “Strategy is very important obviously. But it is the easier part of trying to take a business to the next level. Culture is about how you get everyone in your organisation and team to buy into the strategy. How do you get the team motivated; everyone to channel all the energy and passion into the same direction to execute on the strategy? I think culture is probably the most important part of any organisation. Once you work out what your strategy is, ensure you build the right culture to achieve that strategy.”
Rich Simmonds, our panel member, commented: “Culture needs to be built and you can only do it with the people, then your strategy can come together. But if you forget your people you will never get it right.
Louis Groenewald reminded us that the body language of leader plays a huge role, and culture can be sensed and felt. He emphasised that it is vital at all levels, even in schools and small businesses.
It is accepted amongst experts and leaders that whether one consciously works on it or not, a culture exists.
It is about defining and knowing what it currently is and then deciding if it is what you want and need. When organisational results are not what they should be chances are the culture is not a match.
According to Veldsman there is a Shona saying that states: “The power of the fish is in the water.” In an organisational context the water represents the culture. “Culture creates the conditions under which people can perform; the enablement and empowerment. Enablement = the tools to do the job. Empowerment = freedom to act in terms of the strategy. You can’t divorce the two’” according to Veldsman.
Culture consists of hardware and software. When for example you decide to become an innovative company then the conditions in the organisation, the physical elements must follow and be put in place to back this up.
Hardware: Reward and recognition; work practices and standards; structures and roles; etc.
Software: Need satisfaction; behaviour; attitudes; perceptions; feelings and thoughts; and so on.
Experience indicates “it may take 3-5 years to establish, entrench and institutionalise a new culture,” says Veldsman
On the software side, Kumbier shared: “I am a big believer in empowerment – empowering staff to perform to their best. So you want to employ the right people to fit your culture and then make sure you hold on to those people, that they are satisfied from a job point of view. Then make sure you provide the necessary training and importantly give them the tools to do their job effectively. Once that is done you need to have a transparent appraisal process to make sure that if someone has done their job well they are rewarded and looked after.”
Does culture drive strategy or does strategy drive culture?
“Chicken or the egg,” commented Veldsman. The general feeling by the panel was that there should be a strategy first “and then you mould your culture accordingly to deliver,” said Kumbier.
I feel strongly that there are two levels to culture:
- A strong strategy-linked culture – hard and soft issues. This part of the culture does not necessarily sink deep into the essence of the business and may change when a leader at the top changes; when the strategy changes.
- An enduring culture – that part of the organisational DNA, character that stands the test of time; that outlasts the change of leadership at the top; that is not solely dependent on the strategy. For example, one could entrench a culture of innovation, can-do, resilience which is not necessarily linked to the strategy.
In my view an organisation with both dimensions will be more equipped to outlast difficult times, if it and its leaders and employees are clear about both dimensions of their culture, who they inherently are, even independently of their current strategy.
Velsdman felt that these two dimensions interact with one another, which makes sense.
Kumbier referred to research shared with his team by Citadel that leaders should take note of: There is a direct correlation (70%) between growth in the economy and results of companies listed on the JSE, from a net profit point of view. The economy does well, companies follow and when the economy does badly company results follow. There were however six companies that bucked the trend and grew by more than 10% for 10 years in a row, no matter what the economy did. One of the attributes these companies had in common – part of their culture – was that they innovated at every level of their organisation.
A couple of years ago Kumbier and his team got together and decided to take their business to another level, to double the size of the bank and become number one in the SME space. An outside organisation came in to analyse their culture. They discovered three different sub-cultures because of its historical background. They realised none of these cultures were right or wrong, but to take the business forward as per the strategy they had to take the best parts of all three cultures, especially the “strong relationships with clients” aspect. In about two years they have managed to pull all this into one culture.
Over and above these factors another component to consider is the link between leadership at the top and the culture of the organisation, which according to Veldsman shows a 70% correlation.
This means the average 3-5 year tenure of CEO’s together with a 3-5 year timeline to bed down a culture poses other challenges. Should the culture change every time a new leader comes on board?
Kumbier reminded us that it is an organisational culture, not the leader or CEO culture.
“When you want to drive your culture it starts at the top – you have to drive it hard from the CEO downwards. If the CEO does not buy into the culture, how can the rest of the organisation do it?”
“After coming up with our strategy and culture we made sure all our business unit heads ate, slept and drank the culture on a daily basis, and that they would go back to their managers and do the same. For me, you build a culture in the organisation so that if the CEO left it wouldn’t impact on the actual business.”
Veldsman concurred and again referred to the operative word “shared”. It must be shared, and then it is a more enduring organisational culture.
We also touched on the need for the Board of an organisation to understand and buy into the strategy and culture. When this happens they will search harder to match the next leader with the culture of the organisation.
Leaders should also ensure that not only clinical performance form part of KPA’s but also culture – whether the leader is living the values and defined culture of the organisation. If this is not done there will be a “focus on hard results only and not the soft results as well,” commented Veldsman.
For Kumbier half of his balanced score card is numbers based and the rest is strategy, people and softer things of the business.
Simmonds referred back to “culture eats strategy for breakfast”, which means look at your culture first. He used South West Airlines as an example (listen to podcast for more).
Groenewald ended with: “A positive culture in an organisation of trust, authenticity and emotional intelligence, are so interrelated that you can’t separate them. To be honest, we are the culture of our organisation as leaders.”
Kumbier: “Culture is the most important part of any organisation and if your staff are motivated, fired up and passionate then that will result in better service to your customers, you will have more customers and at the end of the day the bottom line will look after itself.”
Veldsman: “Culture is important. In an ever changing world of hyper-turbulence, culture keeps you together. In the end culture also protects the brand out there. The brand attracts people, it keeps talent.”
A leader can change a strategy and a culture. This is the power of a leader. However, when it is shared across the organisation, including the board, then the organisation is in good shape.
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