According to research from talent-focused consulting firm Korn Ferry, 72 percent of executives “feel culture is extremely important to organizational performance.” These executives have good reason to feel this way: in the early 1990s, researchers John Kotter and James Heskett found that companies with “performance-enhancing cultures” saw an average of 682 percent growth in revenue and 901 percent growth in stock price over a twelve-year period. Companies without such cultures only saw a 166 percent growth in revenue and a 74 percent growth in stock prices during the same period.
How does culture come to have such a significant impact on organizational performance? “There’s a certain way of organizing and behaving that you need in order to effectively achieve your [business] strategy,” explains Gabriella Kilby, senior partner at Korn Ferry.
For example, say a company is looking to implement an aggressive growth strategy. Such a strategy requires that people move and make decisions quickly; that people act locally, rather than being tied up in hierarchies; and that people take risks and try new things to meet consumer needs and demands. Contrast these needs with a company that has traditionally been very deliberate in making decisions and conservative in pursuing opportunities.
“You can see how one culture would be supportive of that [growth] strategy, and another culture would not be,” Kilby says. In other words: a company that wants to pursue an aggressive growth strategy will have a hard time doing so if employees are conditioned to run every decision or idea by management before acting.
Strong cultures clearly bring significant value to businesses when aligned with company strategies, and the majority of executives realize this. So why, then, did the same Korn Ferry survey mentioned above find that only 32 percent of executives “say their organizational culture aligns to a great extent with their business strategy”? How do we account for such widespread misalignment when so many executives recognize the need for culture and strategy to work together?
Strategy Is Intentional — But Is Your Culture?
“I think the reason that there’s a misalignment [between culture and strategy] is because organizations get very intentional about their strategy, and where they want to go, and how they want to compete, and they’re not that intentional about the culture that has evolved potentially around that and whether or not that’s supportive,” Kilby says.
Every company has a culture — as Kilby puts it, “You have a culture whether you want one or not.” Companies can either establish their cultures via careful design, or simply allow cultures to just happen organically.
“You either have something in mind towards which you want to move and you’re doing it intentionally, or it just arises by default, because people are together … and things just fall into place that way,” Kilby says.
If a company articulates an intentional strategy but does not create an intentional culture to support that strategy, then, naturally, a misalignment will occur between the carefully planned strategy and the somewhat haphazard culture.
To make things even more complicated, a number of variables act on and shape a company’s culture. Creating an intentional culture is not as simple as sitting down in the conference room and making a plan. Rather, culture is a shared set of values, beliefs, and norms, and it emerges through — and is shaped by — the structures, behaviors, and artifacts of the company. Everything from talent management — e.g., what kind of people does a company hire? — to work environment — e.g., do people sit in an open office or a bunch of discrete cubicles? — factors into a company’s culture.
“Culture is complex. You can’t act on it directly. You can’t press X and get Y,” Kilby says. “It’s a system at work, and as a result of that, it can get complex for people to think through [it] and to actually have a direct impact on [it].”
Culture involves people, and people create ambiguity, Kilby says. “They do their own thing and they do it when they want to, so it’s a lot tougher to change culture than it is to change the system or a process.”
Changing a system or a process is hard, of course, but it’s also structural: shift the right structures around, and a company can create the systems and processes it desires. “Getting people to adapt to structures, that’s where the challenge is,” Kilby says. “You can be intentional about culture, and then you do all of those right things to get the culture that you and, and then people will still do their own things.”
But all is not lost for companies looking to realign their culture with their business strategy. Revamping a business’s culture may be difficult work, but it’s not impossible. “If you do [the right things] well, and you do them in alignment — if you do them in support of each other — you’ll likely get the behaviors you’re looking to develop,” Kilby says. “You can do a lot to shape culture, but you’re also dealing with people who can create their own ambiguity as well.”
Six Dimensions to Consider When Realigning Culture and Strategy
To affect cultural transformation, companies need to articulate the kind of culture that will be supportive of their organization’s strategy. To do this, Kilby suggests that businesses consider six factors:
1. What Do You Want to Keep?
When realigning culture with strategy, it is not necessary to throw out the entire current culture and start from scratch. The first step, Kilby says, is to identify the values you want to preserve.
“If you’re looking at transforming your culture, there will be things that you’ve done in the past that people are very committed to. There will be values that are deeply held,” Kilby says. “There will be ways of being or behaving or showing up that are so meaningful to people that they’re actually important to preserve, and you may not want to change [them], because they’re so core and so fundamental.”
While clarifying what you want your company to look like and where you want it to go, you also want to be clear about what you want to keep from the existing culture.
2. What Do You Need to Toss?
Once you know what you’d like to keep, then it’s time to identify what you want to leave behind. “There are elements of a past culture that you certainly don’t want to take with you for one reason or another,” Kilby says. Find the things that hinder your strategy’s execution — for example, needless hierarchies in a company that wants to give employees more freedom to act quickly and efficiently — and toss them.
3. What Does the Culture Look Like in Practice?
Culture is a slippery, abstract concept — but it manifests itself in the form of practices and behaviors. You’ll need to get specific about what your culture will look like in practice: how will people behave in this new culture? What do they need to do to perpetuate the culture?
Kilby says this step is when you begin to take specific actions — for instance, changing leadership practices: “Leaders cast a big shadow, so when you’re thinking about the culture that you want to create, one the the things you need to get very clear and specific about is how you want leaders to show up and how you want them to operate, in terms of how they work with each other, how they lead the enterprise, and how they engage with their people.”
Be very precise about the kinds of behaviors you want to see among employees at all levels.
4. How Are We Operating?
In the same way that you need to align employee actions with the culture, you’ll need to look at larger, overarching operating practices and ensure that they, too, align with the culture. Consider things like decision making, communication, and conflict management: how do these things get resolved in your organization? How should they be resolved under the new culture?
“What expectations would you have around what people are doing to work their way through any of those, whether they’re leaders or they’re at other levels of the organization?” Kilby asks.
5. Does the Structure Facilitate Our Culture?
“You can’t have an organization that is very heavily structured — and the bureaucracy that goes with that — and then expect decisions to be made quickly or expect people to feel perfectly empower to make the decisions that are nearest to them,” Kilby says.
The structure of your organization should facilitate the kind of culture you want by allowing the behaviors and practices which embody that culture.
6. Who Works for Us?
“Talent management is a huge part of how culture looks,” Kilby says. You need to attract the kind of people who mesh with your desired culture, and that depends on a lot: how you position your company in the market, the kind of place your company is, and the kind of place candidates see your company as.
Your company needs a way to accurately ascertain which candidates fit best with your culture, as well as a way to acclimatize new hires to the culture once they arrive.
“What sorts of behaviors are your reinforcing in terms of how they do their work? What sorts of behaviors or capabilities are you reinforcing in terms of who gets promoted?” Kilby asks. “Everything within that talent strategy supports culture as well.”