The Importance of Culture to Organizational Performance

In Our View …

Perhaps it is because the newspapers, airwaves and digital platforms are so full of environmental news these days (with BP bearing the brunt of the public’s anger) that I began to think about how important the “environment” is in the corporate world as well.

You see, the quality of the environment (i.e. the culture) really does matter.

Leaders not only have to take ultimate responsibility for shaping the environment within which their people live, but they must be good stewards of it as well and manage for the long term consequences. The only way to judge an organization’s commitment to a healthy, sustainable and robust culture is to examine the choices leaders make – including the choice of where they put culture on the organizational list of priorities.

It seems to us the choices we face, the decisions we make and the results we achieve all have to do with the health of the environment within which we operate. We develop our bad habits in good times. We develop our good habits in bad times.

In other words, I cannot imagine there is any better time than right now to take a long, hard look at the question of organizational culture and determine what can and should be done to ensure the environment is helping, not hurting, your chances for success.

Organizational DNA …

In our work over the years, we have searched long and hard for the secret to high performance and the elusive tonic to guarantee success. We are not the only ones. Bookshelves, boardrooms and lecture halls everywhere are full of people anxious to share their secret formula for breaking the code of cultural superiority.

In this area, history has taught us we need to be careful.

Chances are, there is no one, single, defi nitive answer, no matter how hard we look or how badly we want it. There are, however, some broad guidelines and concepts that are well worth examining and baking into the cultural profi le for any organization. We believe in a framework (based on the one created by Booz Inc.) called Organizational DNA.

In simple terms, it suggests there are four interwoven strands of DNA that can be decoded to help diagnose the state of an organization’s culture. It is a simple concept but, in fact, the power of its insight comes from that simplicity. The four strands to examine are:

Organizational Structure & Effectiveness

  • Is the organization structured in a way that enables performance?

Decision Making

  • Are the “decision rights” clearly vested?

Knowledge Transfer

  • Does information get from those who have it to those who need it?

Motivators & Differentiators

  • What basket of tools is used to guide and direct behavior?

Healthy Cultures …

The truth of the matter is, the DNA of a “healthy” culture cannot be reduced to just one set of attributes or principles. As with so many things in organizational life, the context has to be taken into account and, frankly, it is more important to have the culture aligned with the context than simply to have the ideal formula.

There are three broad categories of “healthy” cultures:

The Just-in-Time Model

In this case, the culture focuses on seizing opportunities. The organization is quick to change course and does not hesitate to head off in a new direction when the winds of change indicate an advantage.

The Military Precision Model

Here, the organization is responsive to “commands” from the inner circle at the top who can quickly galvanize the troops into perfect alignment and they then fly in formation.

The Resilient Model

The organization built in this manner is able to ride over any rough patches and come away from that experience even better or stronger. Typically, this type of organization does not allow ego to blur its vision.

Unhealthy Cultures

Organizations are living, breathing, dynamic creatures. As such, they suffer from the same fl aws, imperfections, obsessions and biases as do the people who work in them – and the leaders who guide them. The possible dysfunctions of organizational life are many and the variations endless. There are, however, a few basic “pathologies” we can use to identify the fundamental diseases and discomforts.

There are four broad categories of “unhealthy” cultures:

The Overmanaged Model

A very common category of misfi t, even in these leaner times, this tends to be the organization that has built in multiple levels of supervision and prefers
endless analysis and talk to action and results.

The Outgrown Model

Typically, this can be observed most readily by the fact the stress and strain levels are high and the organization is just barely hanging on. It tends to be
controlled by a very few people at the top who micromanage in the extreme.

The Fits and Starts Model

In this this case, the organization has plenty of energy and plenty of talent, but cannot seem to stay the course on anything it starts. The attention span of the leaders is short and that fl ows down to the levels below.

The Passive Aggressive Model

A more common dysfunction than you might think, this organization suffers from what Jack Welch calls “superfi cial congeniality”. Things look good on the surface, but just underneath jealousies and bad behaviors run rampant – both ignored and tolerated.

Attitudes & Beliefs …

In the “real world” – the world that exists just outside the walls of the large conglomerate or multinational corporation – we have long relied upon the work of anthropologists to help us understand culture. Whether in ancient Egypt, deepest darkest Africa or the mountains of Latin America, the work of anthropologists is fundamentally to help us decipher and understand the genetic code of the particular tribe in question, by examining their rituals,
customs and habits.

In an organizational context, that list includes attitudes and beliefs.

In both cases (ancient Mesopotamia or modern Manhattan) we know that, for some reason, certain cultures thrive for a short while, some thrive for a long time and some die a quick and merciful death.

Why?

It seems to us, the mindsets, attitudes, belief systems and approach which the “tribe” chooses, make the ultimate difference.

Choose well – you thrive. Choose poorly – you die.

In either case, the culture that emerges is a choice, not just a random set of events, equivalent to a plague or a famine. The culture of an organization matters a great deal. It is the culture, the unspoken, the ephemeral that actually shapes the view the organization has and, as such, it defi nes the choices it puts before itself.

Values & Competencies …

Sitting just alongside the attitudes and beliefs of an organization is a companion set of attributes that round out the cultural blueprint. It is represented by:

  • The Values – espoused and held to be important.
  • The Competencies – nurtured to drive performance and build talent.

It is a pretty simple formula – so simple that many seem to think they need a greater order of complexity in order to justify adoption of a set of basic principles aimed at ensuring the culture is able to be self sustaining, healthy and productive.

We disagree!

In fact, we think organizations over complicate and over engineer in order to hide from the truth that may emerge if they were to focus on just the “vital few” and make them visible to the entire organization.

In our view:

  • Attitudes & Beliefs – correspond with character
  • Values & Competencies – correspond with competence

Together, they defi ne the culture of the organization and the genetic code, or DNA, that will either allow them to thrive, survive or die!

The formula?

Ability + Agility x Vitality
——————————— = Superior Results
Inward Focus + Ego

Linking Culture & Focus …

In our continuing study of organizational culture and high performance, which has incorporated the thinking and efforts of many others who practice in this fi eld and whose contribution is enormous (if unheralded), we are constantly amazed by how much “noise” exists in the typical organization.

Quite frankly – we fi nd noise to be a terrible distraction!

The noise amounts to the cultural equivalent of toxic waste and displaced energy, and is a sure sign of lack of focus. Chatter, confusion, speculation and miscommunication all contribute to a loss of value – but does anyone care?

  • A culture that suffers from noise- cannot be a focused culture.
  • A culture that is not focused on the right stuff – cannot aspire to high performance.
  • A high performance culture – makes crisp focus a competency for all leaders.
  • A good leader makes focus on the customer – the critical imperative for everyone.

Linking Culture & Talent

There are a few things we know for sure about talent. Simply put – talented people want to work with other talented people and will only work for talented leaders. In this case, it is pretty easy to see why the cultural environment matters so much to talented people who will only work in conditions that maximize their abilities and potential.

The truly talented have options, alternatives and confi dence that do not exist in the more mediocre layers of the human capital structure and so, are less loyal on one hand and much less tolerant on the other.

Leaders of an organization who genuinely seek to perform at the highest level know they need talented people (from both within and outside) because they know there are some special tasks and responsibilities that need to be addressed. The more talented the people, the higher their ability to live with ambiguity and the better the odds they will be able to:

  • Identify, defi ne and scope the issues
  • Solve the frustrating dilemmas and wicked problems
  • Resolve the hidden tensions and incongruities
  • Overcome the barriers and obstacles

High Performance Cultures

The reason culture matters, and the reason the environment a leader creates is so important, is not simply to win an award or have satisfi ed employees. The real reason is to drive business results and achieve superior organizational performance.

In our view, that is the only way to secure the necessary resources to implement the programs, create the tools and develop the talent that allows performance to be sustained.

We don’t want to be unkind, but have you ever conducted the “lobby test”?

Here is how it goes. Walk into the lobby of your best customer, your major competitor or, even better, your most underperforming business unit and just hang out for a morning. The things you see and hear will scare you to death.

High performing cultures don’t accept what you will fi nd in those lobbies. Not because they have abolished the pollution and shame with policies, but because the culture looks after the little things through a combination of pride and accountability.

High performing cultures know how to:

  • Attract – the best
  • Retain – the best
  • Bring out – the best
  • Showcase – the best
  • Reward – the best

High Performance Results

Let us assume, for a moment, that any organization worth its salt wants to achieve superior results and wants to do so for as long as they possibly can. If so, they should realize the price they have to pay is in doing whatever it takes to create “winning conditions”. These are the conditions, refl ected by the cultural environment, that allow people to deliver results by creating a willingness to devote a higher share of their “discretionary investment” than in an average or mediocre organization.

In our view, extrinsic motivation will only take you so far – it is table stakes in today’s world. The more powerful enabler is intrinsic volition, and that can only emerge in an organizational culture that understands how much the “contract” has been re-written.

High performance is achieved when, amongst the talented people, the:

  • Inner restlessness – is high and constructively directed
  • Intolerance – for stupidity and bureaucracy is high
  • Impatience – to get results and improvement is high
  • Intensity – is high and the focus crisp
  • Imagination – is allowed to run wild

Steps to Take :: Actions to Consider

In this paper, we have been as clear as we can be about the importance of culture within an organization, the relationship between culture and talent and, fi nally, the relationship between culture and performance.

At the end of the day, organizational strategy is not implemented in a vacuum. The success of a particular strategy is dependent upon the environment within which it is set. In organizational life, that environment is the culture. In order to be successful, great strategy needs to be augmented by great culture and needs to be monitored with the use of a very precise “dashboard”. A dashboard that includes a:

  • Thermometer – to track the heat
  • Tachometer – to track the metabolism
  • Speedometer – to track forward progress

Establish a Baseline

Remember when you were a child and your mother took your temperature to check and see how sick you really were – or if you were just trying to get a day off school because you had not fi nished an assignment that was due? It’s the same in organizational life. You have to know what you are dealing with.

Identify the Gap

There is absolutely no point avoiding bad news. Ignorance is not an excuse. The worst truth is still better than the best lie. If you are going to be serious about building a better, healthier culture, then you’d better fi nd what’s broken or not working well, and begin to address it – head on.

Think Forward

Most of us get some comfort from the past and the warm memories that wrap us in nostalgia, providing some temporary relief from the stresses and strains of the day. However, when it comes to culture, the key is to aim for a moving target, off in the future. It’s not good enough to refl ect on yesterday, or even build for today. You have to predict the future.

Make Hard Choices

There is always more than one choice when you come to a fork in the road. Typically, there is the tried, tested and comfortable path and then there is the other one. The road less travelled. In the case of organizational culture redesign, it’s better to make the tough choice, rather than take the easy path.

Enforce Accountability

It seems that all too often, the best intentions of the leadership team are not fulfi lled and the promise that existed evaporates into thin air. All too often, this is because the escape hatches were left wide open and, when it was convenient, some people found it too tempting to avoid accountability.

Keep Score

The joy of victory is sweet. When the trophy is lifted over your head, and you look into the eyes of your opponent and see their disappointment, you do not so much gloat as be glad the game was played and you came out on top. In any game, including the game of business, you need to keep score.