Introduction
As the world increasingly becomes a more challenging and complex place, the ability of businesses to adapt and reshape themselves has become an essential survival capability. There is a good deal of evidence to indicate that this capability is strongly linked to the type of business culture that exists within an organisation. It has also been demonstrated that organisational performance is strongly linked to organisational culture.
This month’s article will highlight the nature of organisational cultures and detail what leaders can do to create genuinely adaptive cultures.
The Case for a Strong Culture
The relationship between organisational performance and strong cultures was first demonstrated by Kotter and Heskett in their 11 year study of 207 large U.S. companies. They observed two distinctly different types of cultures – constructive and defensive. Those organisations displaying attributes of a constructive culture outperformed those of defensive cultures across a range of performance measures. For example, the study clearly showed a four fold difference in revenue growth between constructive and defensive cultures.
More recently, Dr Robert Cooke, (Associate Professor of Management – University of Illinois) a long time researcher of organisational cultures, presented clear evidence of a direct and positive correlation between profitability and constructive organisational cultures (Cooke, 2004).
Towards a Common View of Culture
Arriving at a common view of culture is difficult. Culture is not something that can be easily touched or felt. As culture is tied closely to the dynamics of people, its nature is inherently complex.
Although difficult to define in concrete terms, a commonly accepted and workable definition is, “the way we do things around here”. Other workable definitions include, “the personality of the company”, and “what people do when the boss isn’t around”.
Kotter and Heskett add: "We encounter organisational cultures all the time. When they are not our own, their most visible and unusual qualities seem striking: … When the cultures are our own, they often go unnoticed-until we try to implement a new strategy or program that is incompatible with the central norms and values. Then we observe, first hand, the power of culture."
The common theme in all these descriptions is that organisational culture is about ‘how’ people go about their work; the way they think and the way they behave. The implications are profound. If we accept the link between culture and performance, then ‘how’ an organisation goes about achieving its objectives is as important as the objective itself. This is somewhat contrary to traditional management thinking that places a heavy emphasis on outcomes and very little emphasis on how these outcomes are achieved.
Cultural Levers
Since culture is defined and manifested by the behaviour of people, any activity that influences people’s behaviour will have an impact on organisational culture. These activities include, reward and recognition systems, recruitment and promotion practices, and performance management / measurement systems.
Leaders play a pivotal role in shaping and influencing an organisation’s culture. By definition, a leader has a significant impact on the thinking and behaviour of the people around them. This takes place at two key levels:
- Explicitly by the way a leader directs the activities of others
- Implicitly by their own behaviour
These two factors play a key role in defining an organisation’s cultural and defining behaviour and defining “how things are done”.
Cultural Behaviours: Constructive Cultures vs. Defensive Cultures
People in constructive cultures are actively encouraged to carry out their work and interact with each other in a way that promotes achievement, builds self esteem and develops interpersonal relationships. The following behaviours are inherent within constructive cultures:
- The setting of challenging goals by individuals for themselves
- Creation of clear action plans that define how to achieve goals
- Pursuit of excellence at individual and team levels
- Enjoyment from work
- Ownership for self-development
- Care and sensitivity regarding the needs of others
- Open communication at all levels
- A friendly environment
- Support for others to achieve their full potential
Conversely, within defensive cultures, people are expected to approach tasks in a way that is aggressive and forceful, where people act to protect their status and interact with others in a way that is competitive. Within defensive cultures the following characteristics and behaviours are the norm:
- Internal competition is encouraged
- Successes are rarely rewarded and mistakes are punished
- People avoid taking risks
- Messages at both implicit and explicit levels are inconsistent
- Confrontation is the norm – leaders gain status and influence by being critical of others
- A strict hierarchy exists
- Action is strictly controlled by rules and procedures
- Decisions are made centrally
Leaders who are able to create an environment that promotes people’s growth, rewards achievement, actively builds personal self esteem, and develops team behaviours will inevitably develop a constructive and successful culture. This will in turn drive superior performance.
Key Actions to Creating a Constructive Culture
While reaping the numerous benefits of constructive cultures is alluring, developing and maintaining a culture with constructive characteristics is a complex process. However, the following key actions will help leaders more towards a more constructive culture:
- Actively and clearly communicating the vision and strategic objectives of the organisation. This sets a clear direction for people to follow.
- Explicitly stating what the organisation stands for – its values and beliefs. This helps define how people will be expected to go about achieving the organisation’s objectives.
- Aligning the selection, promotion, performance measurement and reward and recognition systems to the organisations' values and beliefs. This enables all staff to effectively track their performance against strategic organisational goals.
- Developing leaders and leadership practices that support a constructive culture, including:
- Raising the importance of values alignment in the selection and promotion of leaders
- Supporting leaders to develop leadership behaviours that promote organisations’ values and beliefs
- Helping leaders develop a common understanding of how values translate into business activity
- Developing the coaching capability of leaders so that they can positively influence those around them in a way that supports organisational values and the attainment of strategic goals
Conclusion
Academic research has conclusively demonstrated a clear link between organisational culture and organisational performance. Cultures built around achievement, developing personal self esteem and fostering strong interpersonal relationships are those that are more capable of adapting and maximising opportunities in an increasingly changing business environment.
Leaders play a pivotal role in creating and maintaining the characteristics of organisational cultures. The values they promote both by their own behaviour and by the way in which they directly impact those around them will be the values that underpin the organisational culture.
Consider your own organisation and think about the following issues – does it demonstrate the characteristics of a constructive culture?
- Does everyone in the organisation know and understand the key business goals and strategies?
- How clear are people about what the organisation stands for?
- Are people measured on their output alone? To what degree are behaviours a factor?
- How are personal performance issues managed?
- What opportunities exist for people to develop?
- Is there a structured leadership succession process? What are the criteria for promotion?
- How are decisions made?
If you would like more information regarding the creation of constructive, high performing cultures please contact one of our consultants on 61 3 9855 1436.
