What exactly is organizational culture and how can it help your business?
There are a number of inter-related performance factors in a company’s operating style/culture (the way things are done) that can significantly influence its organizational effectiveness. Poor execution caused by organizational issues is held responsible for over 50% of corporate failures to fully deliver business strategy. Moreover, at least 60% of company mergers fail to realize their anticipated pre-acquisition values, and approximately 75% of all change programmes are unsuccessful. Why? Because organizational culture can secretly conspire against these efforts.
Cultural clashes mean that what looks on paper to be a sensible restructuring solution often doesn’t work in reality unless potential incompatibilities of organizations and units during merger integration are addressed. Discovering cultural differences too late can prove costly, time consuming and hugely frustrating.
What is organizational culture?
Many books, filling plenty of library shelving, give us all sorts of statements and descriptions characterizing organizational culture. Organizational
psychologists talk of the values, assumptions, behavioral patterns, style, climate, atmosphere, norms, and observable attributes that we associate with a particular organization or group. Put more simply, it’s “the way things are done around here.”
Employees soon learn the ropes about the organization’s culture by experiencing how people behave towards one another and about the ‘rules of the game’ through what is paid attention to. These behavioral norms may or may not be aligned with the company’s stated values or conducive to the achievement of its stated strategy.
Examples abound. The CEO who is adamant about the need for entrepreneurial creativity and innovation as a strategic imperative, and whose senior manager’s immediate response to any volunteered creative idea is: “It won’t work.”
The corporate center that entreats frontline staff at a bank to engage in more consultative (and time consuming) dialogue with customers, only to have the branch manager quietly mouth “hurry up” from behind the customer queue. The FMCG leadership who extol an end to bureaucracy, encouraging operational slickness and efficiency while at the same time demanding the 27 monthly reports, 50% of which nobody reads.
What type of culture is best?
These might all be examples of potential misalignment between organizational behaviors and the view from the top, but they illustrate reality for many employees.
What these examples don’t really tell us and what many organizational culture diagnostics fail to uncover is what the “right” culture to have is. Even the grandfather of organizational culture gurus, Dr Roger Harrison, couldn’t get us past the strengths and limitations of his model of four organizational cultures: Power, Role, Achievement, and Support. It has still been left to organizations to try to fathom out what type is best for them.
Ultimately, why organizational cultures secretly conspire against what a company is trying to achieve is because they are by their very nature so difficult to pin down. Virtually intangible, organizational culture has been notoriously difficult to describe in terms of how it operates and its concrete impact on organizational performance, even despite the plethora of stories and examples.
Luckily for us we have seen the advent of organizational culture change initiatives with a strong emphasis perceiving them as the key mechanism to organizational effectiveness and performance. A focus was given to answering questions including: What type of culture do we need? What is the relationship between culture and performance?
What has to be changed to modify the culture? Recent writers including Collins & Porras, Hesketh and Kotter have found positive relationships, in terms of process, between organizational culture and organizational performance. Models such as the European Foundation for Quality Management’s Business Excellence Model also provide some hooks to be able to understand and measure the impact of “the way we do things here.”
With these frameworks for measuring and monitoring how the way things are done influence an organization’s performance outputs, we can begin to develop an answer to not only how “the way things are done around here” helps or hinders our organizational strategy, but also allows for a definition of the type of culture that is needed to achieve strategic goals.
So how does organizational culture help or hinder?
The body of research into this field of organizational performance seems to have certain common themes. There are be two discrete and independent scales or dimensions of organizational culture that work with each other to help to describe a number of combined organizational characteristics. The first of these two dimensions provides a picture of whether an organization tends to be orientated more towards tasks, processes and quantitative goals rather than people, relationships and qualitative goals. The second dimension describes an orientation either towards collaboration, slower timelines, and considered responses or more towards competition, faster timelines and pro-activity.
Rather than providing strict labels of organizational culture, they offer typical behavioral patterns depending on their combination. The research also
identifies a number of internal performance factors directly linked to and influencing business performance and other outcomes. What all the research points to is that there are a number of very discernable, inter-related organizational performance factors in a company’s operating style/culture (the way things are done) that can significantly influence its organizational effectiveness.
These factors, processes, ways of working and behaviors, clearly influence the psychological contract between company and employee and ultimately how it performs in the market. They include the extent to which the strategy is clearly communicated and understood and is in keeping with organizational values; the extent to which goals are clear at the individual and team level and have an explicit fit with one another and the organizations overall business objectives.
They include the extent to which leaders and managers operate in ways that are consistent with the stated vision and values of the organization, providing psychological reward and recognition over and above the financial aspects, and engendering employee participation and cooperation across the business. They also include the extent to which the business is generally structured and organised to facilitate decision-making, autonomy and control dispersed at the appropriate levels in the organization and freed from layers and bureaucracy.
What research has gone on to demonstrate is a correlated relationship between these organizational factors and levels of employee satisfaction and morale; the levels of willingness and ability to initiate and manage change successfully; the extent to which employees feel personal responsibility and accountability for customer service and business performance; the effectiveness of internal communications, cross-functional collaboration and ultimate organizational performance effectiveness.
The perennial ‘problem’ with organizational culture has always been the difficulty of pinning it down so that something tangibly could be done about improving or changing it. With these performance drivers it is much easier to identify what exactly is operating in the organizations style that is influencing the results it sees. With some regression analysis of the co-relation and relationship between these behavioral norms and the organizations resulting effectiveness, it is possible to address the root causes rather than the symptoms.
These performance factors in an organization’s style or culture are so powerful that they can make all the difference to the successful delivery of business strategy and execution of business plans. They represent the glue that creates engaged, highly committed workplaces. And when working like the highly oiled pistons of a high performance engine, organizational culture can transform companies, as Collins describes, “From Good to Great.”
About the Author
Joe España is Managing Director of Performance Equations, a management consultancy that helps companies and individuals become more successful by directly linking strategy to people and business performance.