Does Culture Matter?
Yes. As Peter Drucker famously said, “Culture eats strategy for breakfast.” And LSA Global’s research on organizational alignment found that culture accounts for 40 percent of the difference between high- and low-performing companies in terms of growth, profitability, customer satisfaction, customer retention, leadership effectiveness, and employee engagement. Indeed, culture matters. Any strategy or initiative must go through culture to get results.
How HR Typically Defines and Works with Culture
In our experience, HR and talent development leaders typically deal with culture from either an organizational health or performance management perspective. Both are important, but they are not enough.
Organizational Health. In general, smart leaders strive to create healthy organizations because employees want to work in a healthy environment. The health of an organization encompasses the well-being of employees, their ability to function effectively, their adaptability, their opportunities for growth, and the effective use of resources.
Organizational health can be measured on a “good to bad” or “healthy to unhealthy” scale using employee engagement surveys and other validated tools. And there are absolutely minimum levels of organizational health that must be attained for your company and your people to thrive. However, while organizational health has been proven to be necessary for success regardless of industry, it rarely, in and of itself, differentiates the performance of one company from another. Organizational health alone will not set you apart from your peers in terms of business results or talent management.
Organizational Performance. The next ingredient in a high performance culture is your performance environment. Smart HR and talent development leaders know that the performance environment goes a long way toward creating the circumstances to consistently get the most out of people in a way that is consistent with the organization’s core values, behaviors and strategies.
In general, leaders that create potent performance environments ensure employees have crystal clear direction, know what defines success and failure, know where they stand at all times, receive positive feedback and rewards for desired behaviors, and receive negative feedback and consequences for undesired behaviors. These attributes constitute performance management 101 and most savvy talent development and HR leaders are good at making this happen.
The Hidden Layer: Cultural Alignment and Purpose
The third, and often the least effectively used, ingredient required for a high performance culture is the alignment of your corporate culture with the business strategy. The goal is to design a purposeful culture that is 100 percent aligned with moving your business forward. This is where many HR and talent leaders get tripped up.
Remember, organizational health engages employees. It is the “ticket to play the people game” for any well-run organization. Your performance environment creates the circumstances for your people to thrive and know where they stand. A purposeful and aligned culture (what we call the Big C of culture) engages the business strategy by focusing on how the strategic work gets done. Unlike organizational health that is measured on an “unhealthy to healthy scale,” cultural alignment can be measured on an “unaligned to aligned” scale.
While HR and talent leaders and companies have made great progress on the health and performance management fronts, HR rarely plays the all-important role of ensuring that the culture is fully or purposefully aligned with the strategy.
Why Is Cultural Alignment Important?
Business strategies typically consist of a specific set of tasks than can be communicated, tracked and acted upon. But when employees are asked to execute the strategy, “culture happens.”
Strategies often fail because organizations haven’t adequately aligned their culture with their vision for the business. Many organizations have a highly fragmented set of underlying beliefs which determine how to interpret and accomplish the strategic goals. What’s more, these critical beliefs required to size up and execute the strategy are rarely articulated, measured or purposeful. So “culture happens!”
What Can You Do?
HR and talent development leaders need to help line leaders purposefully craft and nurture a culture that will align with and support their company’s unique organizational goals. Creating alignment between strategy and culture allows everyone to act with a more unified mindset.
LSA Global has identified 10 dimensions of purposeful culture in the areas of customers, market approach, loyalty, focus, risk tolerance, operational approach, decision making, location, atmosphere, and results. Progressive HR and talent leaders can use this framework to define and align the beliefs needed to best execute the strategy. The goal is to make it easier to get things done.
For example, the purposeful culture dimension of “Atmosphere” describes a continuum ranging from disciplined to social. Both can be good; however, everyone likely has a biased view of what a highly disciplined or a highly social organization would look like to best execute the current strategy. This unique approach allows leaders to pull culture out of the shadows. They can clearly and contextually define the desired culture, transform the underlying beliefs, and, with intention, align culture with the organization’s strategic goals.
If you want to align your culture to your strategy to drive higher performance and gain a seat at the executive table be sure to:
- Define the Current Culture. Create a common and organization-specific definition of your culture across the ten dimensions by identifying the current and most critical cultural beliefs that exist today.
- Identify the Desired Culture and the Biggest Gaps. Identify the critical few gaps between the current and needed culture to execute your strategy. For example, a recent client identified the need to have decision-making become more decentralized and their customer orientation to become more intimate for the company to realize their expansion strategy in Europe for their new and more complex service line.
- Change the Culture. Prepare people leaders to become culture ambassadors, cascade and translate strategic goals and their level of cultural alignment, address organizational health issues which may create road blocks and create action plans to create alignment. Then track progress and adjust accordingly.
A high performing culture has three interdependent components that must be monitored and shaped to suit your unique business strategy:
- organizational health
- performance environment
- aligned and purposeful culture
A purposeful and aligned culture is the secret sauce—the DNA of an organization—that determines success or failure. A purposeful and aligned culture means that teams are operating with the same objectives in mind and approaching those objectives in the same way. Because strategy must go through culture to produce results, how the company culturally views areas like customer intimacy, market leadership, focus, risk tolerance, process variation, and decision making plays a key role in strategy execution.
Unlike the Little C of culture, the Big C of culture is not measured on a “good to bad” scale. It is measured on an “aligned to unaligned” scale in terms of its ability to drive the strategy forward in a way that makes sense.
So, are you monitoring and shaping all three levels of culture to drive peak performance?