The importance of aligning organisational culture with business strategy
Steve Newhall, Managing Partner, Leadership & Talent Consulting, UK
Business leaders spend significant amounts of time designing and agreeing upon strategy but comparatively little time thinking about their culture.
In a 2014 Korn Ferry survey, while 72% of executives agreed that culture is extremely important to organizational performance, only 32% believed their own organization’s culture is aligned to its business strategies.
What is culture? Culture is the accepted norms, values and behaviours that drive how employees behave. It influences everything a company does, from management decisions to recruitment or production. As Peter Drucker said, “Culture eats strategy for lunch.” It is often neglected because it can’t be measured on a balance sheet and because of a perception that it is hard to change.
Neglecting culture is a mistake however, because it is the glue that holds a strategy together. For example, a consumer technology firm’s strategy might be heavily reliant on continuously innovating and coming up with exciting new products. If the company’s culture doesn’t encourage and reward that sort of innovation amongst its employees, its progress will stall. Similarly, a bank’s marketing strategy might focus on presenting itself as a ‘trusted’ organisation. But if the culture of being trustworthy isn’t engrained in the workforce, their reputation could be tarnished overnight.
We have seen numerous highly visible examples of how failure to successfully integrate two cultures in a merger prevents the combined entity from realising its potential. DaimlerChrysler is one example, AOL Times Warner is another.
First and foremost, organisational culture should be aligned to the business strategy. Yet a recent Korn Ferry report suggests that only one in three executives believes this to be the case in their own business. Culture is visible through the organisation’s people; they have to buy into it to make it work. However, this is often not the case – just 35 per cent of respondents to the Korn Ferry study believed their employees could even articulate their business culture effectively.
Executing a business strategy well requires the alignment of culture and talent. Businesses should consider the following six questions:
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 is to identify the values you want to preserve.
There will be things that you’ve done in the past that people are very committed to, values that are deeply held, or ways of behaving that are so meaningful to people that they’re important to preserve.
2. What do you need to get rid of?
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. 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 get rid.
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 behaviours. 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 it?
This 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 of the things you need to get very specific about is how you want leaders to behave and operate, in terms of how they work with each other, how they lead the business, and how they engage with their people.
4. How do we operate?
In the same way that you need to align your desired employee actions with the culture, you’ll need to look at larger, overarching operating practices and ensure that they, too, align with it. Consider things like decision-making, communication, and conflict management: how do these things get resolved in your organisation? How should they be resolved is your ideal culture?
5. Does the structure facilitate our culture?
You can’t have an organisation 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 empowered to make the decisions that are nearest to them. The structure of your organisation should facilitate the kind of culture you want by allowing the behaviours and practices which embody that culture.
6. Who works for us?
Talent management is a huge part of how culture looks to those inside and outside the company. You need to attract the kind of people who mesh with your desired culture, and keep them engaged, focused and committed.
Examine what sort of behaviours you are reinforcing in terms of how employees do their work. What behaviours or capabilities are you reinforcing in terms of who gets promoted?
Businesses are changing faster than ever before, with omnipresent globalisation, mergers and acquisitions, joint ventures and outsourcing making it more difficult than ever to create and sustain an effective and consistent corporate culture. This makes it more vital than ever that businesses spend time identifying what their culture should be, how this aligns to the business strategy, and how it can be integrated across the organisation.