The Vital Role of Culture in Business

The January-February issue of the Harvard Business Review spotlights The Culture Factor, with five articles on the subject.  Culture is the tacit social order of an organization: It shapes attitudes and behaviors in wide-ranging and durable ways,” notes the issue’s lead articleCultural norms define what is encouraged, discouraged, accepted, or rejected within a group.  When properly aligned with personal values, drives, and needs, culture can unleash tremendous amounts of energy toward a shared purpose and foster an organization’s capacity to thrive.”

In Who Says Elephants Can't Dance?, - his excellent chronicle of the IBM transformation he led as Chairman and CEO from 1993 to 2002, - Lou Gerstner wrote: “I came to see in my time at IBM that culture isn’t just one aspect of the game - it is the game.  In the end, an organization is nothing more than the collective capacity of its people to create value.  Vision, strategy, marketing, financial management - any management system, in fact - can set you on the right path and can carry you for a while.  But no enterprise - whether in business, government, education, health care or any area of human endeavor - will succeed over the long haul if those elements aren't part of its DNA.” 

The HBR article further points out the very close interrelationship between strategy and culture: “Strategy and culture are among the primary levers at top leaders’ disposal in their never-ending quest to maintain organizational viability and effectiveness.  Strategy offers a formal logic for the company’s goals and orients people around them.  Culture expresses goals through values and beliefs and guides activity through shared assumptions and group norms.”

“Strategy provides clarity and focus for collective action and decision making… Culture, however, is a more elusive lever, because much of it is anchored in unspoken behaviors, mindsets, and social patterns…  whereas strategy is typically determined by the C-suite, culture can fluidly blend the intentions of top leaders with the knowledge and experiences of frontline employees.”

Attributes of Culture

Based on a review of the academic literature, the article identifies four key attributes of culture:

Shared - Culture is an attribute of a whole group, not of an individual or a collection of individuals.  It’s all about the unwritten, shared values, rules and assumptions that guide how organizations behave.

Pervasive - Culture applies broadly throughout an organization, permeating all levels and functions.

Enduring - Culture has a major influence over the long-term mindset and actions of an organization.  It includes the shared rituals, stories, legends and experiences that typically define the organization.  It plays a major role in determining those who fit in and stay and those who don’t and tend to leave, thus becoming self-reinforcing and resistant to change over time.

Implicit - People are hardwired to instinctively recognize and respond to culture, - serving as a kind of organizational silent language.  Research has shown that the human capacity for culture is universal, having been shaped by evolutionary processes.

Cultural Styles

The article offers a framework to help understand the cultural styles of different organizations.  The framework looks at cultural styles along two key dimensions: 

People interactions, ranging from highly independent to highly interdependent.  At one end are independent leaning cultures, which emphasize autonomy, competition and individual action.  At the other end are interdependent leaning cultures, which emphasize integration, relationships and group collaborations.

Response to change, ranging from stability to flexibility and adaptation to change.  Stability leaning cultures favor consistency, predictability and maintenance of the status quo, while flexible, adaptable cultures favor innovation, openness and a longer-term orientation.

Eight different styles can then be identified when culture is mapped along these two dimensions: 

  • Results - outcome-oriented, merit-based, emphasis on achievement and success.
  • Caring - focused on relationships, mutual trust, loyalty, teamwork.
  • Order - focused on playing by the rules, structure, cooperation, shared procedures.
  • Purpose - exemplified by idealism, altruism, shared ideals, contributing to a greater cause. 
  • Safety - defined by planning, thinking things through, anticipating change, being prepared and realistic.
  • Learning - characterized by innovation, creativity, knowledge, being open-minded, exploring alternatives.
  • Authority - defined by strength, decisiveness, boldness, confidence, being competitive.
  • Enjoyment  - exciting, fun, stimulating, spontaneity, sense of humor.

Every company is a mixture of these eight different styles.  The culture of a specific company is defined by the strengths of each of the styles based on observed behaviors, as well as by the employees’ opinion about which styles best characterize their organization. The relative strengths of each style will differ across organizations.  Nearly all will be strong in the results and caring styles, and weak in enjoyment and authority.

No style is inherently better than another, with each having advantages and disadvantages.  For example, while a results oriented style will improve execution and the achievement of goals, an overemphasis on winning and achieving results may lead to collaboration breakdowns and higher levels of stress.  Similarly, a caring style will improve teamwork, trust and a sense of belonging, but an overemphasis on achieving consensus could stifle competitiveness and slow decision making.

Levers for Evolving Culture.

“Successful institutions almost always develop strong cultures that reinforce those elements that make the institution great,” wrote Gerstner in his aforementioned book.  “They reflect the environment from which from which they emerged.  When that environment shifts, it is very hard for the culture to change.  In fact, it becomes an enormous impediment to the institution’s ability to change.”

The HBR article make a similar point.  “Unlike developing and executing a business plan, changing a company’s culture is inextricable from the emotional and social dynamics of people in the organization.”  Four practices, in particular, lead to successful cultural change:

Articulate the aspiration. Cultural transformation is not unlike defining a new strategy for the organization. They both must be openly discussed and understood throughout the company.  Leaders must understand how the new culture aligns with market and business conditions.  Since culture is a somewhat ambiguous and abstract subject, it’s important to use real, concrete business challenges and opportunities to help people better understand and connect to the need for change.

Select and develop leaders who align with the target culture. In the end, leaders set the culture of their organizations.  It’s thus very important to select leaders whose cultural style is well aligned with the desired change.  At the same time, culture change often leads to turnover because some leaders are no longer a good fit for where the organization is headed.  Such leaders should be asked to leave lest they jeopardize the needed organizational changes.

Use organizational conversations about culture to underscore the importance of change. It’s important to discuss the desired culture change throughout the organization so that people can viscerally understand both the challenges and opportunities for the change. “As employees start to recognize that their leaders are talking about new business outcomes - innovation instead of quarterly earnings, for example - they will begin to behave differently themselves, creating a positive feedback loop.”

Reinforce the desired change through organizational design. “When a company’s structures, systems, and processes are aligned and support the aspirational culture and strategy, instigating new culture styles and behaviors will become far easier.”  Cultural changes are generally accompanied by changes in the way employees are paid, evaluated and promoted.  These are concrete, visible ways of reinforcing the desired evolution of the organization.

“Leading with culture may be among the few sources of sustainable competitive advantage left to companies today.  Successful leaders will stop regarding culture with frustration and instead use it as a fundamental management tool.”

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