HR managers know better than anyone that a healthy culture is foundational to a company’s success. And of late, there’s been no more popular subject in HR than what constitutes a healthy culture and how to improve an unhealthy or even toxic one.A healthy culture is foundational to a company’s success Click To Tweet
But company culture is only one aspect of an organization’s ecosystem. And while it’s true that a company with a toxic culture will do poorly over time, it doesn’t follow that a successful culture inevitably leads to success in business.
That’s why the next step in the conversation about company culture is how to align it with business goals—and the more explicit the connection, the better.
Lots of organizations have been persuaded of the importance of culture, but “what most executive teams typically fail to do,” according to Paul Leinwand, Global Managing Director at PwC’s strategy consulting business, Strategy&, “is to connect the company’s culture with how the company makes its strategy work.” Culture determines how employees interpret business goals. If you don’t understand the relationship between the two, you can’t improve culture or performance.
So, while CEOs are usually comfortable with HR taking the lead in implementing culture initiatives, the division, whether it’s a department of many or a team of one, “rarely plays the all-important role of ensuring that the culture is fully or purposefully aligned with the strategy.”
But the symbiotic relationship between culture and strategy means that those tasked with managing company strategy need to be on the same page as those managing and driving company culture.
The symbiotic relationship between culture and strategy means that those tasked with managing company strategy need to be on the same page as those managing and driving company culture.
Culture vs. Business Goals
In 1994’s The Reengineering Alternative: A Plan to Make Your Current Culture Work, William E. Schneider, cofounder of Corporate Development Group, argued, “No management idea, no matter how good, will work in practice if it does not fit the culture.”
Seventeen years later, in 2011, corporate advisor, author, and Stanford lecturer Nilofer Merchant observed the same phenomenon: “If the strategy conflicts with [what] a group of people already believe, [how they] behave, or make decisions, it will fail. Conversely, a culturally robust team can turn a so-so strategy into a winner.”
Trying to overhaul company culture without considering how that will affect the execution of business strategy can doom the culture efforts—just as updating the business strategy without understanding how the culture will affect its implementation can lead to a failed strategy.No management idea, no matter how good, will work in practice if it doesn't fit the culture Click To Tweet
The worst case scenario is not only that the culture and strategy don’t align, but that they’re in direct conflict with each other.
At one startup, for example, leadership determined they needed to improve workplace culture by making business decisions more transparent. They instituted listening sessions and brought in management coaches who mediated company-wide discussions—to no avail. Despite all the conversation, and all the feedback, employees found that neither the criteria used to make decisions nor the method of making them had changed. Employees continued to be left in the dark about decisions until after they had been made, at which point it was clear their feedback had not been incorporated.
The attempt to create a more transparent workplace was in conflict with how the leaders were running the business. Worse, employees became even more frustrated than they had initially been, once they realized they were offering feedback that was simply being ignored.
In other words, trying to create a company culture that conflicted with the business strategy backfired, further deteriorating the workplace environment.
Similarly, a company that revises its hiring practices to increase diversity but can’t retain those hires is, unfortunately, becoming a classic example of misaligned culture and strategy. Adopting a value that isn’t applied to the whole of the business only serves to make it more obvious where and how the company isn’t “living” the value in question.
It’s a conundrum that seems to have become more common as more organizations focus on their culture, without considering how it fits into the business as a whole.
Aligning Culture and Strategy for Agility
The challenges of an uncertain business environment and rapidly evolving technologies mean that successful companies must be able to adjust quickly and seamlessly. Doing so requires institutional agility, even for larger companies.
Of course, increasing agility can be a huge shift not only in strategy, but also in culture. How does an agile strategy affect workplace culture? How doesn’t it might be a better question.
In a piece on the agile trend, Knowledge@Wharton, the school’s online business analysis journal, took a look at IBM’s approach. The company is “deliberately designing the whole organization around agile, everything from how the workplace is designed with open spaces even for the most senior leadership, to the rewards system, to assessments, to their recruitment, learning and development, their communications process. They are a 100 percent agile organization.”
Agile organizations require managers to take a more hands-on approach in proactively initiating and driving the development of their employees.
Agile organizations require managers to take a more hands-on approach in proactively initiating and driving the development of their employees. Altering the assessment process is therefore common, and, for companies transitioning from annual-review-only assessments to real-time feedback, can be a major shift. If the current culture discourages uncomfortable conversations, if regular and open communication between employees and managers isn’t normal, real-time feedback won’t work without a conscious effort to adjust the company culture.
Doing It Right
Starbucks is an oft-cited example of a large enterprise that has successfully—and profitably—aligned their business strategy and company culture. Their “consistently comfortable and welcoming ambiance” is a global phenomenon. But, as a Harvard Business Review analysis noted, “You don’t get that simply by telling your staff to be warm and friendly.”
How did they get there? That dovetailing of culture and strategy is the result of former company president Howard Behar’s belief that “employees who feel cared for will care about their customers.” That care trickles down to the way employees, called partners, talk to each other. Rather than ordering employees to do something, partners use language like “Would you do me a favor?”Employees who feel cared for will care about their customers Click To Tweet
It’s the company-wide, relationship-driven attitude of putting people first—employees and customers—that has “encourages staff to form close bonds with each other.” And that good feeling is central to creating that reliably “comfortable and welcoming” atmosphere that so essential to Starbucks’ brand.
Make It Happen
You’ve got culture and you’ve got strategy. Here’s how to bring them together and make them play nice. A goal alignment system enables employees to take initiative and stay engaged, while also tying their activities to overall company goals. For a fast-changing business, it is crucial employees have the right tools to help them visualize where they fit into the larger whole.
Aligning culture and business strategy must be a collaboration between HR and the strategy leader(s).
- Together, identify the current culture: shared purpose, values, and goals.
- Identify which aspects of the culture that are “connected directly to your identity and specific capabilities that are driving success, [and] double down on them.” Find ways to reinforce and extend the behaviors that result from those beliefs.
- Those who most represent and live the values are your company’s “culture leaders.” Enlist these folks to lead by example and facilitate discussion.
- Explicitly link those positive cultural behaviors to the company’s business strategy, so employees connect their efforts with the company’s success.
- When evaluating business goals, identify what in the culture might facilitate those goals. Are there aspects of the culture that will support a new strategy, or will the culture need to shift in order to accommodate the change in goals?
The Starbucks brand is so successful because the company identified its values and put in place practices to make sure those values help determine the business strategy. As John Kelly, Starbucks’ head of responsibility, put it, “At the end of the day we are a company that lives its values, and that has been key to helping us drive our business.”