Personal Finance

Put culture first and not strategy

Culture provides resilience in tough times. photo | fotosearch
Culture provides resilience in tough times. photo | fotosearch 

The phrase ‘‘culture eats strategy for breakfast’’ was coined by author and renowned management consultant, Peter Drucker, and made famous by Mark Fields, President at Ford.

So what comes first, strategy or culture? Does a great strategy translate to success or is company culture the determining factor?

Strategy is what is on paper: the plan that is documented — and hopefully shared. Culture is what determines how things get done. Strategy is probably easier to define and explain, whereas culture is less so.

Culture is intangible — something businesses are trying hard to make more tangible.

Strategy provides direction, aligns to the business vision and mission, helps decision making, prioritises activities and defines accountability.

Without a clearly defined strategy, the business is in danger of floundering, not knowing what decisions to make or why. Strategy guru Michael Porter says “strategy is about making choices, trade-offs; it’s about deliberately choosing to be different.”

Choices become easier when we are clear about where we want to go. Merriam Webster’s dictionary states that ‘‘culture’’ was the most popular word of the year in 2016.

It now has to become the most important word in the business boardroom (after coffee). Research carried out by Gallup on the State of the American Workplace in February 2017, shows that only 31 per cent of employees are engaged at work, 51 per cent are disengaged and 17.5 per cent are actively disengaged.

Disengaged employees are not going to drive hard to help achieve an organisation’s goals. They are likely to go to work, just about do what they need to do, and then leave until they really must go back and clock in the next day.

The recent incident with United Airlines, where a passenger was dragged off the flight, is very unlikely to be part of their strategic five-point plan!

That behaviour is down to the company culture and what employees perceive as acceptable behaviour. Culture is about how employees behave when no one is looking, kind of like the child, alone, next to a cookie jar.

How do they treat a customer when they think there will be no consequences? When an employee has to think on their feet and make the decision, what decision will they make?

Several businesses think that culture is the wishy-washy stuff that really doesn’t matter. Or even if they think it does matter, many find it difficult to get a handle on understanding it or how they go about creating a conducive company culture. Culture is about the way things get done, the values we believe in and the way we behave.

John Kotter and James Heskett carried out a quantitative study of the relationship between culture and performance in more than 200 companies, such as Xerox, Hewlett-Packard, and Nissan.

They found that shared values and unwritten rules can profoundly enhance economic success. Conversely, their absence can lead to failure to adapt to changing markets and environments.

Fundamentally, people are loyal to culture, not to strategy. Culture also provides resilience in tough times. During the fuel price crisis of 1991, Southwest Airlines didn’t have to execute a strategy of pay cuts, employees volunteered for it.

The team at Nordstorm go above and beyond the call of duty not because it’s in a policy, but because it is part of their culture.

The Nordstorm policy manual is a few sentences long — and its (crisp and focused) rules are as follows: “Rule No.1: Use best judgment in all situations. There will be no additional rules.

Please feel free to ask your department manager, store manager, or division general manager any question at any time.”

When culture and strategy collide, culture will win, as shown by Robert Nardelli’s hard-fisted General Electric (GE) strategies that boosted sales, profits and stock price at the cost of overlooking culture.

However, this was at the cost of violating its people-centric values and ability to compete for the best talent. He ended up getting sacked for trashing a great culture.

Strategy and culture do go hand in hand though. Any company that disconnects strategy and culture is doing so at the detriment of their success.

Culture and strategy are inextricably connected. It is fair to say, however, that it’s easier to change a strategy when it is needed and more challenging to change a company’s culture.

Kotter and Heskett’s research found that effective leadership is what reverses unhealthy cultures and creates great cultures.

However, several leaders spend time mulling over wording their strategy and business plan, instead of creating a culture that drives the achievement of that strategy.