Does business culture have an impact on performance? By performance, I mean net profit, customer satisfaction and loyalty and employee satisfaction and loyalty. Whilst I have not conducted a formal study, my experiences observing organisations tells me that the answer is a resounding yes.
See if you can spot the difference between two sets of culture which I have observed from within and without in eight separate organisations. Whilst the cultures I describe are an amalgam of like organisations, there is a great deal of overlap between those classified as belonging to the same culture.
The first culture has the following characteristics.
The hours spent at work are observed. Those spending more hours at work are considered to be working hard. Those spending fewer hours at work are considered to be unmotivated. Comments such as, “Having a half day today, are we?” are heard occasionally being said to staff who leave before 6:00 pm.
Most of the major metrics are internal. All metrics with any external weighting are lag indicators. Targets are mainly created by looking at past performance and adding or subtracting numbers to achieve a particular result. Only the few cases where individual managers work that way, do metrics cascade from a single numeric goal based on cause and effect.
Days at work are consumed by never-ending meetings. Few decisions are made at the meetings. Attendance at the meeting is dictated by a need to keep all stakeholders informed. Consensus and not making mistakes are given more weight than speed in decision making. Either an informal approach or an overly formal decision making process is used if and when decisions are actually made.
Several studies or projects are underway at any given time. More than thirty initiatives are probably underway, if one itemised them all. Less than 20% of the initiatives are making a significant difference to the goal set for the organisation, in the next twelve months. The studies and projects consume a large proportion of the time of the most talented and experienced people in the organisation.
Contributing to the analysis and final presentation of the analysis of a study or a project is given ten times as much weight and focus as implementation. Reports are typically 30-40 pages long with many tables and graphs of problem definition and analysis and one to two pages on implementation.
Perks are seen to go with seniority. People who contribute and drive the analysis of a study and write a report only make the presentation when the presentation is risky and the location of the presentation is not exotic (head office training room versus sales conference at a resort).
Relationships with external stakeholders are competitive. The concentration is on dividing the spoils and/or maximising power.
Sales and marketing is seen as something that almost anybody can do as long as they have an outgoing personality. Sales and marketing are not aligned. Sales and marketing as a group are not aligned to operations. Silo mentality is the norm.
Systemic thinking is seen as too hard.
The other culture has the following characteristics.
There is one goal. It is well known and recited often to make sure everybody knows what it is. There are a few key strategic platforms which drive the organisation towards their goal. The strategic platforms are well known and are talked about in every internal presentation. Performance indicators cascade from the goal and the strategic platforms. A mix of lead and lag indicators is used. Some indicators are found to be ineffective over time and are replaced with others. As many external metrics as are accurately measurable, which provide real insight into progress towards the goal, are used.
Internal meetings are kept to a minimum. Authority for decisions is clearly spelled out. Accountability is seen to go hand in hand with authority. Accountability is formally known. External meetings are encouraged. Quick decisions with an ability to detect when decisions in hind sight actually were poor are encouraged over consensus. Initiative coupled with risk management is encouraged.
Studies and projects which do not contribute to the goal are starved of resources or are not approved at all. Reviews are held regularly on the contribution to the goal of projects and studies underway.
People who contribute the most to a project or study reap the rewards, positive or negative. They are held responsible for good or for bad. Their managers, or those who selected and mentored them on the project or study, are held accountable for their good or poor performance.
Relationships between the organisation and its important stakeholders e.g. distributors, regulators, compliance auditors, are collaborative and concentrate on increasing rather than dividing the whole. This applies alike to money, standards and authority.
One part of the organisation is seen to drive the others. The hierarchy is evident based on the cascading of strategy and tactics to reach the goal, but not on personal importance. Silos may exist where team work is not required, but the role of each group in reaching the goal is well known and preserved assertively.
Systemic thinking is normal.
The difference in performance between the organisations I have allocated to these two cultural norms is stark.
The first set of organisations are characterised by the following performance.
Employee satisfaction is low. Turnover rates are higher than normal for their industry. Power bases are obvious and fiercely protected. Passive aggressive people are rewarded. Politics is a skill to be learnt to progress.
Decision making is slow. Opportunities are missed. When opportunities are noted to be missed the initial reaction is to cover up. The second reaction is to blame. Targets are often missed.
Profitability or other benchmark statistics are below industry average.
Little is implemented. Projects with a charismatic forceful leader are implemented; however, this is not the norm.
The second set of organisations is characterised by the following performance.
Employee satisfaction is low in pockets. Efforts to increase satisfaction are generally successful. Assertive people are rewarded. Power bases exist and are defended when the role of the group in reaching the goal is being eroded.
Decision making is swift. Mistakes are made. Mistakes are corrected. People who continually make mistakes are demoted. Targets are rarely missed.
Profitability or other benchmark statistics are above industry average or moving quickly towards industry average from a low base.
Much is implemented. Implementation is celebrated. People have a clear sense of where they have come from and where they are going to.
My reflections above are real. So real that they form part of what we do when we look at the health of organisations and the potential for improvement. Most organisations are somewhere on the continuum between the two examples. Where does your organisation fit? What impact does culture making on your performance?
