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Strategy And Corporate Culture

Managing a strategy into reality (Part 7)

15Nov

If an organization has a corporate culture, it has its own unique way of doing things. This corporate culture will be reflected by the habitual response – emotional, verbal or physical – of the employees of the organization to events. When asked about their role, do they feel threatened or do they appreciate the interest? When faced with an issue, do they gather to find a solution or to find someone to blame for the issue? During meetings, do they speak their minds freely or say what the manager wants to hear? Corporate culture can be defined, therefore, as the values, attitudes, and behaviors that have become ingrained in an organization.

Strong versus weak corporate culture

Corporate culture is sometimes referred to as 'Corporate DNA'. This is not an entirely accurate metaphor, however. It gives the impression that corporate culture is a constant, something that can’t be influenced or changed and is simply handed down as-is from one generation to another, while the truth is that organizations can influence their culture.

By valuing and rewarding certain attitudes and behaviors, and punishing others, organizations effectively influence the behavior of their employees and thereby build a corporate culture.

If the corporate culture building exercise is undertaken consistently year after year, and across the different functions, then a strong corporate culture will develop. Employees are then incentivized to either opt-in and adopt the defined attitudes and behaviors, or opt-out and leave the organization. This will lead to development of a consensus about important and unimportant, good and bad, coveted and abhorred, favored and disliked in the organization, and consequently a common way of working.

On the other hand, in organizations that do not actively manage their corporate culture, employees will continue to work in their own disparate ways. In this case, the corporate culture will be weak and the interactions between the employees much less effective.

Constructive versus destructive corporate culture

A strong corporate culture is a powerful management tool. It builds team spirit and aligns efforts and decisions, making an organization more effective. In other words, it enhances the ability of an organization to execute whatever it puts its mind to.

However, this does not mean that a strong corporate culture automatically supports strategy execution. It all depends on exactly which attitudes and behaviors the corporate culture promotes.

If the promoted attitudes and behaviors are aligned with the strategy, it is a constructive corporate culture that supports achievement of the strategic objectives. An example of this would be when a company that wants to enter or develop new markets - it encourages creativity, risk-taking, and a customer-focus.

On the other hand, if the corporate culture is not aligned with the strategy, it is a destructive or 'toxic' culture. An example of this would be when the same company that wants to enter or develop new markets encourages standardization, cautiousness, and a cost-focus.

In all, therefore, corporate culture can influence an organization’s ability to execute strategy in four different ways:

1. If the corporate culture is weak and the alignment between the corporate culture and the strategy is also weak, the organization will be characterized by chaos. On the ground, different employees will display different ways of working, while the organization promotes yet another way of working that conflicts with the strategic objectives.

2. If the corporate culture is weak while the alignment between the corporate culture and the strategy is strong, the organization will be ineffective. The organization will promote a sensible way of working, but the employees have not bought into this way of working.

3. If the corporate culture is strong but the alignment between the corporate culture and the strategy is weak, the culture will be obstructive. The corporate culture will influence the values, attitudes, and behaviors of the employees, but lead them to think, feel, and act in ways that go against the strategic objectives.

4. If the corporate culture is strong while the alignment between the corporate culture and the strategy is also strong, the organization will be effective. In this case, the corporate culture is supportive of what the organization tries to achieve.

Building a Strong, Constructive Corporate Culture

Since Strategy Execution will fail if the strategy is not supported by an aligned corporate culture, during Strategy Formulation already there should be thinking about the cultural attributes that will be required to capture the big opportunities ahead of the competition.

If the strategy requires a change in the corporate culture, during Strategic Planning that change should be defined, incorporated into the overall strategic plan and executed along with the other elements of this plan.

Changing corporate culture requires more than just developing a set of corporate values that define the desired culture. In addition, it requires:

- The values need to be communicated in a way that explains what they require in terms of practical behavior. This can be done through development of video clips in which the desired attitudes and behaviors are acted out in typical business situations, and/or the organization of role-plays that teach the employees the new culture and give them the opportunity to practice it in the presence of coaches, again while imagining typical business situations.

- It is absolutely critical that the communication is supported by leaders practicing what they preach. To employees, the values, attitudes, and behavior displayed by leaders communicate what the organization really believes – irrespective of what is formally communicated. Hence, if there is a disconnect between the desired corporate culture and the attitudes and behavior displayed by the leadership, the desired cultural change will never be brought about.

- If corporate leaders 'live and breathe' the desired corporate culture, they can pull the employees of the organization along by incentivizing the required values, attitudes and behaviors, and push them along by penalizing the unwanted values, attitudes, and behaviors. This requires the employee performance management system to not just consider results, but also the way these results were achieved.

Strategy or Corporate Culture, which one comes first?

The fact that strategy and corporate culture need to be aligned does not necessarily mean that the corporate culture must be aligned with the strategy.

It is possible for an organization to have a corporate culture that provides it with a unique strength, something that gives it a competitive edge, such as ExxonMobil‘s focus on standardization, discipline and cost control, or Dyson’s focus on innovation.

Such companies would be foolish not to leverage their cultural strengths when formulating their strategy. ExxonMobil's strategy, therefore, should be about finding and developing oil and gas in the most difficult of terrains, under the most difficult of circumstances, since there it can do what others can’t. And Dyson should aim at developing new markets (blue oceans) and avoiding existing markets (red oceans), because its corporate culture will enable it to succeed in the prior yet struggle in the latter.

What all this means is that culture management should not be an afterthought to strategy. The alignment of strategy and corporate culture should not be achieved by thinking about strategy first and corporate culture second, but by considering both topics together.

The 'Managing a Strategy into Reality' series

Part 1 discussed the necessity of establishing a Strategy Management Team (SMT).

Part 2 reviewed the Strategy Formulation phase of Strategy Management.

Part 3 reviewed the Strategic Planning phase of Strategy Management.

Part 4 reviewed the Strategy Execution phase of Strategy Management, focusing in the Strategic Performance Management process.

Part 5 continued the review of the Strategy Execution phase of Strategy Management, focusing on the Strategic Risk Management process.

Part 6 discussed the key competencies required for effective Strategy Management.

Part 7 reviewed the relationship between Strategy and Corporate Culture and explain how Corporate Culture can be managed to supporting the Strategy.

Part 8 will review whether Strategy Management remains relevant in today’s volatile, uncertain, complex, and ambiguous world.

Sources

This is Part 7 of the series 'Managing a Strategy into Reality'. The objective of this series is to help organizations execute their strategies for success. It documents what I have learned from implementing and managing Strategy Management processes at international and national companies for over a decade, on 3 different continents. It focuses in particular on the 'soft side' – the 'Art' – of Strategy Management: how to engage an organization in strategy and induce it to support the change it entails. It is not intended as a summary of academic literature on the subject, therefore, but as a 'practitioner’s guide' covering what I’ve seen work well and not so well.

The previous Parts 1 to 6 of the series explained the pivotal role played by the Strategy Management Team (SMT) in Strategy Management. The following Part 7 will review the relationship between Strategy and Corporate Culture, and offer advice as to how Corporate Culture can be managed to support the Strategy.

If you have any kind of feedback, feel free to leave a comment or connect with me on LinkedIn.

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