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The culture conundrum

It seems like there’s never a week when a new corporate scandal isn’t hitting the headlines. We are often amazed that errors of this magnitude can occur in large, highly-regulated companies. Can the right culture help avoid these situations? You bet

Again and again we read about yet another corporate scandal which hits the news. From Enron to Uber; Wirecard to Nissan. What happens next is a well-trodden path: a senior executive gets blamed and fired (which I believe is often the right thing to do), the press talk about a ‘toxic culture’, there’s an enquiry and a lot of talk about change…….but nothing really changes! A few months later there is another crisis and no one seems to be learning the lessons from the past.

Establishing and/or improving culture is one of those things that gets talked about a lot and everyone agrees is important but it is all too often forgotten or pushed to the bottom of the priority list.

Winning…at what price?

I ran a leadership conference a few years ago where one of our speakers talked about culture. He was part of the internal team and was a cynic when it came to the importance of culture over strategy. However, in the journey to create his presentation he started to realise that under every strategic pillar sat a foundation of culture. He started his talk by getting the audience to agree with him, out loud, by shouting “Bull****” after each item on a list of cultural statements. The message – we don’t need this culture stuff, we just need to get on with shooting the lights out, driving profitability, selling more and WINNING! It was so “alpha” and testosterone filled. But then he surprised us with an about-turn, he asked how we should win. Is it OK to win by breaking the law? Is it OK to win but have a toxic work environment in which mental illness, depression and stress are prevalent? Do we want to enjoy coming to work AND win? Do we win by collaborating with each other or are we so fixated on our department winning that we will fight each other to achieve the goal?

OK, so that got people thinking! Thinking about what sort of environment they want to work in, what sort of company they want to be talking to their clients about. Ah, so now we’re starting to talk about culture, is it still bull****?

And then the data heads started to talk. “Great” they said, “we want to have a great culture AND we want to win, and we can see how these are mutually supporting. So how do we measure this, how do we know if we are getting the culture we want?”.

Now we are starting to ask the difficult questions. We can, of course, measure lots of items: employee engagement surveys, exit interviews, compliance breaches etc. And all those metrics give us indicators to our culture. But can we directly correlate these metrics with profitability and company performance? Yes, you can, but you also need to take into consideration all sorts of other factors: the market, the economy, our products etc etc.

And how much is a focus on this going to cost? And will we be able to measure a direct ROI on it? Possibly.

All of this depends on the extent to which you value culture. If you think it is important you will invest in it and know that, while you can’t see any direct ROI, it is helping to create a sustainable and connected business which together can WIN!

A consistent approach

The real test of the value you attach to culture is how you operate when things start to get tough, profitability drops off, markets are down, and you may even need to do a round of redundancies to balance the books. Do you cut culture-shaping activity or not? It is easy to cut and easy to rationalise as unnecessary or frivolous. But if your activity is aimed at creating a joined-up, collaborative business which recognises that we are better together and enjoys the power of synergy, surely it is those very behaviours and underpinning beliefs that will get you out of the hole.

Culture is a strategic lever which you pull for the long term. We have a host of levers we can pull to shape the business and get it through tough times and they will be pulled and pushed regularly. But the culture lever is always on. Once you have made the choice to pull that lever it is for the long term. It has to be. Launching with a fanfare (and associated budget), announcing that we care about culture, then backtracking sends a terrible message. We are saying “we do care but we don’t care enough”.

Why culture counts

So why pull the lever in the first place? Why should we believe that culture is something that is worth investing in?

The counter-positive message is to avoid the corporate scandals we read about. We don’t want to be the organisation that is known for LIBOR-rigging or manipulating of FX etc. But to focus on it just to avoid scandal is the wrong reason. We need to believe that a positive culture adds value to our business. So how can it do that:

  • It can create a reputation as a good place to work and a good company to do business with
  • It can reduce the ‘noise’ in the flow of work from silo to silo and make us more efficient
  • It can be seen as a multiplier in our valuation (to enlightened purchasers)
  • It can create an environment where people are willing to ‘go the extra mile’
  • It can give you a unique strategic position beyond product characterises. Think about Apple – yes, the product is very good, but you are also buying into a culture. And Starbucks – the product is the same as anywhere else but the consumer bought into the culture. And challenger banks – their supporters are buying into their culture.