A big culture–strategy disconnect can be catastrophic. Only a formal assessment based on objective data can tell you if your organization is ready to transform.
“Culture eats strategy for breakfast” has been one of the most lasting aphorisms in business. The phrase has been so durable because it accurately, and vividly, describes a common issue: trying to pursue a strategy that the organization isn’t ready for. Yet although the phrase nicely sums up the problem, the solutions are harder to find.
Success requires understanding—and measuring—the potential disconnect between the culture of an organization and the strategy under consideration. Cultures can change, but they can’t change radically in the near term. If a leadership team can determine the size of the gap between culture and strategy in advance, they can set the right level of ambition for that strategy—and increase the odds that it will succeed.
Start with the data
First, you need to understand the company’s culture—the identity of the organization. A lot of CEOs think they have this understanding, but that’s often at a high level, based on impressions and anecdotes (and of course, CEOs don’t always get the full and unfiltered view). Even when companies conduct formal research, they tend to focus on employee engagement, asking whether employees are happy coming to work, whether their jobs are fulfilling, or whether they’d recommend the company to a friend. Those methods have value, but they answer a different question: whether employees feel positively or negatively about various aspects of their workplace experience. They don’t identify what the culture actually is.
To fully understand a company’s culture, you need to go beyond those sentiments. That requires a comprehensive survey of the organization, one that looks at more than just employee engagement. Questions need to be structured to accurately define the dominant traits of an organization and how they might impact its ability to deliver on its strategic goals, as well as the workplace experience it offers to employees. It’s a challenging task, because culture—the unwritten rules for how a company functions on a day-to-day basis—is often invisible.
For example, PwC’s Culture Thumbprint diagnostic asks employees a series of questions about their company, each of which has a sliding scale between two opposing attributes, such as:
• Are there single points of accountability, or are decisions made by a consensus?
• Do interactions tend to be polite and cordial, or with the acceptance of conflict?
• Is the organization focused on specific priorities, or is it open to new opportunities as they emerge?
• Is your organization comfortable with risk, or is it risk-averse?
• Is your organization comfortable with formal processes, or does it encourage improvisation?
By aggregating these answers from all employees, companies can synthesize them down to a set of core cultural traits that are unique to the organization—and quickly identify the elements of culture that can be leveraged as strengths, along with those that most need to evolve. This analysis also can highlight nuances in the corporate culture, or pockets in which one business unit has a somewhat different culture than another, or the organization overall. With this view in mind, you can be much better prepared to see whether the culture is compatible with the company’s target strategy—and this is where things get interesting.
Measuring the alignment between culture and strategy
One client in the financial-services industry recently applied this approach. The firm had been experiencing high employee turnover, and management wanted to transform to become more innovative and customer-centric. That’s a common goal of a lot of organizations right now, spurred in part by the acceleration of technology. But the diagnostic showed that the firm’s culture was very hierarchical and process-focused, with a cautious approach to change. That kind of culture has long made sense in the financial-services industry, which is heavily regulated and rewards compliance to predefined processes. However, such a culture doesn’t readily align with innovation and customer-centricity, which made it difficult for the client to achieve those goals.
Another noteworthy finding was the disconnect between how management talked about the firm’s culture, and the reality of the culture revealed in the data. Before running the diagnostic, management often described the firm as having respectful, egalitarian leadership. But in the results, the firm’s hierarchical culture came through loud and clear. That disconnect created a kind of incoherence that affected the workplace experience. It’s a common problem: managers see and say one thing; employees experience something else.
Notably, no cultural trait is inherently good or bad. On the contrary, just about any trait can include both strengths and weaknesses. For the financial-services firm, another cultural trait that emerged was that many employees had a “get it done” mindset. That can be an organizational strength: team members are able to rally together during difficult times, and they have a bias toward action, flexibility, and speed.
But this trait can also pose challenges. The sense of constantly responding to pressure can cause stress and burnout (a prime source of employee turnover). Similarly, the firm’s get-it-done mindset meant employees were often finding clever workarounds to processes, without ever stopping to see how the processes themselves were ineffective. (The diagnostic also found that the financial-services firm’s employees were more likely to fix problems than prevent problems—less than ideal in a regulated industry.)
Closing the gap
What to do when there is a gap between the current culture and the target strategy? Leadership teams are sometimes tempted to undertake a large initiative to completely change the culture, but that would be a mistake. Culture is self-sustaining and difficult to change. Rather, leaders should identify elements of the existing culture that support the company’s strategy and are sources of pride, and magnify these elements.
In addition, leaders can identify a critical few behaviors to evolve specific elements of the culture that are particularly problematic. The key here is focus: rather than attempting a wholesale revolution of culture, successful initiatives prioritize specific pieces. For example, the financial-services firm identified behaviors that affected cross-functional collaboration and transparent communication. It set up an advisory board on which a small group of nonmanagement employees could provide unvarnished feedback to the leadership team. This broke down the overly hierarchical culture at the firm and helped it achieve its goal of becoming more innovative and customer-centric.
Other organizations with a large gap between culture and strategy could try different solutions. Regarding innovation, for example, an organization could create a new business unit that serves as a hub for new ideas, with teams given an explicit mandate to move fast and work in new ways.
But none of these options will be possible until companies systematically and quantifiably assess their current culture and determine how well it supports the ways in which they want to operate in the future.
By Alice Zhou, Mara Kelly, and Christopher Hannegan
Courtesy PwC Click here for article
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