The "Hows" and "Whys" of Organizational Culture

It’s all about culture. Period. It doesn’t matter whether you are talking about leadership, innovation, diversity, change-management, training, quality improvement/assurance, engagement, sales, delivery, customer service, communication, etc., it’s all about culture. Look out the window any evening. There goes 90 percent of your assets. Culture is the real value of any organization and the only real product. Employees have the potential to be creative, passionate people who want to wake up every day and do their best. However, they also have the potential to be dysfunctional, controlling, egotistical and complacent. Organizational culture determines what makes the difference about which person will walk through that door. It is the fundamental difference between long-term successful and profitable companies and those that eventually end up in the dustbin.

Interesting Facts About Culture

According to a 1990’s KPMG study of mergers and acquisitions, 83 percent failed to return any positive shareholder value to the organization and was cited as the number one career killer for CEOs. The main reason given? Culture clash.

The public sector is facing a crisis attracting and retaining top talent. It cannot compete with the private sector in terms of compensation; it can no longer guarantee a job for life. The public sector is constantly expected to do more with less. Culture is by far their greatest tool for attracting and retaining talent?

Studies among Gen. Ys cite that working environment, work-life balance and opportunity are the top reasons they select a place to work. Do you have a culture that allows them to develop without burning out?

All of this work on leadership ignores that the end result is culture. What good is having "great leadership" if the organization is so dysfunctional to the point where people do not feel they have a stake in the success of the organization?

The "What" of Organization Culture

Organizational culture can be difficult to define, let alone understand. Our definition of culture is the collective unwritten beliefs, rewards, ethics and behaviors that determine how people within the organization react and behave both toward their internal and external stakeholders, peers and customers.

There are two types of culture—flexible culture and inflexible culture. Flexible cultures exist in organizations where people are encouraged and rewarded for their commitment. These cultures are innovative, diverse and change-ready. Inflexible cultures are marked by their inability to change and exist in places where people’s energies are focused internally.

Examples of Inflexible Cultures:

Survivor: This is a culture where people are so focused on the internal threats and politics that burn out is high, and innovation, because it is "sticking your neck out," is low. It is a culture dominated by fear.

Centralized: This is a very top-heavy culture where senior management is at the center of every decision. It is a 50s-style corporate culture where the only people who make any decisions are senior management and change happens very slowly—if at all—because people have no ownership. It is a culture dominated by complacency. In this culture, when they tell you to hammer a nail, you keep hammering until they tell you to stop.

Bureaucratic: This is a culture where process and procedures take precedence over people and needs. Systems are very well entrenched and are very rarely reviewed and changed. One Six Sigma statistic that always struck me is that 85 percent of the data that an organization collects is meaningless. In this culture, it takes an enormous amount of energy just to get through the paperwork.

Examples of Flexible Cultures:

Customer-focused: This is a culture where people have ownership of their clients and are willing to push back internally and argue on behalf of their customers. This is a culture that adapts quickly to meet the needs of the marketplace because they know the needs and demands of the end user.

Learning culture: This is a culture that encourages innovation and where commitment is rewarded over loyalty (click here for explanation). In this culture, innovation and acceptable risk taking are rewarded and people are constantly encouraged to not only learn but apply their learning within the organization.

Ethical culture: This is a culture where people feel that the organization "walks their talk." It is a culture that embraces diversity and people believe that they are part of a greater good and that what they do makes a difference. In this culture, people are engaged and empowered.

What Makes Up a Culture?

We will explore all areas of culture in future articles, but a good place to start is to look at the major elements that make up a culture. They are:

Leadership: What is the vision, plan and communication that provide the organizational glue?

Attitudes and Beliefs: Is the culture you think you have the one everybody throughout the organization thinks you have?

Ethics: What is it that you do as opposed to what you say?

Rewards and Recognition: How are people promoted, compensated or recognized?

Processes and Procedures: Are there clearly understood processes that are reviewed to meet dynamic needs?

These elements, when combined, have a direct impact on an organization’s diversity, its ability to innovate and change, how it reacts to its customers, how it delivers its products or services and how it communicates both internally and externally.

The Bottom Line

Culture has a direct impact on the bottom line. You can click here to see our models of the elements of a flexible culture as well as the enablers and resisters of change and how it affects the bottom line. The way it works, though, is quite simple. An initiative is implemented in order to meet a need. It is then communicated to the organization. The message is filtered by the culture which then implements it and affects how it is delivered to customers, when it is implemented, how much resistance there will be and the quality with which it is done. That implementation ultimately determines success or failure.