Driving Growth

Why business culture dictates growth more than strategy

By: Mel Wombwell

Evidence shows that culture drives performance – so why is it so hard to change your corporate culture?

“Culture eats strategy for breakfast,” said leadership guru, Peter Drucker. Certainly a polarising statement; it seems strange that culture could be so important for success. Surely clear strategy, good products, market positioning, world-class execution and sound financial management are the keys to success? Yes and no. All of these elements of course have an impact, yet culture seems to transcend them all.

Culture is the environment in which all human systems operate. In the same way that variables in the environment critically affect a plant's growth (sun, position, rain, etc) so the culture of an organisation dictates its growth.

The idea that culture has a huge impact on performance and sustainability is not just sentiment it is backed up by hard empirical studies.

In our experience most leaders realise that culture is fundamentally important and yet they find themselves impotent to change the culture when it isn’t productive.

What is culture?

We think of culture as the outworking of the ‘normative truths’ in the organisation.

There are different types of truth. There is objective truth: I burnt the dinner last; the sun will rise at 6.15am tomorrow; and there is subjective truth: Fred is not competent and we need to replace him; this project won't succeed. The problem faced by most organisations is that the leaders everywhere believe that their subjective truth (view of the world) is objective, when everyone else can see that it is subjective.

There is much that we observe that we think we have an objective view of and yet when we compare this view with others we realise that actually there is little that we observe in a truly objective way. We each have our own filters, which make our observations subjective. Furthermore, we even collude over the sun rising when, of course, we all know that it doesn’t – the earth revolves around the sun.

In an organisation there is also a third type of truth that we call the normative truth. When all the individual subjective world views are put together, they begin to form patterns, things that are generally agreed to be true (often not consciously). These views form norms that become the normative truth and, in this way, a culture is formed.

For instance, in one organisation it is acceptable to wander into a meeting five or 10 minutes late and in another no one would dream of doing so. The normative truth is that it is acceptable or not, and so this forms part of the culture.

Very often in organisations these normative truths are badly understood, if they are understood at all. In one major bank that we worked with, the values poster in reception proudly proclaimed the new values of the organisation. From our viewpoint these appeared to mean virtually nothing to the people who worked there because they did not reflect the normative truths. Maybe somewhat unsurprisingly, the normative truths in that organisation of ‘Make sure you don’t screw up’ and ‘Don’t admit you don’t know the answer’ didn't appear on any glossy posters.

Why is culture so hard to change?

Culture is hard to change because it is only possible to shift the patterns or norms that are already there. The idea that these can be ignored, replaced and totally forgotten in the place of a raft of new and improved norms is clearly ridiculous, and yet it is the basis for virtually every culture change programme that we come across.

Millions are spent on new values, purpose, visions, missions and yet they bear no relation to where the organisation's human system currently is. Not surprisingly, the human system is inclined to reject them. As a consequence, the response of the large organisation is often then to fire the CEO – since they clearly failed to impose their will – and huge cost is spent bringing in a new CEO who will need to be even more superhuman than the previous one and is almost bound to fail.

 The author is a Partner at Grant Thornton UK. Grant Thornton International Ltd. is a leading global business adviser that helps dynamic organizations unlock their potential for growth. Punongbayan & Araullo (P&A) is the Philippine member firm of Grant Thornton International Ltd. For inquiries, you may direct them to 988-2288 ext. 760 or visit our website at grantthornton.com.ph

As published in Philippine Daily Inquirer dated 16 May 2016