Why culture is as important as strategy for successful leaders…

Strategy and culture are two sides of a coin

Successful leaders attribute their companies’ prominence to the culture they have fostered. Studies show consistent correlation between engaged cultures and high-performance results. Starbucks, GE, Microsoft, Tatas are some of the companies that come to one’s mind. Ginni Rometty, CEO of IBM rightly said, “Culture is your company’s number one asset.” These companies succeed as their strategic intent, operating principles and a character to engage and respect their people – irrespective of their age and level – are anchored around their culture.

It is a second nature to these leaders to generate regular behavioral reminders about the values, aspirations, and engagements that underlie their companies’ strategy. The leaders ensure that their personal leadership styles don’t dominate, but engage in those styles that make their companies succeed and most importantly live as an institution for generations. Look at some examples:

  • The secret of Southwest Airlines for making profits consistently for more than 38 years is its culture. The culture is singled out for three behaviors all these years: hiring people who connect emotionally with customers and colleagues, volunteering when help is needed at any level, and frugality to the extreme. This cultural spirit has been passed on seamlessly from cofounder Herb Kelleher to incoming CEO James Parker and President Colleen Barrett in 2001, and then to incoming CEO Gary C.Kelly in 2004. Each new chief executive is deliberately charged with keeping the company’s cultural identity intact and at same time, help the company evolve to meet new competitive and market dynamics.
  • Medtronic, world’s largest medical technology $16-billion company, offers innovative therapies to more than 8 million people around the world.  The therapies treat cardiac and vascular diseases, diabetes, and neurological and musculoskeletal conditions. The company’s mission believes in alleviating pain, restore health and extend patients’ lives. “It is more important to us than our numbers,” says its CEO.

How seriously the company takes its mission can be understood by the fact that the most important date in the Medtronic calendar is not the AGM or any quarterly earnings announcement but a day in December when patients who have benefitted from the company’s therapies troop into the Minneapolis HQ to share their experiences with employees worldwide.

Its innovativeness extends to customers making the expensive cardiac implants to patients affordable in easy monthly installments particularly for the economically needy patients. It has tied up with 60 hospitals across 18 cities in India where patients can buy 10 of its flagship products such as stents, pacemakers and defibrillators priced between Rs 20,000 and Rs 5 lakh.

  • In another incidence, when a new CEO took over the company, it was troubled by poor quality and fierce competitors.  The CEO was not much of a social guy and the Myers-Briggs test showed he was an introvert, but had to find a way of connecting with his employees to turn the company around. At that time, ‘people strategy’ emphasized employee health, using an American Heart Association program that encouraged people to walk 10,000 steps every day. So CEO donned a track suit and pedometer and ran around the headquarters building complex every day. Due to his constantly changing schedule, he ran at different times every day, and made a point of running through different parts of the complex. People never knew when they would see him jogging nearby, but they always knew the reason—he wasn’t checking up on them, he was just getting his 10,000 steps in. This practice gave the introvert CEO a highly visible, easy way to interact informally with people he would otherwise see only at formal meetings. It got to the point where the CEO was so comfortable that people weren’t afraid of approaching him.

The cultural context of the organization varies, based on its strategic intent and the business in which it operates. For example, leading pharmaceutical companies such as Eli Lilly & Co, Pfizer and Johnson & Johnson, innovation becomes the key; the same is with Apple. For hotels such as Marriott Hotels and Resorts, providing excellent service is the key. For company such as Southwest Airlines and Ryanair, it is about being frugal by focusing on operational excellence. Like they say imitation is best form of flattery, airlines such as IndiGo and Airasia have followed this model of Southwest Airlines and are succeeding.

All things can be delegated but not culture…

Successful leaders are humble and at the same time motivate people at all levels particularly at the ground level towards their cultural vision and strategy. They know that the ground level people, frontline employees or barefoot soldiers are the crucial link between strategy and execution.

They build a sense of shared purpose through the organization culture, making employees ask for help on how to do some aspect of their jobs better, or offer to help others improve their performance. They also make employees learn how to analyze and critique their own and each others’ tasks from the organizational cultural context. This could also mean subordinates learning to share inconvenient issues with their superiors without any fear and likewise, superiors learning to appreciate the truth, even if it is unpalatable, all because they share a collective purpose. Leaders know that culture is just not complying with values of the company, but being ethical and doing the right things. Without this cultural context, these issues would result in interpersonal, intradepartmental and intra business conflicts, pulling down the morale and business performance.

Why demonstration of culture vary…

If one starts peeling the layers of organizational culture for implementation, how culture needs to demonstrated differently based on the hierarchical levels and the subcultures within an organization gets revealed.

Hierarchical levels:

  1. Team Leadership: This is about employees starting at the bottom and gather practical experiences as they move into the manager’s level after 3-4 years of experience. To begin with people joining fresh out from colleges whatever be their profession need to analytical – that is how to apply whatever they learnt in the real world. Next comes working in teams, doing tasks by coordinating inter and intra departmental tasks that helps the department and the business. The next obvious skill would be the ability to communicate and deal with the real work issues that impacts the departments and business.
  2. Operational Leadership: This is about valuing others by managing and developing people and the team leaders. Managing and developing people are revolved around the organizational and business initiatives and in meeting the cultural and strategic objectives. Operational leadership is about building synergy within and across departments and businesses and being resilient.
  3. Strategic Leadership: It is about setting the vision, culture and the strategy for the organization and establish the required policies, systems and processes.  It is about developing and finding operational leaders to implement and execute the strategic and cultural intent. Most importantly developing those people in the operational leadership who could occupy strategic leadership in the next 2-3 years.

Subcultures within an organization

Edgar Schein in his book, ‘The Corporate Culture Survival Guide’ says, as organizations grow and mature, they not only develop their own overall culture, but they also differentiate themselves into many cultures based on occupations, product lines, functions, geographies and echelons in the hierarchy. In some organizations the subcultures are as strong as or stronger than the overall organizational culture. Leaders thus must not only understand the cultural consequences of the many ways in which growing organizations differentiate themselves but, more importantly, must align the various subcultures that have been created toward a common purpose. This is an excellent book with many tools for anyone thinking of designing, implementing and sustaining the culture of an organization.

Providing a context for demonstrating and developing the culture

All said and done, some companies go to great length to institutionalize their culture.  Some have defined simple behavioral demonstration statements to each of their value for employees to understand and demonstrate them. Others have taken pains to conduct workshops and integrate them into Performance Management System for institutionalization. There are other companies who have clearly interwoven their cultural values into the strategic operations and the culture in which they need to operate. Here are three companies:

  1. The Nielsen Code: In 1931, Arthur C. Nielsen, Sr., wrote the Nielsen Code, defining the principles that would guide ACNielsen to global leadership in marketing research. The Code remains relevant today and continues to guide their business.
  • Impartiality: Be influenced by nothing but your clients’ interests. Tell them the truth.
  • Thoroughness: Accept business only at a price permitting thoroughness. Then do a thorough job, regardless of cost to us.
  • Accuracy: Watch every detail that affects the accuracy of your work.
  • Integrity: Keep the problems of clients and prospects confidential. Divulge information only with their consent.
  • Economy: Employ every economy consistent with thoroughness, accuracy and reliability.
  • Price: Quote prices that will yield a fair profit. Never change your price unless warranted by a change in specifications.
  • Delivery: Give your clients the earliest delivery consistent with quality – whatever the inconvenience to us.
  • Service: Leave no stone unturned to help your clients realize maximum profits from their investment.
  1. Johnson & Johnson’s Credo:

We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality. We must constantly strive to reduce our costs in order to maintain reasonable prices. Customers’ orders must be serviced promptly and accurately. Our suppliers and distributors must have an opportunity to make a fair profit.

We are responsible to our employees, the men and women who work with us throughout the world. Everyone must be considered as an individual. We must respect their dignity and recognize their merit. They must have a sense of security in their jobs. Compensation must be fair and adequate, and working conditions clean, orderly and safe. We must be mindful of ways to help our employees fulfill their family responsibilities. Employees must feel free to make suggestions and complaints. There must be equal opportunity for employment, development and advancement for those qualified. We must provide competent management and their actions must be just and ethical.

We are responsible to the communities in which we live and work and to the world community as well. We must be good citizens – support good works and charities and bear our fair share of taxes. We must encourage civic improvements and better health and education. We must maintain in good order the property we are privileged to use, protecting the environment and natural resources.

Our final responsibility is to our stockholders. Business must make a sound profit. We must experiment with new ideas. Research must be carried on, innovative programs developed and mistakes paid for. New equipment must be purchased, new facilities provided and new products launched. Reserves must be created to provide for adverse times. When we operate according to these principles, the stockholders should realize a fair return.

  1. CEAT Tyres

Vision

To be amongst the most profitable tyre companies in India by 2016 through:

  • Market leadership in select categories in India and
  • Market leadership in significant countries outside India

Values – CAIRO

  • Challenger – We attempt to try new things and not fear failure, we question existing ways of working and we are open to critique and suggestions from the team and others in the organization
  • Aspiration-led – We encourage our people to dare to dream. Our aim is to deliver exceptional service to our customers. This we do by trying to excel at our work.
  • Integrity - We take responsibility for our actions and ensure our behavior matches our words. Being honest and transparent in our work is our continuous endeavor.
  • Result-obsession – We respect the time of others and strive to display a sense of urgency in taking decisions.
  • Openness – We value the skills, strengths and views of others and have a passion for learning and sharing ideas.  We appreciate and are responsible with the information the company shares with us.

Common ailments that affect the culture

The reason why most organizations don’t succeed in the long run is due to their short-term myopic views focusing on the current business challenges. Some of them are:

  • Doing what is convenient rather than what is right: Leader-follower model worked well in agrarian and industrial economy, as the work was primarily physical. But in today’s knowledge economy, whatever be the work, it needs cognitive skills of the employees and their passion, energy and ownership. We carry on the command and control mentality, which is being reinforced from our childhood to listen and obey elders.  We tend to believe that our leaders know more than us, revering hierarchy, and seldom questioning authority. Result: poor decision making; dysfunctional behaviors that not only come in the way strategic objectives; but also wasted opportunities and sometimes destroying the reputation of the company itself. Although there are many cases, the recent case of Ranbaxy is one such instance.

Dinesh Thakur, a former Ranbaxy director of research information and project management alleged in the US courts that senior company executives ordered destruction of evidence when they were alerted to data fudging, misbranding and adulteration in drugs in 2005. The company agreed to pay a $500-million penalty to the US government to settle a criminal and civil lawsuit that leveled charges of falsifying data from its drug facilities. Thakur was awarded $48.6 million from the penalty for reporting the violations

  • My view or your view, but not what works for the organization: Most business opportunities of an organization don’t reach their potential, when employees get entangled interpersonal conflicts looking at a business issue from their own views and choices. The employees rarely consider the third alternative – the view and choice that is best for the organization. Exploring the third and best alternative in the interest of the department and business brings in a sense of a shared culture. Practicing the shared culture requires subordinating one’s ego and pride, which unfortunately has become a rare commodity.
  • Other typical behaviors: Employees not aware of their mistakes and its implications on business. Brushing issues under the carpet, not sharing critical information and knowledge. Deriving power by hoarding information and experience. Not sharing the credit for success with others. Patronizing some and excluding others.

Sustaining the culture…

For a company desiring to have a cultural system, a starting point is the realization of the need itself for institution building. At this point, the company’s collective practices and beliefs can’t be labeled either good or bad as they may have evolved over time for one reason or the other. The cultural alignment has to be championed from the top for encouraging the new behaviors at all levels. This is one thing that the top management can’t delegate. Keeping in mind the entrenched mindsets and habits that you want to change:

  • Single out those key behaviors that exemplify the best of your company and which you want everyone to adopt. Walk the talk by visibly adopting these behaviors yourself.
  • Inspire your people to focus on your company’s aspirations and its potential.
  • Balance your exhortations to include both rational and emotional cues.
  • Make the change sustainable by rewards and recognition on the few critical elements that you have established as important.

When companies start encouraging and rewarding their employees in doing what is right for the company rather than what is convenient, then they have a made a good beginning. The culture takes a deep root when performance management system plays a big role by assessing and developing people to look beyond their job and to work in the interest of the department, business and community around them for the long haul. The hallmark of visionary companies is that they institutionalize strategic business ideas through its value system and not their leaders’ personalities.

Key sources:

  1. The John Adair Handbook of Management and Leadership. Ed. Neil Thomas. Viva Books Private Ltd 2007
  2. The Corporate Culture Survival Guide. Edgar Schein. Jossey Bass. 2009
  3. Culture and the Chief Executive. Booz & co. Issue 71. Summer 2013
  4. No room for followers. A guide to creating leaders at every level. David Marquet. 9th December 2011  www.managementexchange.com/hack

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