Why Company Culture matters!

If I ask you what is common between Nokia and Kodak, you will probably say that they were once the biggest and the best in mobile phones or photography. Sadly, there is another fact they share, they both fell victim to the same prey; their dysfunctional company cultures. The same culture that took them to the top turned out to be the cause of their downfall. Did you know the first digital camera was invented by an engineer in Kodak? The same invention that the Kodak leaders ignored, transformed the photography market so much that their world-dominating products were outdated in no time. Both companies’ leadership failed to look outside the box and adapt to changing market and client needs, and by the time they reacted, it was already too late. History is full of companies ignoring their incompatible culture and paying a price for it they couldn’t afford. There is a reason why Peter Drucker concluded that your culture eats your strategy for breakfast. Your company culture matters, and it matters a lot. Whether you are trying to improve your productivity, become more innovative, acquire new companies, become more customer-oriented, or attract top talent in the market, your company culture will play a big role in the outcome. In this article, we will discuss why leaders should pay more attention to this seemingly soft item on their agenda because when it hits, it can hit very hard.

What is Company Culture?

Let’s start by defining what we mean by Company Culture. In simple words, company culture is the mindset of your workforce.  How does someone in your company relate to their role, their colleagues and to the outside world? It is this mindset that dictates how an employee approaches and handles their task, clients, innovation, information, leadership, teamwork, communication, processes, rewards, work-life balance, learning and every other aspect of planning and running the business. All the way from your logo to unconscious business practices, behaviours, and values.

If culture is the mindset of the people, we should look at how our minds work. There are a couple of things that all our minds share, irrespective of the company or the country we belong to. People are social beings, meaning we influence and get influenced by other people around us, mostly unconsciously. When new employee joins the company, they tend to get their orientation and instructions about what is expected from them and what company values to follow as a good employee. But in reality, what most employees do is that they observe others around them and try to figure out what makes a good employee in that workplace. How are decisions made, what are the meeting protocols, is everyone following the process, what makes a good leader, what is the preferred communication style and so on? In other words, they see which behaviours are rewarded and sanctioned, and try to replicate those in their own role. Most companies tend to pass on their existing culture and mindset to the next generation without planning.

And secondly, we are all creatures of habit. This is our survival mechanism; habits take less effort and allow us to save our attention for managing ‘new things’ in our lives. The same applies to the workforce in your company. New employees are very conscious and aware of their behaviours and actions, but over time most business practices are more habits than conscious actions. Everyone goes about their day with the same business practices as everyone else. They are rarely challenged. And even if someone new in the company tries to bring their new ideas with them, they are quickly put in line.

Company Culture needs to be managed

If left alone, your company culture tends to sustain and replicate itself. And this is OK as long as your culture works in your favour. But what happens when the company needs to evolve in this ever-changing landscape? Clients, market, technology, society, etc. are always evolving and leadership has the task of ensuring that the company is moving in the right direction to cater for the change. We have experienced unforeseen events like the COVID-19 pandemic that changed the rules and norms overnight, giving companies no time to act or even react. Many companies are still struggling with the challenges of the Great Resignation or Hybrid teams. Employees measure and rank companies on different criteria now.  Money alone is not enough to attract the right talent anymore. Salary packages or remote working is losing ground due to a concern about the culture and ways of working in many companies and sectors now. Leadership style, role compatibility, openness, flexible working, employee vs. work focus, learning opportunities, inclusiveness, belongingness etc. are becoming more and more important in deciding the key issues such as retention or attracting talent in companies.

Even when two successful companies come together, the new entity is not guaranteed to succeed. In fact, we see over 80% of Mergers and Acquisitions deals fail to achieve the intended outcome. Cultural incompatibility between the two entities is a leading contributor to that. Daimler-Benz and Chrysler, Sprint and Nextel, and Alcatel and Lucent are a few examples of failed M&A deals where company cultural clashes were too big to handle. In many cases, the two sides do not assess their cultural compatibility before the merger, and the resources and processes can end up working against each other. These clashes between two entities often lead to employees not executing the planned post-integration plans. Successful mergers and acquisitions need to measure and assess the workplace cultures of both sides and add it as an integral part of due diligence. This could save a lot of effort, time, money and frustration for both sides.

But culture is not only a cause of challenges and headaches for an organisation’s leadership. We also see companies using their culture as their greatest asset. Companies like Netflix and Spotify are redefining how companies should be run. Their agile approach to running a business is even copied by more traditional sectors like banking. ING Bank did just that by transforming its entire organisation to adopt the Agile philosophy. Great company culture is turning out to be a big leverage for companies competing for top talent across the globe. We see more and more organisations investing time and effort in discovering and managing their culture. And reaping the rewards that come with it.

Culture and Strategy go hand in hand

A great strategy and plan need a careful compatibility assessment with the existing culture in the company and if needed, a culture transformation plan that goes hand in hand with your strategy implementation. Your company culture dictates how easy or difficult it will be to bring in new ways of thinking and working. Can the current mindset in the company take the new direction in its stride or do you need to assess and fill the gap first? It is imperative that the leadership teams should be aware of the culture in their organisation, and its impact on their existing and future plans.

Why not ask yourself now, what is the culture in my company? You may be surprised how wrong your perception of your culture can be. Unfortunately, one of the issues with most leaders is that they are unaware of the actual culture in their companies. They work with what they think they have, which we call ‘perceived culture’. Luckily for some, their perceived culture can be close to the actual culture, and their plans seem to work out anyway. But we have seen leadership teams getting it totally wrong when their plans clash with their actual culture. Culture is not just a good-to-know item, it is a must-know, especially if you are going through challenges or planning a strategic company-wide initiative. Leaders cannot afford to ignore their company culture anymore. After all your culture may make or break your company.

In the next article, we will look at how to measure and manifest a company’s culture and its impact on strategic planning and execution. Global Business Culture works with many multi-country organisations and helps them with their cultural assessment and transformation. If you are interested in getting a free assessment of your company culture, contact us.