Business leaders need to move from thinking about their organisation’s success solely in terms of their financial performance to thinking “culturally” about organisations and all the elements that contribute to performance, according to a new report.
It suggested that the CEO is the most important factor in strengthening culture, followed by rewarding or penalising work or behavior that impacts cultural values and, recruiting executives with the right cultural attributes.
“If organisations accept, as many do, that the cultural leader is the CEO, it is imperative to recognise that the CEO, after setting the tone, then lives it,” said Katie Lahey, executive chairman, Australasia for Korn Ferry, which conducted the report.
HR executives a critical role as advocates, guides and facilitators of culture in an organisation, according to Lahey, who observed that the head of HR is a trusted advisor to the CEO and will play a strong role in promoting cultural alignment across various groups in an organisation.
“They can particularly play a key role in determining that the recruiting structure assesses a candidate’s cultural values and their fit with those of the organisation they are joining,” she said.
“The importance of ‘recruiting for culture’ was cited by many of the business leaders as an essential part of the culture journey.”
Where strategy meets culture
The report also explored the relationship between strategy and culture and how fault lines can form in organisations that allow toxic sub cultures to flourish.
“When culture is dramatically breached, the fallout can be costly to the brand, the bottom line, the social license to operate – and the long-term health of the organisation,” said Lahey.
“Leaders should not wait for a public breach of culture to identify and act on issues.
“Cultural work needs to be part of the day-to-day way an organisation and its people operate.”
A Korn Ferry survey of 500 business leaders globally found that 72 per cent said culture was extremely important to organisational performance, yet just 32 per cent said their organisational culture aligns to a great extent with their business strategy.
“The gap between these contradictory findings should concern business leaders, board directors, and executive teams,” said the report, which is based on a series of in-depth interviews with CEOs and non-executive directors.
“It is where risk and ambiguity thrive and where small cracks in culture widen, until something, somewhere, falls through.”
10 culture derailers
The report also explored how non-executive directors can identify culture derailers and identified 10 culture “red flags” that companies should be wary of.
“People often say after a crisis that they could see the warning signs,” the report said.
“The red flags were there, hiding in plain sight, accessible to those closest to them if they had known what to look for.”
The 10 culture red flags were identified as:
- The CEO: A “god-like” CEO should set off warning bells. Command and control is out, bringing people on the journey is in. How the CEO values and demonstrates culture should be a key performance indicator.
- The strategy. Do you know the kind of culture required to drive the strategy, and was the strategy created in the context of culture?
- The executive team. Is the executive team accessible to people at lower levels? Look for hierarchical clues that point to a closed door at executive level.
- Talking culture. Start talking about culture to fellow non-executive directors, the CEO, the executive team, and employees. Can they articulate it? Is everyone on the same cultural page?
- Whistleblowers. Is there a formal whistleblower program? What is the process when an employee needs to speak up? And most important, how are whistle-blowers treated?
- Toxic subcultures. Subcultures can be difficult to identify and challenging to change, particularly if toxic subcultures are thriving in high-performing parts of the business.
- Media noise. Look for inconsistencies in media reporting between what you read and what you know.
- Be a customer. Phone the call centre, make an inquiry, or visit a shop. Experiencing the organisation as a customer will reveal things about the culture that you may not learn in a non-executive director role.
- Engagement surveys. Be forensic in your review of employee engagement surveys and HR data.
- Recognition and rewards. Are the reward systems financially driven, behaviour-driven or both? … People’s behaviour will directly correlate to what is most valued and rewarded.
Source: The Tone from the Top – taking responsibility for corporate culture. Image source: iStock
