Why Culture Eats Strategy for Breakfast
- Corporate culture can be a company differentiator and growth accelerator.
- It's created by design or by happenstance. Either way, it heavily influences employee productivity, customer engagement and business strategy outcomes.
- For most organizations, it is the single biggest untapped asset to boost staff productivity, employee tenure and company growth.
Few dispute Peter Drucker's claim that "Culture eats strategy for breakfast." But fewer understand why.
A growth culture and growth strategy are separate but symbiotic. The former will either strengthen or weaken the later. In fact, while there are a lot of things the company can do to drive business growth, the one thing that will directly impact every other is the corporate ethos.
It is the human performance engine that drives the success or failure for every business strategy, revenue initiative and change transformation. It is a precursor and top contributing factor to anything and everything that requires staff effort.
And unlike a business strategy that is created for a set period, the company ethos is developed over time. More often by happenstance than design.
Every company has an ethos. Most low performance company cultures are a consequence of unplanned actions, unmanaged behaviors and random outcomes. In contrast, high performance environments are intentional, proactively designed and in a constant state of awareness and improvement. They don't leave staff productivity and business performance to chance.
I've been a business growth consultant that's led the design and implementation of growth cultures for many years. And I've always been taken back by the number of executives that put more planning into a product, a project or a company party than their company cultures. I generally find these leaders don't fully understand the benefits and payback.
The Payback and ROI
Dr. John Kotter and Dr. James Heskett of Harvard compared low and high culture business performance results over an 11-year period. They reported that the high-performance culture companies realized an average 516% higher revenue growth, 246% higher net income growth and 755% higher stock price growth. The company strategies were not materially different, but the corporate ethos was.
Employee engagement is a cornerstone of a high-performance corporate ethos. The connection between engagement and business outcomes is measurable and undeniable. Gallup research has been tracking employee productivity for over 4 decades. It reports that in comparison to workgroups with disengaged employees, engaged staff are 18% more productive, 16% more profitable, 12% better at engaging customers, 37% less prone to absenteeism and 27% less likely to be a source of inventory shrinkage.
A high-performance corporate ethos drives staff productivity and company profits, making it an on-ramp to a successful revenue growth strategy.
But managing a growth culture is different than managing a growth strategy.
Corporate strategies include time-bound performance objectives, while corporate cultures are not time-bound.
Company strategies are fluid and change year to year. New strategies are generally implemented annually and revised during the year. In fact, company strategies must change and adapt to stay ahead of shifting markets, increasingly empowered customers and innovative competitors.
On the other hand, once culture declarations are defined and refined, they seldom change. They act as a solid bedrock for how staff align, communicate and work. They are pervasive and perpetual. They start slow but steadily build like a flywheel to the point where they grow under their own momentum and are difficult to slow down.
Why culture eats strategy for breakfast
The company ethos aligns leaders with staff and strategy with actions. It acts as a backstop that guides staff performance. During periods of ambiguity or sudden change, employees revert to the company norms. When strategy and culture are not aligned, employees defer to the later.
A weak corporate ethos fails to align strategy with behaviors. At best, staff simply go through the motions. More often, staff operate as they always have, and irrespective of strategy.
A company culture is democratized and empowering. Every person can make it what they want. Unlike business strategy which comes from the top, the company ethos is defined near the coffee machine, in the company lunchroom or wherever staff congregate and view the behaviors of others. Everybody contributes.
A growth culture is one of only four sustainable competitive advantages. While strategies, products and services are copied by competitors in increasingly shorter cycles, company cultures are not easily copied by competitors or displaced by new technologies.
The Point is This
Corporate culture research shows that your corporate ethos is both the biggest enabler of business strategy and the main obstacle to change and transformation. It either promotes or inhibits strategy and performance.
It determines the level of employee effort, and whether employees are merely going through the motions or are fully invested and delivering their best contributions. It's what we refer to as their discretionary effort. And it's the single most influential factor in driving employee productivity and the company's strategy.
Until you achieve a growth culture you will not achieve your company's potential. Your company strategy, employee productivity, revenue growth and financial results will remain at comparatively lower levels and permit any competitor with an intentionally designed ethos to outperform your company. It's not easy to achieve, which is why those who do outperform those who do not. And that is why culture eats strategy for breakfast.