Boyden Executive Search

Boyden's Matthew Lewis shares four reasons why culture matters and ultimately determines an organization's performance.

By Matthew Lewis
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In an environment of VUCA (volatility, uncertainty, complexity and ambiguity), how do you get the best from your team in terms of engagement, performance and profit? What separates the highest-performing organizations from the rest? Clever strategy? Superior products? Better people? Corporate agility? Perhaps, for a while – but any advantage fades if it is not built on something more fundamental. Something that enables a competitive advantage to sustain and grow over time. That something is culture.

What is culture?

Culture starts with what people do and how they do it. In any industry, what people do in one organization may not differ dramatically from another, but high-performing organizations distinguish themselves in how they do it. The cumulative effects of what is done and how it is done ultimately determine an organization’s performance.

Culture also encompasses why people do what they do. As the Titanic’s captain grasped a little too late that fateful night in 1912, 90 percent of an iceberg’s mass lies beneath the surface. Culture is similar, in that it includes observable behaviours (the what and how above the surface), as well as everything underneath. Just like the captain navigating frigid waters, anyone trying to understand an organization’s culture must recognize that most of what matters cannot be readily seen. Culture is the common set of underlying mind-sets and beliefs that influence how people work and interact day to day.

Four reasons why culture matters:

  1. Culture correlates with performance. Based on our research of over 1,000 organizations, comprised of more than three million individuals, those with top quartile cultures (as measured by McKinsey’s Organizational Health Index) post a return to shareholders 60 percent higher than median companies and 200 percent higher than those in the bottom quartile.
  2. Culture is inherently difficult to copy. The quickening pace of innovation means that products and business models face a constant threat of being replicated. In this environment, the ultimate competitive advantage is a healthy culture that adapts automatically to changing conditions to find new ways to succeed.
  3. Healthy cultures enable organizations to adapt. In a world where the one constant is change, culture becomes even more important because organizations with high-performing cultures thrive on change. The converse also holds true: Unhealthy cultures do not respond well to change. Research shows that 70 percent of transformations fail, and 70 percent of those failures are due to culture-related issues.
  4. Unhealthy cultures lead to underperformance…or worse. Over time, not only do unhealthy cultures foster lacklustre performance, but they can also be an organization’s undoing. As daily headlines attest, culture can bring corporate giants to their knees.

The topic of how to create healthier, higher-performing cultures is well worth exploring, as it can make the difference between profit and loss.

Culture at play

You can take the lead from sports like athletics, cycling, or team sports like rugby. Teams that do the basics well tend to excel when the pressure is on. They are able to come together, default to a pattern of consistent behaviours and plays that work for them and they know they can deliver – a strategy that pays off in the long run.

Sports teams frequently talk about the “1% effect”. The 1% effect is the cumulative effect of making a 1% difference in multiple areas. Take Formula 1 for example. A 1% weight saving can make a 0.1-second difference in lap times. Each mechanic working 1% faster adds up to a 10% difference in pit stops. The Great Britain Cycling Team (Team GB) adopted a 1% mind-set prior to the 2012 London Olympics, resulting in their most successful games ever.

The best and most consistent sports team in the world is New Zealand’s All Blacks rugby team. They talk about their culture and their code as though it was in their DNA. They have a default position and inner strength, plus they know each other’s strengths and weaknesses and can support each other at any time.

In the work environment, you need organizational agility and the ability to adapt to an ever-changing, fluid market, business situation, and shifting macroeconomic sentiment. The main problem in business is that we only measure what we can see, e.g. results, profit and income. Recognizing the role of culture helps develop an awareness of leadership and team behaviours and their impact on performance.

These are NOT your values. Values are suggested, not implicit. The way your team and company act out those values are behaviours.

How do you drive behaviours?

Leadership requires you to look under the surface at what you cannot see, within the undercurrents of culture. We now know, based on the latest research at Harvard Medical School as well as applied neuroscience, that individual and team behaviours are driven largely by how you think, your emotions, and even your physiology.

If you want a great team and organization, you need highly functioning human beings. Think of them as corporate athletes. If you don’t fuel them, train them, or help them to rest and recover, you will have a substandard, disengaged, unmotivated group of individuals who cannot function as a team. Having a healthy culture is not about gym membership and bowls of fruit or yoga classes.

If you want to learn about the secret sauce of culture, I will cover it in my next article. If you cannot wait that long, I encourage you to get in touch.

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