Sunday, July 19, 2015

Strategy and Organizational Culture

Implicit in the discussion of internal analysis is the role that corporate culture plays in the development of strategy.  Conceptually, strategy and culture are quite different as the former is “rational and logical” while the latter is “human, emotional, and complex” [1].  Despite this, culture has a drastic impact on strategy as it constitutes “a set of beliefs that drive employee behavior” implying that a strategy will be unsuccessful if it cannot align employees towards a common goal based on their expressed beliefs [2].  Looking at some other perspectives provides some interesting takeaways:

“There's no such thing as a good or bad culture, just an effective or ineffective one” [2].

Apple and Google foster a culture of innovation among their employees that rewards the promotion of good ideas, yet doesn’t penalize constructive failures [2].  Walmart, by contrast, competes using strategies that capitalize on its culture of efficiency [2].   These are vastly different viewpoints, but these companies are nonetheless successful in their respective industries.  Ultimately, this arises not because they possess any particular culture, but rather, because their effectiveness is predicated on how well their culture aligns with their business strategy.

“Effective cultures are not uniform” [3].

Despite the fact that effective strategies are borne of alignment with culture, this culture is not likely to be uniform, but rather, composed of many sub-cultures.  This largely tends to occur across different business units; it would be expected that the finance department would be risk averse to new accounting procedures while the R&D department would be more willing to take risks in its search for innovation [2].  

That said, there are advantages to having a non-uniform culture within an organization or even within business units.  For example, “research shows that diverse teams outperform more uniform groups” because “diverse groups can bring a greater variety of approaches and perspectives to a problem” [3].  Further, “excessive uniformity diminishes an organization’s capacity to adapt” since conformity leads to quashing the introduction of and action on new ideas [3]. The common denominator is that the overall business strategy must account for this heterogeneity and focus units and functions together towards a common strategic purpose in order to be successful [2]. 

Leaders need to ask themselves tough questions.

In order to gauge whether a strategy will be effective, leaders must first ask themselves whether they truly understand the company’s culture and whether employees actually believe the expressed statements of this culture.  Doing so will help them understand where the gaps are between the strategy and culture and allow for action to close them. [3]

“Effective cultures do not lean on history” and “are not tied to a business model”.

There is a resounding theme that culture cannot be a justification for rigid conformity.  Organizations require cultures that while strong, are “able to accept and adapt to change” [3].  Ultimately, “success often breeds failure and every business model eventually falters” as evident in the downfall of Eastman Kodak whose “culture was unable to adapt its business model” in the wake of sweeping changes in the industry [3].

In conclusion, while it is important for leadership to understand the coherence of their organizations’ core competencies and capabilities, it is equally important that they recognize the need for coherence between their strategy and the culture that will ultimately drive its execution.  If they are not aligned, leadership must take efforts to either change their organizational culture or alter their strategy. Or as Torben Rick notes: “A strategy that is at odds with a company’s culture is doomed. Culture trumps strategy every time” [1].

[1]  Rick, Torben.  (7 Jun 2013). What is the Relationship between Corporate Culture and Strategy?  Retrieved 19 Jul 2015 from: http://www.torbenrick.eu/blog/strategy/relationship-between-culture-and-strategy/

[2]  Towers Watson.  (Nov 2013).  Aligning Organizational Culture with Business Strategy.  Retrieved 19 Jul 2015 from: http://www.towerswatson.com/en-CA/Insights/Newsletters/Global/strategy-at-work/2013/viewpoints-qa-aligning-organizational-culture-with-business-strategy

[3]  Satell, Greg.  (18 Jul 2015).  Culture Can Be a Trap – Here’s How to Make it an Asset.  Retrieved 19 Jul 2015 from: http://www.forbes.com/sites/gregsatell/2015/07/18/culture-can-be-a-trap-heres-how-to-make-it-an-asset/


No comments:

Post a Comment

Note: Only a member of this blog may post a comment.