Why is culture still chowing down on strategy?

More precisely, with everything we know about the primary, drop-dead importance of a healthy culture, why are organisations that should know better still getting it wrong?

A LinkedIn user could be forgiven for swearing when they see yet another meme featuring the hackneyed yet accurate phrase “culture eats strategy for breakfast”. It’s as clichéd as a Steve Jobs anecdote at a leadership seminar or an Australian pub band closing their set with ’Khe Sanh’.

The thing is, though, phrases often become cliches because they resonate with so many of us and are undeniably valid.  The list of companies where we can trace cultural breakdown directly to reputational or business failure is sadly impressive; think Arthur Anderson, Enron, Lehman Brothers, VW or the Australian banking sector. Sometimes these breakdowns are existentially catastrophic, while at other times, serious wounds are inflicted but the organisation survives, usually after a leadership spill or significant restructuring. 

PwC is the latest to suffer a self-induced cultural cataclysm. Before culture chomped down, it would have been unthinkable for this leading global consulting company to contemplate selling its Australian government business for $1? It most certainly was not part of the plan, and it’s a textbook example of what we mean when we talk about culture eating strategy.

Reports suggest that unethical behaviour by some senior leaders is the root cause of PwC’s painful predicament. Whilst time will tell what other factors may have been at play, history suggests dubious actions by specific senior individuals are often emblematic of an organisational culture that’s in trouble. At the same time, an organisational culture that’s in trouble is largely the result of poor leadership behaviour over time. Without intervention, one can reinforce the other in a rapid downward spiral.

But why are culture breakdowns periodically chewing well-thought-out strategies to bits?

When we boil it down, strategy is the easier part of the equation – vitally important but with fewer moving parts than culture, which is much more challenging to get right.

Strategies and plans are visible, tangible and usually at arms-length from the messy business of human behaviour. The rational thinking, intellectual challenges and processes mainly involved in developing strategy are within the comfort zone of most executive leaders.

Culture, on the other hand, permeates everything and is, in large part, determined by leaders’ attitudes, behaviours and actions. It is felt by everyone but, except for values statements, is often out of direct sight and may be hard to describe accurately. It shapes and influences an organisation’s behaviours, decisions, relationships and yes, ethics. The type of thinking and methods required to make positive culture changes often involve senior leaders stepping out of their comfort zones and embracing a level of vulnerability.

Any serious attempt at developing and sustaining a positive, enabling culture requires leadership self-awareness, reflection and openness to change. For leaders to improve culture, they must honestly assess their influence on those around them, be receptive to feedback and be willing to adjust their own behaviour.

Low psychological safety in leadership teams can result in classic groupthink, where real questioning and consideration of alternative views is shut down. Stories are told to justify the unjustifiable and poor decisions, which would be clearly dodgy to anyone looking in from the outside, are fuelled by collective hubris.

There is also a fine balance between encouragement to maximise return and doing the ‘right thing’. This is strongly linked to what organisations choose to celebrate and reward. If the focus is on delivering commercial success without considering how it’s achieved, aberrant and unethical behaviour is likely. Despite hard-core Wolf of Wallstreet type views, unbridled greed is not a good thing if your aim is to build and grow a sustainable organisation.

When these and other negative cultural forces conspire, those with the steadiest of moral compasses are at risk of being knocked off their bearings.

So, this is probably a good time for leaders to hold up the mirror, have a considered look at how things are being done in their organisations and take steps to strengthen any cultural cracks, before they become problematic.

If you want to improve the culture in your organisation or sustain an existing positive culture, here are a few key questions to focus your efforts.

  1. Psychological safety – do team members feel comfortable bringing forward ideas, admitting mistakes, contesting ideas and asking for help when needed? If not, you’re unlikely to have an accurate picture of what’s going on around you or eliciting different perspectives which are so important for maintaining strong, positive cultural guardrails.
  2. Know your target culture – are you taking the time to describe, discuss and share your desired culture? In the absence of deliberate positive design, culture may default to unintended negative attributes.
  3. Individual leadership behaviour – are the values of your business being clearly demonstrated by the leaders in your organisation? If not, you can be certain others in the organisation aren’t doing it either.
  4. Leadership team effectiveness – are members of the leadership team truly collaborating and being transparent in their dealings with one another? An organisation and its culture will never reach its full potential if executive leaders are not working as an effective top team.

PwC’s current woes serve as a poignant reminder that culture is a prominent factor in determining organisational success or failure. When it breaks down, even the most well-crafted strategies cannot be sustained. While strategies provide a roadmap for success, culture ultimately determines whether an organisation can effectively execute and thrive.

Collectively, nXus People partners have over 100 years of experience in successfully helping senior leaders and teams. We work with a host of Australian organisations, large and small, to help build and sustain strong enabling cultures and winning strategies. If you need help or want to discuss any aspect of culture or strategy in your organisation, drop us a line.