3 Reasons Organizational Culture isn’t Managed Well

Organizations keep turning up in the news with disastrous circumstances that frequently point back to flaws in their culture:  everything from serious integrity infractions, loss of important talent, and of course the current attention on egregious sexual misconduct and harassment.  No one starts a business with the intent of landing in one of these or other quagmires, quite the opposite.  Most business leaders expect to enjoy the benefits of a healthy organizational culture – one that attracts A players and oozes jazzed employees and an energized atmosphere. This is the stuff of iconic businesses like Southwest Airlines and Zappos and a growing myriad of lesser-known companies who have figured out that intentional management of their culture has a big payoff.  Not only the right thing to do, but it’s also very much the smart thing to do.  It’s so smart, they make sure to not leave it to evolve on its own.  Culture is a beast that grows through who and what feeds it, and wise organizations are carefully managing the care and maintenance of this critical element of their performance.

So… what’s feeding your culture?

Most of us think of organizational culture as this nebulous and hard-to-pin-down reality that we hope is as healthy as we’d like it to be.  From time to time disturbing behaviors and situations crop up, and we deal with them.  Kinda like whack-a-mole –perhaps in place of a careful examination of the root cause.  Over our years of working with executive teams to help them develop healthy, aligned, values-driven cultures we’ve observed a few things about what prevents leaders from grabbing the bull by the horns and managing their culture before it manages them.  Here are 3 consistent stumbling blocks:

1. “I feel really good about our culture” – in short, executives can nurture a false sense of security about what is really happening and experienced by the rank and file.  Instead of verifying their assumptions, they have chosen to rest in their own estimate of reality.  Unfortunately, the higher one is the organization the less honest information we get, a concept popularized by Sydney Yoshida.

2. “I have no idea how to start” –  Let’s face it, we all procrastinate or avoid those things we don’t how to manage.  It’s human nature.  A lot of leaders are not aware that there is a measurable, process-driven approach to managing culture in a way that clearly identifies the percentage of dysfunction that is impeding the highest performance and the limiting values that are driving that dysfunction.  Limiting values look like this: silo mentality, blame, power, greed, confusion, and many others.  Once reality is measured and provides clear data, leadership teams can create the game plan.  We call this the MEASURE – LEARN – PLAN – EXECUTE process.  In addition to learning about the all-important levels of entropy (defined as the amount of energy expended on non-productive activities), organizations can also get clear-eyed on their alignment to their core values. Are they just “words on the wall” or are they a living breathing part of the regular experience of their employees?

3. “I’m not sure I really want to know” –   Leadership guru Henry Cloud subtitles his book on Integrity with this: “The Courage to Face the Demands of Reality” for good reason.  It takes a boatload of courage to seek out what is truly happening in our organizations.  Once we know, the responsibility to do something about it falls on the shoulders of the CEO and their executive teams.  Sometimes, dealing with the causes of toxic cultural impact may require tough and painful decisions that are easier to avoid if we aren’t actively looking for the root cause.  The strength and wisdom required to unflinchingly seek out the truth is no joke, but the relief that occurs once the situation is productively managed is immense.  Recently, a C-Level executive confessed that he was stunned by the positive impact on his team once he pulled the plug on a toxic but performing team member. The team reflected on how much more positive energy was released in the aftermath, even though workloads temporarily increased. 

For these and other reasons, the majority of organizations are NOT actively developing a key contributor to their performance – their culture. Take a look at these outcomes of some recent studies:

• 86 percent of leaders believe culture is an important or very important issue. ¹ 
• 91 percent of executives believe that culture is important to their firms.  ²
• 84 percent of leaders believe that culture is critical to their organization’s success. ³
• 92 percent of board members say that investing in culture has improved financial performance. ⁴ 

Despite these beliefs, true action is slow to happen. Consider these further statistics:

• 28 percent of CEO’s report that they understand their organization’s culture. ¹ 
• 5 percent said their own corporate culture was exactly where it needed to be. ²
• 51 percent believe their culture needs a major overhaul. ³
• 12 percent believe their organizations are excellent at effectively driving the desired culture. ¹

The opportunity that exists for organizations to truly leverage their unique differentiator – their high-performing, healthy culture – in order to pull away from their competitors in the marketplace is huge. The example that is well-known is Southwest Airlines, whose values include: A Warrior Spirit, A Servant’s Heart, and a Fun-Luving Attitude.  Southwest hires for these values, recognizes and rewards them in action, and intentionally develops them throughout the organization.  The results speak for themselves:  after 47 years of service, Southwest is the largest domestic carrier with 24% of market share, is the only domestic airline with 45 consecutive years of profitability, and has been rated #1 by the DOT Consumer Satisfaction Rating for 22 of the last 26 years. Pretty impressive.

We manage what we measure – what’s stopping you?

Footnotes: 

• 1: Deloitte Human Cap Trends 2016. : http://dupress.com/periodical/trends/human-capital-trends/
• 2: Duke/Columbia 2015 Research http://www.inc.com/will-yakowicz/company-culture-can-make-break-company-study.html
• 3: PWC 2013 Culture and Change Management Survey: http://www.strategyand.pwc.com/culture-and-change
• 4: EY 2016 FTSE 350 Board of Directors Survey: http://www.ey.com/Publication/vwLUAssets/ey-culture-and-boards-at-a-glance/$FILE/ey-culture-and-boards-at-a-glance.pdf

Ruth,

The Legacy Center President