What to do if your culture is compromising your commercial success.

Poor company culture costs the UK economy a whopping £23.6 billion a year, according to recent research by Opinium[1].

In 2017, there were around 20,400 businesses employing over 50 people[2] – roughly the point when culture starts becoming a salient concern. So, by my workings, poor company culture is, on average, costing every single UK business an average of over £1.1 million per year. And the fact that this is an average means that for some firms the total cost will be far, far greater.

This doesn’t even begin to identify the commercial benefits that a high-performing culture can bring. Research indicates that revenue growth in such firms is more than four times that of others[3].

Let all that sink in for a minute.

Now, let’s identify how you can quickly impact your bottom line. Here are nine insights from our work creating impact cultures for firms around the world. Every business whose culture isn’t performing will be unaware of at least some of these.

Have a read, then have a go at answering the killer questions. They should help. And do get in touch if you want a chat about improving your company’s impact.

1. Quit believing your business is robust

I get invited to speak at a lot of events with names like Disruption 3.0 and Innovate or Die. I turn most of them down. In essence, they’re a form of disaster tourism. They tend to be full of people who embrace the theory that their business might get disrupted. But too often that’s where it ends: all talk, no trousers. That doesn’t make for an interesting evening.

Here are some uncomfortable truths. Over 50% of companies left the FTSE 250 in the 15-year period between 2000 and 2015[4]. A decade ago, it was banks and energy companies that dominated the Economist’s list of the world’s top ten businesses by market capitalisation. Now, it’s technology companies[5]. And I would wager that many of the people negatively affected by these changes were unaware of the problems before they occurred. Or were too busy killing time at events to do much about it.

Poor company culture is, on average, costing every single UK business an average of over £1.1 million per year.

This is not to argue in favour of blind panic. No-one is capable of walking through the world in that state for long. But a healthy wariness of what the future might bring is a necessary pre-cursor to culture change. Specifically, I mean changing culture so that it can adapt to changing circumstances in a quick and effective way.

The lesson: avoid staged ‘events’ and look for actual ones.

Killer question: Are we doing a good enough job of scanning the horizon and really getting to know what is going on in our industry and beyond?

2. When having a conversation about culture, first check your meaning

In a recent HBR survey[6], 43% of respondents felt that ‘cultural issues’ were hampering innovation. This issue was in second place, behind ‘politics/turf wars/no alignment’ (55%). In third place was an ‘inability to act on signals crucial to the future of the business’ (42%).

So, we can summarise the top three problems with innovation as 1) culture, 2) culture, and 3) culture.

Let’s break it down. Culture is the operating system (OS) of a business. It is the platform that determines why some things happen fast, and some things crawl along or don’t happen at all. So, culture determines whether politics are unhealthy or turf wars exist. This is because culture is the platform on which individual agendas flourish to the benefit or detriment of the whole. Similarly, the OS determines the speed and nature of response to the signals that the firm receives.

Muddy thinking of the sort encapsulated in that survey points to a significant problem. If you can’t align on a shared concept of culture, you can’t hope to manage it. If you believe that culture is politics, say, when your interlocutor believes that it is employee engagement, you’re not to get very far. (Well-meaning conversations where people don’t realise they are talking at cross-purposes are way more common than you might imagine.)

Killer question: When we talk about ‘culture’, what do we mean?

3. Next, check your language and data

Take two minutes and write down the key attributes of your corporate culture. Now ask a colleague to do the same. Compare notes. In most cases, there will be notable differences in your assessments. This points to another problem: people often share a desire for change but don’t realise that they are trying to change different things. This makes a shared language around culture essential.

“But we have values,” you might protest. That’s a start. But, while your values inform your culture, your culture is not your values. Culture is more complex than that. It incorporates organisational narratives, subliminal prioritisation, shared ways of working, and a host of other factors. (Another helpful definition of culture is that it is the ‘social order of a business’.)

If you can’t align on a shared concept of culture, you can’t hope to manage it.

Further, what data do you have about the way your culture is developing? Forget employee engagement and pulse surveys: they are lagging indicators at best. (Most of the time they are not even psychologically accurate.) Instead, you should seek objective, quantifiable indicators of cultural health that are proven to drive commercial performance. This proven formula might be a useful start.

What gets measured gets done… and you get where I’m going. No shared language and no data? No meaningful conversation about culture.

Killer question: Do we have a definition of our culture that is quantifiable and commonly understood?

4. Kill survival worries early

Understatement of the year but, as I mentioned earlier, people don’t react that well to survival threats. Aside from being exhausting, they tend to predict problematic behaviour. Churchill’s adage that “even a cornered rat is dangerous” holds as true in business as it does in life.

Survival worries tend to arise in two forms. The first is job security – in other words, actual survival within the firm (and so perhaps in life). The second is egoic. This is about loss of social status and affirmation, which is a core psychological need for all human beings. Culture change, or the promise of culture change, tends to bring both types to the fore. The worries themselves may not always be obvious, but their presenting symptoms will be. (The most common ones are active or passive resistance to change.)

A lack of shared concept, language and data around culture can turn survival threats from a spark to a raging inferno. In effect, they relegate culture to a Kafka-esque conundrum for the employee, who intuits that “we’re not that clear on what culture we want – but we do know that who you are and how you work might not be right for us any more”.

And we wonder why change processes fail.

Culture change only happens when people feel safe to discuss the ways in which the culture needs to change.

Killer question: How do we create a safe space in which to examine our culture?

5. Listen before you leap

Enthusiasm is a wonderful thing. Nothing changes without it. But it is easy for enthusiasm to manifest as a belief that “you’re either part of the steamroller, or part of the pavement”. This can turn culture change processes toxic.

Listening is an underrated and under-practiced skill in business. It is necessary in any situation in which you are working with others to change what you all do and how you do it. This is because, in effect, all human beings inhabit separate realities. Perception and experience are only ever subjective. Fail to understand someone else’s reality and you will fail in your attempts to improve it.

Survival worries tend to arise in two forms. The first is job security – in other words, actual survival within the firm. The second is egoic – and is concerned with social status and affirmation

Further, all organisations are complex systems. Human beings are terrible at understanding the impact that single interventions can have on the whole. (A lack of system-wide thinking is basically the reason why problems creep into culture in the first place.) We rarely bother to investigate the potential consequences of our actions before we carry them out.

Together, these factors mean one thing: in almost all cases, you need to slow things down, and get good at listening before you leap.

Killer question: What else do we need to understand about the organisation to be able to move ahead?

6. Look for the hidden incentives

In some finance departments, systems make it as onerous to sign off £100,000 as £1,000,000. This is a classic example of a hidden disincentive for change (and the functioning of complex systems). Agile, responsive cultures predict the need for a greater number of smaller investments as the organisation embraces experimentation. But a desire to place small bets in one part of the business creates a considerable amount of work in another.

Organisations are riven with hidden incentives of this sort. They are uniformly excellent at slowing change down, or stopping it altogether. Want to stimulate creativity? Good luck if none of your bonus criteria take this into account. How about greater flexibility in working patterns? If presenteeism is an undercurrent in performance appraisals, it’s not going to happen.

Incentives can be explicit (e.g. bonuses) or implicit (e.g. changed workload or status), and positive or negative in nature. They need catching early – if you’re going to stop the rot, you first need to spot the rot.

Killer question: What does our organisation reward people for doing, and why?

7. Hunt the little problems

Not only is culture a big issue in many businesses, it’s also a big and complex subject (see point 3). So, it’s understandable that for many leaders the question is “where on earth do we start?”.

Diagnostics in this space are complicated, and tend to require specialist organisational psychology and intervention. But firms looking to get a handle on some of their cultural problems could do worse than hunting for the little problems. There is logic here: little problems tend to predict big ones.

Organisations are riven with hidden incentives. They are uniformly excellent at slowing change down, or stopping it altogether.

Do your meetings rarely result in commitment to action? This may predict deeper issues around conflict management and autonomy. Is there all hell to pay if someone shows up at 9.06am? This may mean you have problems around flexibility. Do you rarely have all-hands meetings? Consider whether your leaders are working hard enough to establish contextual clarity.

(The deeper issues I’ve listed here aren’t random. They are academically-validated drivers of cultural health. You can learn more about them via our impact culture formula.)

Killer question: What are the most common day-to-day frustrations that people complain about?

8. Fail to communicate well, and your people will always believe the worst or the weirdest thing

“We need to manage our internal messaging” is a contender for the most depressing thing we hear in the course of our work. Spin doctoring infantilises employees by implying that they are unable to cope with the truth. In turn that diminishes their ability to make a meaningful contribution to problem resolution. It also undermines trust. Organisations are porous, and nothing travels faster than cynicism about an inauthentic message.

Instead of message management, you should focus on telling a truthful, objective, and practical story about your change agenda. When you’ve told this story, you need to do it again, and again, and again, and again. Employees are busy, distracted and prone to forget almost everything unless it’s repeated. And quit obsessing about ‘nuance’: your people will forget all but the fundamentals of what you tell them.

If you don’t communicate regularly and well, you can look forward to an organisation in which rumours are both weird and out of control. This saps momentum and can also give rise to counterproductive behaviour. The human mind focuses on negatives more than positives, and is always on guard for real or imagined survival threats.

Killer question: Are we engaging with our people in the way that we would want to be engaged with?

9. Embrace the fact that culture is a never-ending journey

What’s a perfect culture? The answer is: one that enables a business to be agile and responsive in the face of the relentless and ever-changing demands of the market. There are two constant variables at play in this context. One is the market, which always suffers from some degree of unpredictability. The other is the business itself, which naturally changes over time.

Quit obsessing about ‘nuance’: your people will forget all but the fundamentals of what you tell them.

It follows that the journey of building, managing and (occasionally) repairing culture is never-ending. What is fit-for-purpose in 2018 may not be so in 2022. Further, remaining fit-for-purpose can be a present-day challenge for even the best performing firms. High-functioning impact cultures take careful management: the very pace at which they operate can create its own problems.

The lesson, then: embrace the fact that culture is a fascinating, complex, occasionally infuriating but always rewarding element of business management. It can change your career, and boost your and your business’s earnings beyond all recognition. So, screw your courage to the sticking-place, and get on with it.

Or would you rather leave all that money on the table?

Killer question: How are we going to manage our culture as a core pillar of our corporate strategy both now and over the coming years?

[1] ‘The Culture Economy’, BreatheHR + Opinium research, March 2018.

[2] https://www.statista.com/statistics/676671/employment-by-number-of-business-employees-in-the-united-kingdom-whole-economy/

[3] ‘Corporate Culture & Performance’, Kotter & Heskett.

[4] https://www.theguardian.com/business/2015/feb/25/ftse-100-companies-1999-2015

[5] https://www.weforum.org/agenda/2017/01/worlds-biggest-corporate-giants/

[6] https://hbr.org/2018/07/the-biggest-obstacles-to-innovation-in-large-companies

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