Strategy & Culture: It takes both to win

By Daniel Forrester, CEO
VW stock prices dropped when its culture was made transparent to the world

VW stock prices dropped when its culture was made transparent to the world

The interrelationship between strategy (“the choices leaders make to win”) and culture (“the way things are done around here”) can either create value or undermine success for an organization. This interrelationship demands sustained leadership and board level attention, which it too rarely receives before a problem surfaces. Take Volkswagen— the most recent example of a company whose culture has been named an accomplice to malfeasance. VW’s stock dropped off a cliff when their culture was exposed for years of systematic fraud.

Recent studies have shown that CEOs fail to give sustained attention to corporate culture even when they recognize how much it matters. According to Duke University, 91% of CEOs and CFOs claim culture matters but only 15% believe their culture is where they want it to be. Meanwhile, Motivosity found that less than 2% of CEOs look at annual employee survey results more than once, which implies they are failing to act on feedback from their people, a failure that can systematically erode employees’ confidence and trust.

The implications of these two studies have stayed with me all winter. Both show that CEOs aren’t giving enough sustained attention to culture and its impact on their strategy. Even CEOs who are aware of culture’s importance and ability to create value rarely act to deliver on the desired culture they and their employees want. Instead, product and service expansion, enterprise metrics, revenue growth, and bottom line profits are seen as the critical strategic levers that CEOs should push on.

This decoupling of strategy from culture allows leaders to focus intently on those their organization serves, what their organization does, and how they do it (from repeatable processes to automation), but it fails to address why their organization exists (the purpose) or the behaviors and ingrained habits that can wreak havoc on even the clearest of strategic plans. It is this decoupling that so often proves Peter Drucker right that “culture eats strategy for breakfast.” But THRUUE believes—- and we’ve seen—- that it is possible to prove Peter Drucker wrong if leaders understand and actively manage the relationship between their strategy and culture. Focusing only on strategy or only on strengthening culture is like a baseball team that tries to win a game on great pitching or great hitting alone. It takes both to consistently win.

Some organizations are now being forced to prioritize their focus on culture. Regulatory bodies across the federal government are emphasizing what is happening inside corporate culture as they seek to understand why fraud happens and how best to protect the general public from such behavior. We believe there is much more power in CEOs proactively managing the relationship between strategy and culture than in waiting for aberrant behaviors to arise or to be penalized by regulators.

The evidence is clear: when seen as one, strategy and culture create economic value. When CEOs give sustained and equal attention to both strategy and culture, the payoffs include higher performance, reduced turn over, innovation, collaboration, resilience, and employee fulfillment.

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