Sunday, June 28, 2009

What Makes a Culture Successful?

For decades there has been a discussion going on in the ranks of culture wonks regarding whether corporate culture has a significant impact on a firm’s long-term economic performance. The conventional wisdom says that there is a direct link between corporate culture and success. But, where was the proof?

In the early 1990s John Kotter and James Heskett published Corporate Culture and Performance, in which they studied the relationship between culture and success. Their work uncovers some of the things a manager or leader can do to create a culture that supports the success of the organization.

Admittedly some of the examples in the book are dated. The economy of 2009 has taken some very good companies into uncharted territory regardless of their culture. But, if we look at culture as something that survives beyond the economic cycle, that creates a foundation of the vision, ethics, reality and courage for those who live within the culture, we find that Kotter and Heskett have some great advice for leaders even in today’s turbulent times.

Having a strong culture is often cited as an important element in an organizations success. Kotter and Heskett point out that having a strong culture is not enough. History is full of examples of organizations with strong cultures that were either negative or did not adapt as the world changed around them. Strength of culture does not guarantee success.

These non-adaptive cultures were often characterized by arrogance, bureaucracy, centralization, and insularity. Managers tended to hold on to strategies that were no longer relevant. And, managers in these organizations were likely to make it difficult for anyone below them to implement new processes or procedures. The hierarchy required involvement from the top when implementing new or better strategies. (P. 142 – 151)

Successful cultures were those that had values and norms that helped it adapt to a changing environment. In these cultures managers paid close attention to the world around them, and made incremental changes in strategies and practices to keep the firm’s culture in alignment with “reality”. (See prior blog entries on Reality.)

These managers and leaders were driven by a desire to meet the needs of all constituents – customers, employees, stockholders, and the community. These values also emphasized the importance of people (See prior blog entries on Ethics.), and processes that encouraged changes that created “…competent leadership throughout the management hierarchy.” “[T]his value system is key to excellent performance … because it tends to energize managers and get them to do what is needed to help firms adapt to a changing competitive environment.” (P. 143)

The research of Kotter and Heskett has empirically shown that valuing vision, ethics, and reality are essential to a culture’s success. Their work also suggests that managers and leaders need to exhibit free will and courage to successfully lead their organizations through turbulent times.

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For those of you who are interested in leadership, this might be a good time to go back and review some of the early posts on this blog related to the Dr. Koestenbaum’s work on the Leadership Diamond – Vision, Ethics, Reality, Courage.

Here are a few links, just to get you started:

Leadership Diamond Basics
Free Will
Going Deeper
What is Real
Change
Polarities
Asking the Right Questions

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How to Search Prior Blog Entries:

To search for prior entries on this blog, you can type key words into the search box located in the upper right portion of any blog page. Typing "Reality" into the search box will yield all blog entries where the term "Reality" has been used.