Performance versus Culture

The impact of culture in business

Why is culture so important throughout a business? Why is it more important to focus on culture than performance when building a long-term business?^[1]

Every business is centred around people. I’m hard pressed to think of any businesses where people aren’t at the heart of decision making and implementing. And if we believe this then the way your business behaves will be the sum total of the way your people behave. It is this behaviour that produces the consequences (intended or otherwise) of the business. These consequences include value creation which is good (delivering the purpose and products of the business). But they also produce wasted resources because of sub-optimal performance. This waste includes people effort but also other resources and assets not being optimally employed.  Improving culture reduces this waste.

Culture trumps Performance

Despite most business metrics being performance related we can see that businesses don’t centre themselves around performance but people. Performance can’t create great people, but people can create great performance. And yet, so much effort is built around achieving performance but not addressing the key issue of how we make it sustainable and enduring. Can you think of any business initiatives that have produced initially great performance and optimism, only for this performance to wither and die soon after? People, as wonderfully diverse as they are, rely on something to knit themselves together for the long term good. A performance focus only delivers short term results plus individual burn-out, attrition and resentment. It doesn’t deliver long term improvement. But a focus on culture does deliver long term performance and creates a long-term asset – see our thoughts on Cultural Debt.

The impact of Culture

As an example, we worked at a highly acquisitive business where integration was a real challenge. It was in constant change. Each acquired company came with its own culture. It was given increased revenue targets because it had a larger salesforce to sell through. This continual focus on performance didn’t address the parochial and local cultures that companies brought with them. As a result, revenue didn’t increase, and it wasn’t until we introduced a new culture across the business that the performance increased in line with expectations. Only by changing the culture were we able to consistently increase the revenue and performance. Taking hearts and minds with you on the journey is so important and this can only be done with the right culture.

And the word is spreading about how important culture is. A recent survey found that more than half of people consider culture more important than salary when looking for a new job. This percentage increases for millennials where 66% of people consider culture to be more important than salary. And 77% consider the company’s culture before applying for a job.

Finding the right behaviour

So, if we pivot the success of a business around the behaviour of people to produce the right consequences how do we ensure the right behaviour? Behaviour is largely driven by how people are motivated. Motivation can take many forms and has to include the notion of “Predictably Irrational” as well. People don’t always behave as you predict, but you can motivate them with a useful degree of certainty. And if you choose the right people they will come with many of the right motivations (think here of recruiting for attitudes, character and beliefs).

Motivating People

As well as internal motivators, people are also largely motivated by their peers, employers, markets and customers all the time through regulations, rewards, organisation structure, procedures, ethics, values, etc. This is nothing new. What is new for many is how culture can be intentionally architected rather than produced as a set of performance-focused, piecemeal initiatives. And when we speak about improving culture, we don’t just mean improving team leadership skills. That is important, but by itself would be like training a grand prix driver to perfection without giving them a car to race. What we mean is a culture that is architected for the high performing team to work within and take forward.

The purpose of culture

It is worth noting what the purpose of a culture is.  We’ve seen a lot of companies that focus very much on the employee experience and describing culture as ‘company benefits’ or ‘feel good factor’.  While clearly culture needs to focus on people, the ultimate goal for most businesses is to sustainably drive the performance towards the purpose of the company.  We only have culture because of people, but we don’t have culture only for the people.

Culture isn’t just about good teams either.  If you build culture across the business, rather than just at the team level, you’ll get consistent, effective, enduring performance as the consequences of behaviour. This will be transferrable into your brand experience by people inside and outside your company.

Let’s dig a little deeper

People are core to your business success and work towards goals because of a complex relationship with the organisation they’re part of.  People are not machines and cannot be programmed to work like them.  There is tacit goodwill between people and the business, which creates the culture that drives them both.

People are motivated to behave in a certain way because of various stimuli.  These can be as simple as contracts and rewards or as complex as herd mentality, internal drivers, external influences, beliefs, values, character, etc.  At one end of the spectrum businesses adopt a culture that maximises short term benefit and can treat people as expendable assets that need to be constantly renewed (ever worked for a company like this?).  At the other end of the spectrum are businesses that put their people on a pedestal and won’t implement any changes for fear or upsetting their cherished asset (ever worked where fear of change is an overriding characteristic?).  Most organisations need to be somewhere in between.

Culture creates the motivations and behaviours to drive the consequences (outcomes) that you want.  People see culture in action by the behaviours that people exhibit.  You can architect the culture to achieve this.

Just because I’ve reduced business to three artefacts (motivation, behaviour and consequences) doesn’t mean that we should treat people poorly or be manipulative – quite the opposite in fact. Creating a culture where manipulation thrives will drive a particular set of poor consequences (think Machiavelli).  Conversely, people are unique and bring their own history and influences into the business and their work.  So, use culture to build diversity and inclusion into the fabric of the business.  These three artefacts shouldn’t suggest that culture architecting is straightforward – it isn’t, but with the right framework in place it is both effective and rewarding.

While culture is hugely important to long term success it needs to operate within the context of your business – its purpose, market, strategy, etc. It also needs to be coupled to the capabilities of the business and its ability to make decisions and control outcomes.  We use our 4C Framework to make this all happen – where Context, Culture, Capability and Control work together to make the business perform at its best.

Conclusion

Culture has a huge impact on the long-term success of a business. If you’re looking to create an enduring business, culture has to be at its centre.  But it has to work for the business in tandem with its context, capability and control (4C Framework).  Trying to move the business forward without architecting the right culture will result in poor performance and reduced corporate lifespan.

[1] Beyond Performance 2.0 p48 | ISBN 978-1-119-59665-3