Culture and Success / Chicken and Egg

Peter Drucker, probably the most influential management thinker, said “Culture eats strategy for breakfast”. Like the chicken and egg problem though, I always wonder what comes first? Did a leader focus on building a culture which led to success OR was it a series of decisions and behaviors that worked (success) that built a specific culture that led to continuing success? I believe that it’s the latter.

Unfortunately, there are leaders who think it’s the former. Like Reed Hastings once said, “Culture often becomes the retrospective narrative of success”. Which means that once a company becomes successful, they start attributing their success to their culture. I would tend to believe Reed Hastings who, as CEO of Netflix, built a company that’s widely regarded as being one of the best places to work (notwithstanding the recent WSJ report, paywalled) and whose Culture Deck is widely considered as ground breaking document on building culture (“The most important document ever to come out of the Valley” by Sheryl Sandberg).

Edward Schein, in his excellent book, Organizational Culture and Leadership, talks about an organizational culture model (also called the onion model) consisting of 3 layers of culture: Artifacts (massages, ping pong tables, happy Fridays, et al), Espoused (or declared) Values (We value transparency, we are a meritocracy, we are customer centric, etc. – sounds familiar?) and finally, the most important layer: Basic Underlying Assumptions. These are underlying behaviors of the CEO or founders, how they take decisions, who they promote, how is under performance treated, do they turn up on time for meetings, etc. – this is the layer that has the most impact on a company’s culture. To quote someone (I don’t remember who): Culture is what you do when nobody is looking.

I believe that every behavior the leadership exhibits is slowly, but surely, shaping an organization’s culture. If those behaviors work, i.e., lead to success – they become part of the culture and if not, then those behaviors change. I think this is the essence of building a culture: does the leader leader exhibit behavior that they want to be part of their organization’s culture? Do they roll in to meetings late and unprepared – be sure that, soon, it will be acceptable in the organization to turn up late and not prepare. Do they truly reward measurable results, or based on their perception? Every action a leader takes is an input to culture building that’s happening in their organization. The most dangerous, or best, part is that over time, these behaviors become part of the collective consciousness.

That’s why it’s so hard to change a culture – it’s trying to alter consciousness. 

I think it’s very important for CEO’s or leaders to understand that success attributed to their behaviors and decisions (and not dumb luck!) is what they should focus on – especially in early days of your organization. Because if they believe that culture comes first, it tends to spiral into treating metrics like employee engagement scores as an organizational objective. And it should not be: ultimately culture must contribute to organizational success (however it is defined), otherwise, it’s meaningless.

It’s like a serial ‘dieter’ who obsesses over which diet plan is trending – while losing sight of the end objective – to get healthier! 

It is especially important to understand this because leaders may end up creating an undesirable culture just as easily. Ben Thomson in his truly excellent blog, Stratechery, gives an excellent example of this: In the 1997 MacWorld when Steve Jobs announced partnership with and investment by Microsoft, the audience booed. Apple, at that time, was dying, and Microsoft was throwing it a lifeline, but the audience still booed! To quote Ben Thomson: “that’s how powerful a culture can be”.

Another excellent study (Culture is not the culprit) by Jay W. Lorsch and Emily McTague for Harvard Business Review had a similar finding. For this study, they interviewed a bunch of CEOs in turnaround situations (including Allan Mullaly from Ford). All of them felt that it is important to look at Culture as an outcome – not as something you build or fix. 

So, leaders, focus on the behaviors and decisions you make, not building a culture– the culture is building itself. 

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