The link between strategy and culture is one of the best researched propositions and one of the worst executed. Get it right, and the culture becomes the tail wind to strategy. Get it wrong, people become disengaged, and effort is wasted. We don’t progress.
What is strategy?
In a very good Harvard Business Review article by the famous Michael Porter, the author makes a very clear, up front and bold challenge to us all: operational effectiveness is not strategy. In a stable environment, strategic planning is about evolving an organisation (or product/service). Leaders deliberately choose 1, 2 or maybe 3 strategic ambitions which, if pursued effectively, will deliberately create a different operating cadence (word of the year) within a defined period.
Strategic planning is typically framed by an organisation’s purpose, visionary goals and agreed strategic initiatives. You advance strategy by a disciplined and measurable approach to strategic initiatives that all stakeholders agree on. Advance the initiatives you advance the strategy.
If you are good at doing this, then the initiatives help position you as different from competitors and what you offer is potentially more relevant, exciting, future oriented… or, indeed, strategic.
Great strategic positioning is the result of a lot of expertise, i.e. experience and data, as they relate to what you do (product or service). Your conclusions from a deep dive on these, are usually informed by what customers/clients (segmented or not) want and need, as it relates to what you do. Leaders make strategic choices to advance business or organisational performance.
Making a choice around strategic priorities always brings in a trade off – to do X we will stop doing Y (which allows you to ring fence dollars and human resources) to secure execution. Layering strategic initiatives on top of business as usual (BAU) condemns them to failure. As is, tactical, operational choices will always prevail.
McKinsey notes four fundamentals of strategy, four ‘lenses’ to view strategy through including:
- Financial performance
- Markets
- Competitive advantage
- Operating model
We note that each of these lenses can take reduce strategy (and the implied innovation and future focus) to operational and/or transactional outcomes. Why? Because most leaders are transactional in their thinking both rewarded for and practiced in ‘as is’ thinking.
What is Operational Effectiveness
Operational effectiveness is anything you do that allows you to optimise (maximise) your goods or services at a faster or higher quality than your competitors. You reduce problems, you solve your market needs, faster than others.
You get things to market cheaper and at a lower price than competitors. Improvements in operational effectiveness are incremental requiring a continuous improvement mindset.
If you marry strategic governance (management of execution of strategy) to operational effectiveness, you give life to strategy.
If you get lost in operational effectiveness you lose sight of true innovation and strategic execution.
So, what then is culture?
Organisational culture refers to the embedded beliefs, evident in how people behave day to day. They are, for the large part, unconsciously held. They determine how staff at all levels (including management) interact, perform, and handle business transactions.
Climate, on the other hand, is measured in terms of how we feel at any point in time. Climate can be measured at multiple times over a given year. It provides insight into what feel is working/not working.
Culture, by stark contrast, evolves over significant time and reflects the overtly and/or covertly rewarded and/or punished behaviour of people at multiple levels. It builds slowly.
The famous Enron story is the embodiment of great climate (people were having fun) and appalling culture (people were entrenching illegal behaviour which ultimately caused the collapse of the business).
Culture as a tail wind to strategic execution and operational execution of initiatives
A proverb, attributed to Burkina Faso (Africa) says ‘If you want to go fast, go alone; if you want to go far, go together’. This embodies the power of an aligned culture supporting a clear strategy and agreed initiatives.
Building a culture aligned to strategy is intentional, never more so than in the dispersed post covid world.
Four major challenges:
- We work apart from one another.
Yet, one of the ways to build a strong and healthy workplace culture is through shared experiences. How do we do this if we are geographically distributed or fragmented? How do we build strong
meaningful personal connections between staff when we are almost entirely online? We aren’t hanging around in a shared kitchen or running collaboratively brainstorming sessions in person. (Or not as much as we used to).
- Life is stressful and we are pushing people for greater efficiency/productivity
Research has shown that 50% of senior leaders consider it the biggest challenge they face when striving to create a positive workplace culture. As we pursue productivity, what’s the cultural ‘and’ to address these challenges?
Setting the right shared values and acting according to them becomes particularly difficult when you’re forced to deal with increasingly strong pressure to boost productivity. What are our values? When are we willing to compromise these?
- Integrating New Tech and employee well being
Or, better said: what is the challenge of embracing digital transformation and innovation in your company without compromising employees’ happiness and productivity.
The true challenge here is building a workplace culture that encourages continuous learning, adaptability, and employee well-being to the same extent as our commitment to embracing digital transformation.
- Maintaining a Shared Purpose
Keeping a remote workforce aligned with the company’s strategy (including purpose and values) is a true challenge, since you no longer have those physical cues of the office space – like daily, face-to-face interactions – that keep employees connected to the organisation’s goals.
Answer: you must measure the link between culture and strategy and the ROI of engaging people
Measuring Culture-Strategy Connection: 7 Practical Steps
While everyone agrees that a positive workplace culture influences employees’ levels of engagement and their overall performance, most leaders don’t know the actual ROI of investing in culture and engagement initiatives.
Workplace culture is considered a “nice to have” yet is considered too intangible to measure. This is not necessarily true, if you take the right steps to measure and prove the financial impact of a positive workplace culture.
Your culture is so much more than your vision and values statements. It’s the shared experience of the entire workforce—and it’s a force that drives strategy and in turn, financial results.
Here’s how you measure it.
- Benchmark Your Company Culture Against Industry Standards
This will provide context to the financial performance of the workplace culture you’ve struggled to build. It will also help you identify strengths and weaknesses in your cultural initiatives and measure the progress. To do this utilise leverage Advanced Workplace Analytics Tools as collecting data is crucial for proving how the workplace culture in your organisation has a positive ROI. But how do you collect that workplace data? Here are some options: Culture Amp, Korn Ferry provide data analytics tools for climate (engagement, how we feel about work). OCI & OEI (Human Synergistics) measure culture – what we believe is the way to work around here, shared values, beliefs, workplace practices etc; culture is what employees experience every day.
Measure the ROI business case for initiatives to improve company culture. (A partnership with finance and P&C). Useful metrics to track include:
- Retention
- Recruitment
- Internal promotion and talent pipeline
- Customer experience
- Innovation
- Well-being and workload
- Job satisfaction
- Collaboration
- Assess the Cost of Culture-Driven Turnover
Another step to take when trying to calculate the ROI of the positive workplace culture in your organisation is to calculate the costs of employee turnover, often the consequence of a bad company culture. Include the financial impact of:
- Hiring
- Onboarding
- Reduced productivity during the hiring and onboarding process
- A bad reputation
Once you have all these costs at hand, compare them to those of building and maintaining a healthy workplace culture, one aimed at improving retention, and show the savings the organisation could miss out on.
- Quantify Training and Development Impact
You’ll also want to include the costs of training and investing in new employees’ development in your business case for investing in workplace culture, as these types of costs are a tangible consequence of a bad company culture leading to a high turnover rate.
- Explore How Cultural Factors Boost Customer Satisfaction and Profitability
Probably the most significant financial impact of a constructive culture occurs through higher levels of customer satisfaction. For this reason, it is important to highlight the intrinsic link between an organisation’s culture – one that aligns with the values and expectations of its customers – and the level of customer satisfaction and loyalty. These are pivotal measures for strategy execution.
When customers perceive a cultural synergy between them and the companies whose services or products they use, their satisfaction and commitment to these companies increase. As this loyalty increases, traditional metrics (revenue and margin) improve. The link to strategy execution should be self-evident
- Collaborate with the Finance Team
The finance department can support the strategy and culture teams in identifying metrics that show the link clearly.
- Analysing the data you’ve collected
- Turning it into compelling insights presented in a way that aligns to those key metrics that resonates with the C-suite
- Review Financial Metrics before and after strategic initiatives have been executed
A before-and-after report is the most compelling tactic you can adopt when trying to demonstrate a positive ROI for you’re the alignment of strategic and cultural initiatives within the company. Present a comparative analysis of the key financial metrics before and after your specific actions aimed at improving the company culture.
- How to Showcase the Financial Benefits of Culture Initiatives to the C-Suite
You have all your people’s data and insights proving the ROI of your efforts to establish a stronger culture within the workplace. Now develop a compelling ROI business case.
First of all, you’ll want to shift the approach from convincing them that a positive workplace culture has an ROI to proving to them how exactly it has an ROI.
Secondly, you show senior leaders real examples of good company culture that correlate the strategic ambitions. Showcase results at a macro level, first, then at a micro level. Put them in an organisational context and let the C-suite know the exact sum you want to invest and the return you expect to get on that investment in the context of strategy and agreed culture.
