Here's why culture eats strategy for breakfast, lunch and dinner
Business management guru Peter Drucker coined the phrase "Culture eats strategy for breakfast." While few dispute this wisdom, fewer understand why.
Corporate culture and strategy are separate but symbiotic. Culture will either contribute to or undermine strategy. In fact, while there are a lot of things the company can do to drive growth, the one thing that will directly impact everything else is culture.
Corporate culture is the human performance engine that drives the amount of success, or failure, for every business strategy, revenue initiative, operational performance and change transformation. Culture is a precursor and top contributing factor to anything and everything that requires employee effort.
Unlike strategy which is created at a set period and using a defined process, culture is developed over time, more often by happenstance than design.
Every company has a culture. Most low performance cultures are a consequence of unplanned actions, unforeseen behaviors and random outcomes. But high performance cultures are purpose built, proactively designed and in a continuous state of awareness and improvement. They don't leave employee productivity and business performance to chance.
As a management consultant that's lead the design and implementation of high-performance growth cultures for many years, I've always been surprised by the number of business leaders that put more planning into a product, an IT project or the annual holiday party, than their company cultures. I generally find these business leaders don't fully understand the payback of a high-performance culture.
Harvard professor Dr. James Heskett and Dr. John Kotter compared low culture to high culture company performance results over an 11-year period and found the high-performance culture companies achieved an average 516% higher revenue growth, 246% higher net income growth and 755% higher stock price growth. The business strategies were not materially different, but the cultures were.
Engagement is a cornerstone of a high-performance growth culture, and the connection between engagement and key business outcomes is measurable and undeniable. Gallup research has been tracking employee productivity for over 40 years and has found that in comparison to workgroups with disengaged employees, engaged workgroups are 18% more productive, 16% more profitable, 12% better at engaging customers, 37% less prone to absenteeism and 27% less likely to be a source of inventory shrinkage.
A high-performance culture leads productivity and profits, making it an on-ramp to a successful growth strategy and financial performance.
Strategies include time-bound performance objectives, while high performance cultures are not time-bound.
Strategies are fluid and change frequently. For most companies, new strategies are implemented annually, and updated during the year. Strategies must change and adapt to keep pace with shifting markets, increasingly empowered customers and innovative competitors.
On the other hand, once culture declarations are defined and refined, they seldom change. They provide a firm bedrock for how staff align, communicate and work.
A company culture aligns leaders with staff, and strategy with actions. Culture is the backstop that guides employee performance. During periods of ambiguity or times of change, staff revert to culture. When strategy and culture are not aligned, staff defer to culture.
Cultures left to chance or weak cultures fail to align behaviors with strategy. At best, employees simply go through the motions. More often, employees operate as they always have, and irrespective of company strategy.
Culture is pervasive and perpetual. It starts slow but steadily advances like a flywheel to the point where it builds under its own momentum, and is difficult to slow down.
Culture is democratized and empowering. Every person and team can make it what they want. Unlike strategy which comes from the top, culture can be defined near the coffee machine, in the company lunch room or wherever staff congregate or view the behaviors of others. Everybody contributes to culture.
Culture is one of only four sustainable competitive advantages. While products, services and even strategies are copied by competitors in increasingly shorter cycles, a high performance company culture is not easily copied by competitors or displaced by new technologies.
The Corporate Culture Takeaway
Culture is both the biggest enabler of strategy and business performance, and the main obstacle to change and transformation. It either promotes or inhibits strategy and company performance.
It determines level of effort – whether staff are merely going through the motions or are fully invested and delivering their maximum contributions, often referred to as their discretionary effort, and is thereby the single most influential factor in achieving your company's strategy.
Until you achieve a high performance business culture, you will not achieve your business potential. Your business strategies, operational initiatives, employee productivity and employee tenure will remain at comparatively low levels, and permit any competitor with a high performance company culture to outperform your company.
A high performance growth culture is not easy to achieve, which is why those who do achieve, outperform those who do not. And this is why culture eats strategy for breakfast.