And for leaders, your business’s success does too

I am consistently amazed how much can be outsourced.  There are vendors today that can do almost anything you may possibly need or want your business to tackle. 

Engineering team isn’t strong? There are third party product developers and engineers.  Same for marketing, PR, graphic design, software development etc.  The principal of comparative advantage applied writ large means that there is likely someone who has specialized in whatever you might need to have done.

So what makes the difference from one firm to the next? Previously you could say, what one company did was different from another. But that may or may not be true, as so many functions can be done by a third party firm.

Instead, I am increasingly of the view that it is not expertise that distinguishes one firm from another, but instead it is the culture that defines a workplace.

Culture is a delightfully ambiguous concept.  It is touted for its positive impact, and at times derided for its negative.  But today’s leading organizations are known for their strong culture.  Nordstrom is famous for its sales associates and service culture. And similarly, it is known among potential employees for its attractiveness as a place to work.

So what is culture?

My executive coach recently opined to me that what identity is to the individual, culture is to the organization – an apt analogy. Culture whether overtly discussed or only covertly existing in the background is the de facto operating system for any organization – whether non-profit, business, family, sports team etc.

Over the last number of week’s, we have explored this core idea that our jobs ultimately should be about service to others (see “Service has a reputation problem”). We also considered the idea that while service can happen 1 to 1, such as helping a elderly neighbor with their lawn care, it is far more likely that the businesses (or nonprofits) we work in will be the platform where our service occurs. There is something special and unique about how an organization can harness human potential and deploy it to address needs at scale.

As I discussed in “Where we work: Reimagining Organizations in an Age of Skepticism,” this perspective sounds lofty in theory, we live in a time where many organizations and institutions of all types have been infected by rot, corruption, crime, and all manner of nefarious behavior. We concluded by considering how some macro trends in population and technology make for fertile ground for existing organizations to evolve and new organizations to emerge that can recenter on this ideal of service.

The path forward begins with getting the culture right.

The first step then in building any organization with any sort of excellence and endurance is to understand the current culture, determine its implications, outline potential changes, and then implement.

Culture, then, is the de facto set of norms, beliefs, and values that drive how the organization interacts internally, and responds to its external constituents (customers, etc.).  Let’s deconstruct that definition a bit further.

”De facto“ is an important phrase that is easy to skip over.  What it means is important in this context, it means something is ‘in reality’ this way, what is actually the case.  The true culture of a firm is what is in reality occurring, not necessarily what the corporate mission and values states.  Often, the stated culture and the de facto culture do not align.  When this occurs, it is the on the ground culture that wins the day.

Culture consists of norms – the common ways the organization does things. This could be how employees speak to one another, the language that is used, the brand guide about how communication is to be produced. 

This is on top of the core beliefs a firm holds.  Some cultures believe that the world is out to get them – whether it is competitors or regulators – and thereby operate with a cultural degree of paranoia. 

Values and beliefs are similar, but have differences.  If beliefs describe an understanding of what is true about the world, the values of the organization define how they are going to behave in light of those beliefs.

Next, culture sits often at a subconscious level driving the work of an organization forward.  Understanding the current culture is of critical importance whether as a leader, board member, or other constituent. Often decisions will be made or mandates ignored because they conflict with the culture in place. It can function often like an immune system – “that’s not how we operate here” is clearly and quickly conveyed to those perceived as interlopers or intruders. 

Cultural norms convey benefits and liabilities.  An organizational culture of thrift might be exceptionally good at hitting budgetary targets.  But when investment is required for growth, this norm may prevent an organization from taking the correct steps to take advantage of a clear opportunity.

Culture is a significant component of what attracts and keeps the team at an organization.  A sense of belonging and fit are exceptionally important in today’s market place. Individuals tend to self-select into organizational cultures where they fit / feel comfortable.  Unhealthy or toxic cultures are generally marked by high levels of turnover, low levels of engagement, excessive politicking, etc.

Finally, culture is ignored at your own peril.  If the culture is out of alignment with the market or the leader’s vision / strategy – it will be the culture that wins. Learning to operate within cultural systems is exceptionally important. When change is required to an organization, it must be evaluated through the cultural lens.

Next up, we will consider how cultures can evolve and change.