Crafting culture for corporate clarity

A strong organisational culture drives performance, retention and reputation. Laura Magahy outlines how to shape and sustain culture for competitive advantage

Organisations ignore culture at their peril. We need only look back to the global financial crisis and recent controversies across several charity and public sector institutions to see the results of weak organisational culture.

Peter Drucker may have never actually said, “Culture eats strategy for breakfast”, but Ford Motor Company President Mark Fields certainly did when he put it on his office wall in 2006.

This is much more than a catchy slogan. It underlines a critical truth: no matter how well-crafted a strategy might be, it will fail if the culture in an organisation doesn’t actively encourage its people to live it.

In short, without a coordinated framework for supporting a culture that will drive the company’s vision forward, achieving it will not be possible.

Conversely, organisations with a strong, positive and supported culture enjoy significant benefits, including improved performance, enhanced employee recruitment and retention and better overall reputation.

The cultural wake-up call

The 2008 global financial crisis cast a spotlighted cultural failings in financial institutions as a key contributing factor.

By 2012, corporate culture began to be seen as a key strategic element to prevent future crises.

In 2018, the Central Bank of Ireland conducted a behaviour and culture review of Irish banks. What followed was the establishment of the Irish Banking Culture Board, which was set up to drive cultural change in financial institutions.

More recently, other high-profile scandals have led a number of public sector authorities, agencies and charitable bodies to look seriously at organisational culture as part of essential governance oversight and reputation protection.

Defining and assessing organisational culture

The challenge facing organisations is how to determine if they have the right culture and, indeed, what that culture should be.

There is no identity for setting the ideal or target organisational culture. The nature of the individual organisation and the circumstances in which it operates are of fundamental importance and must be considered.

For example, the culture required for a commercial, sales-focused organisation may be different to that of a public service provider; where a number of organisations are merging, they may need to define a new culture for the new entity; when a new agency is being established or has an expanded remit, they may need to reset their target culture.

In all cases, the target culture must be aligned with what the organisation and its leaders want to achieve to support their mission, vision and values.

Organisational culture, if not actively supported and monitored, tends to grow and evolve organically and frequently in unintended and unexpected ways. It is created through the behaviours that are displayed by both the top management and local leaders through their day-to-day actions.

Four common culture types

Broadly speaking, organisational culture will often fall into one of four general categories. Each is based on different value drivers, which depend on various factors, including whether the organisation is more internally or externally focused, how flexible and innovative it needs to be to deliver on its mission and what its risk appetite should be.

1. Clan culture: Internally focused, promoting long-term cohesion, with core values of commitment, communication and staff development.
2. Hierarchical culture: Also internally focused, prioritising efficiency, consistency and structure in the pursuit of a common goal.
3. Adhocracy culture: Externally oriented, with a long-term vision; competitive, driven by innovation, agility and transformation.
4. Market culture: Also externally focused, with a sharp emphasis on customer service, goal achievement, market share and profitability.

In reality, most organisations exhibit a blend of these types. What really matters is if it is the right target culture for what the organisation needs and, if not, what the right one would be.

Characteristics of strong vs. weak cultures

Strong organisational cultures typically exhibit traits such as:

• Honesty and transparency;
• Strategic and forward-thinking approaches;
• Respect and accountability;
• Adaptability and reliability; and
• A shared sense of purpose.

In contrast, weak cultures are often characterised by:

• Siloed thinking;
• Short-term focus;
• Low employee morale;
• High staff turnover;
• Over-concentration of power; and
• Lack of trust and engagement

Cultural variation across departments

It should be emphasised that uniformity of culture across different parts of an organisation is not necessarily critical for mission delivery. As long as the people within the organisation are aligned with the same goals and values, then cultural variation or sub-cultures across departments and divisions can co-exist.

For example, adhocracy may suit a research and development department, while the sales operation may find a market culture more appropriate.

As long as they share the behaviours and values of a strong, positive culture, they can work together in harmony or at least in a mutually supportive environment.

Laura Magahy is Head of Public Sector Consulting at Forvis Mazars