Harbridge Insights – Culture
Part 1 – What is Culture?
8-10 min read
What is culture? There is no universal definition of culture. It is one of those ubiquitous terms that everyone believes they understand and can define. Unfortunately, if you ask a range of people, you will get a range of very different answers. In this series of four articles, we:
- examine exactly what culture is (and isn’t) and provide some simple frameworks to help you understand and assess the culture in your organisation;
- discuss culture versus strategy;
- provide evidence-based ways to positively influence culture; and
- explain why a positive organisational culture will become increasingly important over the next decade.
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in Australia has clearly defined both community and regulator expectations in terms of acceptable organisational culture. These expectations are further emphasised by culture deficiencies found in both the Aged Care and Child Sex Abuse Royal Commissions. Findings from all three Royal Commissions have far-reaching impacts for culture (and governance) expectations for all types of organisations.
Definitions of culture
The word “culture” is derived from the term “cultivation”. Culture is what is tended to and grows. Looking to cultural research, definitions include: the expectations and written/unwritten rules that drive behaviour; whether change will be successful; and the shared beliefs and assumptions that determine behaviour. Our definition is that “culture is the way things get done (or don’t get done) when no one else is looking”.
Culture is as unique to every organisation as fingerprints are to each person. It influences what is acceptable (or not) in the organisational environment. This includes how we communicate, act, dress and generally operate and function. An organisational culture can be positive or negative, or sometimes combinations of both. Organisational culture is a combination of everything that is occurring (or has occurred) within an organisation. Some cultural activities can be so firmly entrenched and taken for granted, that they can act as a cultural blind spot and not be viewed as either positive or negative by the employees.
We regularly review Codes of Conduct, Codes of Ethics or other similarly named documents when performing due diligence on investment managers. Our general assessment of these documents is that whilst being well-intentioned, they are often more the espoused values, rather than those being lived and breathed. They can be token in nature and sometimes even copies of other organisation’s documents. Unfortunately, they are rarely reflective of the underlying behaviour and practices of the organisation we are assessing.
What is (and isn’t) culture?
So, before we discuss exactly what organisational culture is and provide some simple ways to assess it, let’s start with what it isn’t. A great culture is not the outcome of measurement from staff engagement surveys or similar assessments. These are essentially weather reports which tell you whether it is raining or not. What they don’t tell you is what is driving the weather changes. Culture is not an annual (or less frequent) set and forget process. Nor is it the latest series of warm and fuzzy words that HR or marketing has plastered around the office.
At its heart, culture is what motivates and drives people. It is what the organisation is willing to accept or not. Organisational culture is a driver of performance (good or poor performance). It is not an outcome to be measured post performance. Culture is the way that people interact with each other day in, day out, regardless of whether anyone is watching or not. It includes the way staff, clients and customers are treated, as well as how an organisation implements and adapts to change. It is the social norms within an organisation, with group behaviour driving individual behaviour (acceptable or otherwise).
Frameworks/models to assess culture
There are various frameworks which can help you to understand and analyse your organisation’s culture. This article considers two of them to help you think about the culture in your organisation.
- Schein’s Organizational Culture model
The first framework is Schein’s Organizational Culture model. This model specifically focusses on the three levels of culture, some of which are visible and tangible, whilst other parts can only be assessed through patterns, inferred values and assumptions. The three levels are:
• Observable artifacts
• Basic underlying assumptions or mindsets
Observable artifacts – The observable artefacts are the easiest to assess as they can be seen. They can include the physical layout and office space design, dress codes, symbols, language and behaviour. Things such as who has offices and who doesn’t, how people interact with each other, and an even how meetings are conducted are observable artefacts that can drive culture.
Values – Similarly, some values are a combination of visible items such as publicly stated values, mixed with those that are lived and breathed consistently. Other values are observed from recurring events or patterns, such as traditions (cakes for birthdays), celebrations (staff recognition and awards) and other ceremonies. Sometimes, values are more difficult to observe. Some values can only be detected from hearing those stories repeated over time. This is the same way that traditional elders have passed on their cultural values and beliefs to younger generations.
Mindsets – Some of the basic underlying assumptions of organisational culture relate to recognition and punishment. If behaviours occur and are positively acknowledged or encouraged, they are more likely to recur as they are deemed to be acceptable. However, if they are not negatively reinforced, it will also be assumed that the behaviour or actions are acceptable. Doing nothing allows poor conduct to be continued. A perfect example of this is staff checking their phones during meetings. If not discouraged early or continuously, it reinforces this as an acceptable behaviour. As an aside, it also diminishes the value of holding meetings when staff are distracted. We now know from multiple neuroscience studies that multi-tasking isn’t effective. Therefore, people who think they can check their phone(s) and listen/participate in a meeting, are not performing either function well.
It is only when there is some form of punishment or negative reinforcement aligned to a behaviour or action, that the behaviour or action will be considered unacceptable. Whether or not certain behaviours continues and becomes part of the accepted organisational values are determined solely by whether they are acceptable within the organisation.
- Organisational Virtues Framework
Another way to assess organisational culture is using the organisational virtues framework consisting of five key assessment areas: Innovation; Customer retention; Employee turnover; Quality; and Profitability. This model is most closely aligned with positive organisational scholarship. The assessment is concerned with especially positive outcomes, processes, and attributes of organisations and their members. Each of these five areas are discussed further below.
Innovation – Research indicates that innovation and creativity are higher in individuals who are flourishing. Employees who are more satisfied with their lives, including their work life and work environment, are more likely to think more creatively and be more collaborative. They are also likely to take controlled risks and be willing to try something new and innovative. This creates great opportunities for the development of new products and services. It also creates potential opportunities for identifying alternate ways to complete work tasks and service clients.
Taking risks is the cultural trait with the most significant impact on staff performance. The opportunities to try new approaches and new ideas, irrespective of the certainty of success, has been shown to improve performance by 39%. This process also contributes to a growth mindset (the understanding that abilities and intelligence is not fixed and can be developed). Allowing for and encouraging failure is a strong driver of innovation and helps to creates a psychologically safe work environment.
Client/customer retention – Customer retention is critical for any business. It both increases revenue and minimises the costs associated with needing to obtain new customers to retain the same level of revenue, thus making it more profitable. Research suggests that organisations that exhibit positive leadership have higher profits and higher levels of customer satisfaction and loyalty.
Employee turnover – Satisfied employees are more cooperative and collaborative with their work colleagues, have fewer sick days and remain with their employer longer than dissatisfied and disengaged employees. They are more likely to spend more time volunteering and helping strangers. They are also more highly rated by their clients/customers, as well as by their supervisors.
Quality and Profitability – Each of these issues can have significantly positive impacts on both quality and profitability. Engaged employees are more likely to have higher levels of productivity. As a result, they work longer and harder than disengaged employees. Focusing on an organisation’s core strengths and outsourcing where you do not have competitive advantage can also have positive impacts on quality and profitability. This is especially true where an organisation partners with (and actively monitors) strategic business partners to ensure that quality and other service levels are continually met or exceeded.
Establishing an organisational purpose (the “why” of why you are in business), as well as the underlying values required to achieve its purpose, is a critical step in determining the required culture to achieve any organisational strategies or long-term changes. Boards should use the collective input of staff to identify the best facets of an organisation’s culture. This assessment can be benchmarked against their assessment of the ideal culture for strategy execution and ongoing change management. The comparison will help determine the required behaviours and practices that will maximise cultural effectiveness. Staff engagement and involvement is critical continually assess the gap analysis to identify the actions required towards the desired culture. These issues will be discussed further in our third article on how to positively influence organisational culture.
There are two key factors that any organisation whether large or small, for-profit or for-purpose, must consider about culture:
- Firstly, culture is not static and is constantly evolving, even if only microscopically. Even in a large organisation, a new staff member or a small change to existing procedures can change the culture and cause positive or negative ripple effects throughout the organisation. These ripples are bi-directional. Any organisational change will change the culture, and any culture change will change the organisation; and
- When analysing organisational culture, whether as a director/employee or an outsider, we bring our own biases and interpretations. Therefore, every assessment of culture will differ to both the collective organisational view and the underlying opinions of each assessor.
For these reasons, it is critical that culture is actively managed, owned by the board and executive team (rather than HR) and is consistently monitored and managed (also a key recommendation from the Haynes Financial Services Royal Commission). We will discuss these issues further in Article 2: Culture versus Strategy and Article 3: Evidenced-based ways to positively influence culture.
Please get in touch if you wish to discuss this article further.
Harbridge Optimal Performance
About Harbridge Optimal Performance
Harbridge Optimal Performance is a specialist consulting company offering a range of services to optimise the performance of individuals, teams and organisations. We believe that applying a positive, strengths-based approach to traditional strategy, people and change management practices optimises individual, team and organisational performance. We work top down with boards and executives at the organisational level and work from the bottom up both one-on-one and with groups at the individual and team levels.
Our clients include investment managers, super funds, a university and other institutional investors, ASX listed companies/subsidiaries and various other professional services firms, as well as individuals from a range of industries.
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