This is why and how you can build the type of business culture you need to thrive in today’s competitive business world.
Austrian-born American management consultant Peter Drucker said: ‘Culture eats strategy for breakfast’; a phrase later made famous by Mark Fields, then President of Ford. It’s possible. After all, research shows a direct correlation between a healthy, productive culture and a company’s bottom line.
Why culture matters at all
In his book The Culture Cycle, JL Heskett explains that effective culture can account for 20-30% of the differential in corporate performance, when companies are compared with “culturally unremarkable” competitors.
Culture also creates a competitive safeguard. An aggressor in the market may be able to duplicate another organisation’s strategy, but it can’t replicate culture, which is the key to differentiating one group of people from another.
What if things don’t go according to plan? What if the economy is in a downturn? What if public opinion sways in an untoward direction, or a strategy proves untenable? Culture can save the day, because people are loyal to it.
Now this is all very well, but culture is also a bit of a unicorn. It’s beautiful, impressive, and a massive coup if you can seize it. Yet it’s elusive.
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Corporate company culture
Culture, as traditionally understood in the corporate sense, is composed of the values, beliefs, underlying assumptions, and attitudes that are shared by a group of people. But these are of little importance unless they are engrained in a company’s practices, which is why culture is equally about behaviours.
No company can build a coherent culture without employees who either share its core values or possess the willingness to embrace them over time. Equally, those who thrive within an organisation are likely to be those who most embody the prevailing culture. As a result, the beliefs and values of a company – if shared – can serve as a self-selection recruitment mechanism.
For this reason, I believe management should spend as weighty an amount of time defining, communicating, and inculcating culture as it does on strategy.
Holding company culture
Creating and sustaining culture in a holding company is more complicated than anywhere else, perhaps because there are different and diverse businesses under one umbrella – but often not under one physical roof.
In this case, it’s important for each individual company to preserve its own unique culture, in ways that make sense for that unique business.
At the same time, the holding company should build a group culture for the subsidiaries to buy into. Without this, true integration will be hard to achieve.
The challenge is the chicken vs the egg scenario. Which culture comes first? Well, the make-up of a holding company changes over time, as it acquires different businesses at certain stages. As a result, a foundational culture is required, into which existing and new subsidiary cultures can comfortably fit.
Where to start?
- Let’s say that a holding company develops a set of values, behaviours, and drivers – and defines what these items look like in concrete, practical terms.
- It develops a positioning statement, to communicate what the company stands for internally and externally. Google’s, for example, is “organising the world's information and making it universally accessible and useful”.
- It creates a motto, to sum up its culture. Google’s is, "Don't be evil” (that is, doing good things for the world even if it forgoes some short-term gains).
- The holding company communicates these widely, sustaining them with ongoing repetition. (This may sound obvious, but so many holding companies have values that are never communicated to subsidiaries.)
- With each new subsidiary that joins the family, the holding company invests time and resources to ensure that the combined cultures of the different companies do not implode – costing key people, clients, or worse.
- Culture is learned, which is why induction programmes for new employees are so important. But what about later? What about 12 months in, 3 years in, 10 years in? A company needs campaigns, reminders, infusions – ways to remind people what it is all about and what its culture feels like.
- It shares and entrenches its own ‘base’ culture, as a unifying factor.
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The bottom line
Peter Drucker has pointed to a powerful triumvirate in corporate transformation: strategy, capabilities, and culture, saying that all three need to be designed together, aligned and enabling of each other.
This is, by necessity, more complicated and challenging in holding companies. But it’s not impossible. Communication and collaboration are critical, to yield a clear culture that drives strategy and encompasses the group’s capabilities.