Performance versus Culture

The impact of culture in business 

Why is culture so important throughout a business? Why is it more important to focus on culture than performance when building a long-term business?^[1]

Every business is centred around people. I’m hard-pressed to think of any business where people aren’t at the heart of decision-making and implementation. If we believe this, then the way your business behaves will be the sum total of the way your people behave. It is this behaviour that produces the consequences (intended or otherwise) of the organisation. These consequences include value creation, which is good (delivering the purpose and products of the business). However, they also produce wasted resources because of sub-optimal performance. This waste not only includes people’s effort but also other resources and assets not being optimally employed.  Improving culture reduces this waste.

Culture trumps Performance

Despite most business metrics being performance-related, we can see that businesses don’t centre themselves around performance but people. Performance can’t create great people, but people can create outstanding performance. And yet, so much effort is built around achieving performance without addressing the vital issue of making it sustainable and enduring. Can you think of any business initiatives that initially produced excellent performance and optimism, only for it to wither and die soon after? People, as wonderfully diverse as they are, rely on something to knit themselves together for the long-term good. A performance focus only delivers short-term results plus individual burn-out, attrition and resentment. It doesn’t produce long-term improvement. However, focusing on culture provides long-term performance and creates a long-term asset – see our thoughts on Cultural Debt.

The impact of Culture

For example, we worked at a highly acquisitive business where integration was a real challenge. It was in constant change. Each acquired company came with its own culture. It was given increased revenue targets because it had a larger sales force through which to sell. This continual focus on performance didn’t address the parochial and local cultures that companies brought with them. As a result, revenue didn’t increase, and it wasn’t until we introduced a new culture across the business that the performance improved in line with expectations. Only by changing the culture were we able to consistently increase the revenue and performance. Taking hearts and minds with you on the journey is so important, and this can only be done with the right culture.

The word is spreading about how influential culture is. A recent survey found that more than half of people consider culture more important than salary when looking for a new job. This percentage increases for millennials, where 66% of people consider culture more important than salary. And 77% research the company’s culture before applying for a job.

Finding the right behaviour

So, if we pivot a business’s success around people’s behaviour to produce the right consequences, how do we ensure the correct behaviour? Behaviour is primarily driven by how people are motivated. Motivation can take many forms and has to include the notion of “Predictably Irrational” as well. People don’t always behave as you predict, but you can motivate them with a valuable degree of certainty. And if you choose the right people, they will come with many of the right motivations (think here of recruiting for attitudes, character and beliefs).

Motivating People

As well as internal motivators, people are largely motivated by their peers, employers, markets and customers through regulations, rewards, organisation structure, procedures, ethics, values, etc. This is nothing new. What is new for many is how culture can be intentionally architected rather than produced as a set of performance-focused, piecemeal initiatives. And when we speak about improving culture, we don’t just mean improving team leadership skills. That is important, but it would be like training a Grand Prix driver to perfection without giving them a car to race. We mean a culture architected for the high-performing team to work within and take forward.

The purpose of culture

It’s essential to understand the purpose of a culture. Many companies prioritise the employee experience and view culture as synonymous with “company benefits” or a “feel-good factor.” While it’s true that culture should focus on people, the ultimate goal for most businesses is to drive sustainable performance toward the company’s purpose. Culture only exists because of people, but it’s not solely for the benefit of people.

Culture isn’t just about good teams, either.  If you build culture across the business rather than just at the team level, you’ll get consistent, effective, enduring performance as the consequence of behaviour. This will be transferrable into your brand experience by people inside and outside your company.

Let’s dig a little deeper

People are core to your business’s success and work towards goals because of a complex relationship with their organisation.  People are not machines and cannot be programmed to work like them.  There is implicit goodwill between people and the business, which creates the culture that drives them both.

People are motivated to behave in a certain way because of various stimuli.  These can be as simple as contracts and rewards or as complex as herd mentality, internal drivers, external influences, beliefs, values, character, etc.  At one end of the spectrum, businesses adopt a culture that maximises short-term benefits and can treat people as expendable assets that need to be constantly renewed (have you ever worked for a company like this?).  At the other end of the spectrum are businesses that put their people on a pedestal and won’t implement any changes for fear of upsetting their cherished asset (have you ever worked where fear of change is an overriding characteristic?).  Most organisations need to be somewhere in between.

Culture creates the motivations and behaviours to drive the consequences (outcomes) that you want.  People see culture in action through the behaviours that they exhibit.  You can architect the culture to achieve this.

Just because I’ve reduced business to three artefacts (motivation, behaviour and consequences) doesn’t mean we should treat people poorly or be manipulative – quite the opposite. Creating a culture where manipulation thrives will drive a particular set of poor consequences (think Machiavelli).  Conversely, people are unique and bring their own history and influences into the business and their work.  So, use culture to build diversity and inclusion into the organisation’s fabric.  These three artefacts shouldn’t suggest that culture architecting is straightforward – it isn’t, but it is both practical and rewarding with the proper framework in place.

While culture is hugely important to long-term success, it needs to operate within the context of your business—its purpose, market, strategy, etc. It must also be coupled to the business’s capabilities and ability to make decisions and conduct outcomes. We use our 4C Framework to make this all happen, where Context, Culture, Capability, and Conduct work together to make the business perform at its best.

Conclusion

Culture has a significant impact on a business’s long-term success. If you want to create an enduring business, culture must be at its centre. However, it has to work for the business in tandem with its context, capability, and conduct (4C Framework). Trying to move the business forward without architecting the right culture will result in poor performance and a reduced corporate lifespan.

[1] Beyond Performance 2.0 p48 | ISBN 978-1-119-59665-3