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How To Build An Effective Culture

2015 August 12
by Greg Satell

In Team of Teams, General Stanley McChrystal credits his focus on transforming military culture as key to turning the tide in Iraq. He writes that “the role of the leader was no more that of controlling puppet master, but of an empathetic crafter of culture.”

He’s not alone.  Philadelphia Eagles Coach Chip Kelly says, “Culture will beat scheme every day.” Former IBM CEO Lou Gerstner wrote that “Culture isn’t just one aspect of the game, it is the game…. What does the culture reward and punish – individual achievement or team play, risk taking or consensus building?”

Yet culture can also be a trap, an excuse for doing nothing when faced with challenges and opportunities that don’t fit in with an organization’s history.  Blockbuster and Kodak both had strong corporate cultures and in both cases, ingrained attitudes contributed to their demise.  So simply having a strong culture is not enough, it has to serve a productive purpose.

Effective Cultures Are Not Uniform

One of the pitfalls of culture is that it is often an excuse to weed out those who don’t fit in.  Those who look or act a certain way are promoted to positions of power and they, in turn, hire others who are like them.  Before long, word gets around that the firm favors a certain “type” and the talent pool is limited to only those who are a “good fit.”

While that leads to a cohesive, comfortable workplace, it is a problem for two reasons.  First, research shows that diverse teams outperform more uniform groups, even if the latter are objectively more competent, because diverse groups can bring a greater variety of approaches and perspectives to a problem.

Second, excessive uniformity diminishes an organization’s capacity to adapt.  People of similar backgrounds and perspectives are likely to travel in the same circles, limiting access to new information.  What’s more, new ideas are less likely to be acted on in an excessively conforming culture.

Successful cultures seek out those who share values, not attributes.

Effective Cultures Do Not Lean On History

In Creativity, Inc., Pixar President Ed Catmull recounts standing in front of his employees to announce the merger with Disney.  Knowing that many were fearful about the effect that it would have on the company, he vowed that Pixar’s culture would not change.

He later called it one of the dumbest things he ever said.  Before long, change of any kind—from the production of sequels to the opening of an office annex across the street—was being questioned as a betrayal of Pixar’s culture, even if it had nothing to do with the Disney merger.

The situation got so bad that Catmull had to do a series of new talks to explain that, of course, Pixar would continue to change, just as it always had.  It was, in fact, Pixar’s innovative culture that made it such an enormous success.  A failure to adapt and evolve would not honor Pixar’s heritage, but betray it.

All too often, culture is mistaken for history.  It is not.  Strong cultures are able to accept and adapt to change.

Effective Cultures Are Not Tied To A Business Model

In the late sixties, Gary Starkweather had an idea.  At the time, the only way to share a document was to copy or fax it.  Yet he saw that documents could be bitmapped on a computer, transmitted anywhere in the world and then printed out using new laser technology that he had invented, much more quickly and cheaply.

It was a promising concept, but his manager at Xerox was dead set against it.  Starkweather’s idea didn’t fit well with the division’s existing lines of business and he did everything he could to discourage it.  Luckily, the company’s PARC division got wind of the idea and backed it. Within a decade, the laser printer became Xerox’s top product and saved the company.

Other firms have not been so lucky.  Kodak pioneered digital photography, but its culture was unable to adapt its business model to the new technology.  Blockbuster came up with a viable strategy to address the threat emanating from Netflix, but its strong culture of franchisees resisted and eventually the strategy was abandoned.

The truth is that success often breeds failure and every business model eventually falters. Unless your culture can operate independently on particular practices, product lines and customer segments, it will eventually end very badly. .

Culture Is How An Enterprise Honors Its Values And Mission

As I noted above, culture can often be a trap, because it it so often used as an excuse for failing to accept change.  It’s easy to dismiss people like Gary Starkweather by saying that they “don’t fit in” or to resist change at a place like Pixar by appealing to reverence of a storied past.  Culture, far too often, is a euphemism for the status quo.

A healthy culture, on the other hand, honors the mission of an enterprise.  When Lou Gerstner arrived at IBM, which at the time was on the verge of bankruptcy, he saw that the compelling logic of the firm was to create and deliver technology solutions.  Yet an internal culture had developed that conflicted with that mission.  He wrote:

 

Units competed with each other, hid things from each other. Huge staffs spent countless hours debating and managing transfer pricing terms between IBM units instead of facilitating a seamless transfer of products to customers… Meetings to decide issues that cut across units were attended by throngs of people because everyone needed to be present to protect his or her turf… tens of thousands trying to protect the prerogatives, resources and profits of their units; and thousands more trying to bestow order and standards on the mob.

 

What he realized was that while every successful organization needs to codify what effective practices to transfer institutional learning and knowledge, as the world changes those customs need to adapt.  So he went to work eliminating everything in the culture—the dress code, the arcane internal lingo, etc.—that didn’t support the mission.

A generation has passed since Gerstner’s famous turnaround and today things move much faster.  As technology accelerates and the world becomes ever more connected, disruption cascades through what were previously nearly impermeable boundaries of industry and geography.  No one is safe anymore.

That’s why every enterprise needs to adopt a culture of change and that begins with a commitment to a clearly defined mission.  Culture without a purpose has no value.  It’s just a bunch of stuff that people have gotten used to.  On the other hand, culture that is dedicated to mission and values can focus an enterprise on the challenges that lie ahead.

So it is not enough to promote a strong culture.  You have to ask, culture in the service of what?

– Greg

4 Responses leave one →
  1. August 12, 2015

    Good article, Greg – happy 6th birthday, by the way!

    The key difference seems to be that those cultures that are deeply-embedded and inwardly focused are doomed. Deeply-embedded cultures that focus on the external world, especially customers and also on competitors, are likely to succeed.

    Kevin

    [Reply]

    Greg Reply:

    Very true. Thanks Kevin!

    – Greg

    [Reply]

  2. August 12, 2015

    Brilliant, as usual, Greg! I find myself striving to sync my thinking about culture building, communication, and appreciation, with yours. I’m learning a lot from your posts.

    You also had perfect timing with your continued up-to-date information about military leadership. I have just finished reading Why Marines Fight by James Brady (http://www.amazon.com/Why-Marines-Fight-James-Brady/dp/B007F8B1IA). I was just about to process what I’ve learned from this collection of oral history/interviews to explore the power of strong Marine culture on motivation, and was about to focus on the variety of motivations (and the different priorities soldiers placed on their motivations). Now, your new article here has provided me with a new perspective. I’m wondering if the Marines are experiencing “growing pains” at the level of Basic Training and soldier engagement. Have you come across information about this?

    [Reply]

    Greg Reply:

    Hi Duane. Sorry about the late reply.

    I have not read the book. I’ll have to check it out. I don’t know about Marine growing pains, but McChrystal gives a good description of Special Forces training in the book and the importance of forming a group identity.

    – Greg

    [Reply]

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