Is culture more powerful than strategy?

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Lord Davies’ 2011 ‘Women on Boards’ report set a target of 25% female representation on FTSE 100 boards by 2015. In his review this week Davies said : “The rate of change that we have seen at the heart of our biggest companies over the last three years has been impressive. The voluntary approach is working and companies have got the message that better-balanced boards bring real business benefits… We are finally seeing a culture change taking place at the heart of British business.”

The link between female board directors and corporate performance has been well-publicised, most notably by Mckinsey who in 2007 pin-pointed a 30% turning point at which women’s representation has a significant impact on corporate performance. This shows that a company’s cultural diversity agenda can no longer be thought of as just an HR tick-box exercise but is inherent to business success.

Culture has been described as the set of beliefs that drive employee behaviour – it is essentially what drives results. How these results are achieved can be dependent on two factors: whether a business strategy is efficiency driven, or else strategically focussed on innovation. There is a not a one-size-fits-all solution, and it would be folly to say that one company operates a good culture, while another a bad. What is certain, however, is that for a business culture to be effective it must align with the business strategy.

Companies that are innovation driven could include tech-savvy companies such as Google and Apple where business results depend on high levels of innovation in their workforce and instiling a workplace culture that motivates and stimulates creativity in their employees. Innovative talent is drawn to the dayglo beanbags, yurt-shaped meeting rooms and indoor putting greens – a very specific culture these companies offer.

Other companies, such as Ryanair, whose business strategy is efficiency driven, operate under a different cultural dynamic . Last year Ryanair’s CEO Michael O’Leary faced tough criticism from shareholders at the AGM about Ryanair’s “macho” management culture. “I am very happy to take the blame or responsibility if we have a macho or abrupt culture. Some of that may well be my own personal character deformities,” he is reported to have admitted at the company AGM.

It is unlikely that a company such as Ryanair will be open to a more inclusive and team-driven cultural change, at least while O’Leary is in the top spot, but even if the company wanted to initiate organisational culture change, it is not an easy process and is particularly difficult to do when the culture has been formed in the shadow of its leader.

Cultural change has to come from the top, and it is up to the leadership team to promote it. Leaders have to advocate a working culture that is inclusive, that values the differences between people. Corporate Executive Board (CEB) research last year found that organisations get far more return if inclusion is widely promoted. Their research found that building an inclusive workplace increases discretionary effort from 6% to 12%, and increases retention from 7% to 19%. “Inclusion doesn’t just happen,” says Nicky Moffat, a leadership and diversity consultant; and Jean Martin, executive director of the HR practice at the CEB, added: “It’s about embedded behaviour and it’s not a natural state… Inclusion starts with a natural barrier… When we were hunter-gatherers, anyone different was a threat. We are hardwired for un-inclusive behaviours, so we need to recognise that and overcome it.”

So what can HR do to encourage inclusive behaviour and engage and enable their employees? “HR needs to be an innovation catalyst”, HCL Technologies’ Prithvi Shergill told HR Zone last week. “Innovation is what can differentiate organisations in this competitive world and innovation and creativity produced by a workforce is dependent on how well individuals are managed, empowered and encouraged.

Culture and strategy agendas cannot succeed alone: both must work in tandem for an optimal return. HR is undoubtedly in a key position to integrate the business strategy with an effective work environment, where the culture enables inclusion, empowerment and commitment. And this could be the final push that’s needed for Lord Davies to meet his 25% diversity target levels.

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