Employees watch what their bosses do, not what they say

There is a popular adage attributed to Peter Drucker that “Culture eats strategy for breakfast”.

It explains the fact that the culture of your company always determines success, regardless of how effective your strategy may be.

This brings to the fore the importance of the human factor in any company.

No matter how well crafted the strategy is if the people executing it don’t nurture the appropriate culture, your strategy, or project for that matter will fail.

Organisational culture can be viewed from the context of the set of values, beliefs, assumptions and symbols that are shared throughout the firm and defines the ways in which it conducts its business. 

Shaping an organisation’s culture is therefore a key focus for strategic leaders.

It can encourage or discourage leaders from pursuing entrepreneurial opportunities, which are a vital source of growth and innovation. 

Intangible resources 

Organisations utilise both tangible and intangible resources in the formulation and implementation of the selected strategy. 

The tangible resources are mainly the financial and physical assets on its balance sheet, while the intangible resources are the human resources and culture. 

Intangible resources are more likely to generate a competitive advantage than tangible resources because they tend to be rare and difficult to imitate, with socially complex resources like culture being the most unique of all.

Managers, therefore, need to tailor their practices to a culture that complements the chosen strategy. 

A healthy culture is a critical resource that can provide sustained competitive advantage if it is imperfectly imitable. 

Cultural norms have a fairly consistent impact on quality and hence performance, irrespective of the organisation’s strategy.

No wonder Peter Drucker warns us that culture can have a strategy as its first meal of the day. 

For a culture to provide a sustained competitive advantage, it must be valuable, rare and imperfectly imitable. 

Being valuable means that it leads to high sales, low cost, high margins and generally positive economic consequences. 

Being rare means that it has attributes that are not common to cultures of other firms while being imperfectly imitable means other firms cannot engage in activities to change their culture to copy and if they do they will be at a disadvantage compared to firms they are trying to imitate. 

There is a need to leverage culture as an asset for competitive advantage and this happens when it is different from other cultures and the elements that constitute it are difficult to imitate. 

Culture yields competitive advantage as a result of a cycle beginning with the formulation of a unique mission statement that supports unique processes that are necessary to embed the mission’s values that guide the behaviour required for success that is key for competitive advantage. 

Social learning 

Founders of organisations and the top management teams have a significant influence on the organisation’s culture by the mere fact that they lead by example and the rest of the team tends to align through social learning, whereas employees internalise leaders’ values by modelling their observable actions. 

Negative examples set by corporate leaders do far more to shape the organisation’s culture than do company codes of ethics and lofty statements of supposed corporate principles to which only lip service is paid. 

The leader and the organisational culture are interdependent, with a symbiotic relationship with the leader’s judgements affecting the organisation’s culture and cultural attributes influencing a leader’s future decisions and actions. 

Besides the top leaders, managers have significantly more impact on effecting change and subsequently performance than individual innovators (employees) by integrating and coordinating the innovative work of others and energising the culture and fostering alignment with the firm’s vision and mission. 

In an organisation, the staff look up to leaders for examples of how to act and are regarded as key shapers of the culture of the organisation through the examples they set.

Good examples that show sensitivity to ethical considerations result in a healthy culture while the converse – those with little sensitivity to ethics – result in a corner-cutting culture. 

Job rotation 

Organisational leaders use mentoring, coaching, job rotation and the creation of a conducive learning environment to develop strategic leadership skills. 

Learning is an essential element of strategic leadership development that ought to be part of the organisation’s culture. 

Such a culture would foster creativity and innovation, with employees learning through practice and without the fear of being punished for mistakes done. 

An organisation’s culture must support the execution of its growth strategy.

A strong culture can help achieve desired outcomes that could otherwise not be reached with formal contracts (e.g. incentive-based compensation) alone. 

However, a strong culture is unlikely to operate effectively and consistently in a large and complex organisation since sub-cultures are likely to emerge, making employees inclined to first identify with their business unit and then the organisation. 

Smaller, older and more successful organisations are more likely to have stronger cultures. 

Dr Olaka is the CEO of Kenya Bankers Association and the National President of the Federation of Kenya Employers.