Assessing corporate culture in practice #1 – Kotter’s Culture vs Performance assessment

5 months ago I embarked on the challenging task of seeking to assess and influence the culture of my organisation. Using a range of management theories and concepts, I’ve managed to characterise the organisation and develop a long-term cultural vision for the organisation.

This blog will look at some of the successes, and failures of this venture in short(ish) form. I’ll be producing something much more detailed for my own MBA project.

Why? Why is this important?

Two reasons.

Firstly, we’d carried out a detailed engagement exercise with the workforce across the whole organisation over a 6 month period, really getting under the skin of it. This included workshops, conferences, interviews and breakfast meetings and informal coffee sessions with or  new Chief Executive. These events aimed to give us a an understanding of the mood of the organisation, identify some of the sticking points, and allow them to get to know the new Chief Executive and pass on their advice to him.

A clear message emerged from managers and staff indicating concerns about the culture within the organisation. A selection of the 350 comments we received as a result of the exercise are below

  • “Devolve trust more to take on more – Stop ‘nanny culture’ – trust staff to drive issues.”
  • “Trust and support managers to make decisions.”
  • “Get the right people in the right place to make the decisions.”
  • “We’re too siloed. Look at forming cross departmental working. More forward planning/appreciation, joint working and understanding of impacts.”
  • “Remove the hierarchy ‘don’t put tanks on my lawn’ approach which prevents people working together.”
  • “Overcoming apathy and making sure everyone is up for the challenge.”
  • “Address internal lack of trust.”
  • “Remove the art form of moaning about working here.”
  • “There is a lack of discipline – give us the tools to deal with.”

Secondly, to change and control an organization we have to effectively understand the way that it operates. Since organisations are groups of people working towards a unified goal or task, to find better solutions to the challenges posed by their environment (Lawrence and Lorsch, 1976), it is safe to say that if we are really going to understand our organisation, we have to understand the groups of people that form that organisation.

If we are to gain an insight into, and perhaps some control over our situation… we need to develop our understanding of how such organizations function and why the people within them behave as they do.”

Pugh (2007)

 

At a time of such upheaval and transformation, we have to better understand the organisation and the people within it if we are to deliver change and drive performance.

Kotter’s Culture vs Performance assessment

John Kotter’s 1992 book Corporate Culture and Performance identifies the importance of achieving alignment of culture to strategy in order to implement the strategy successfully. Kotter is a change management expert and professor at Harvard University – he has a website here: http://www.kotterinternational.com/

Kotter starts by setting out to test the ‘strong cultures theory’ – that presumes that organisations with strong cultures perform better than organisations with weak cultures. He assessed organisations with both weak and strong cultures and measures their performance (defined by market value growth). As a result he identified almost a complete absence of correlation between strength of culture and the success of the organisation’s strategy. Strangely enough, organisation

“The statement ‘Strong cultures create excellent performance’ appears to be just plain wrong.” – J.Kotter, p.19, 1992.

Let’s think about this – if a culture is strong and negative, resistant to doing what the strategy says, is it really surprising that performance struggles? Management would be constantly working against the organisation, pulling it in a direction it wouldn’t want to go.

Kotter concluded that the ‘strong cultures’ theory was simply incomplete (p.20, 1992), and that there must be more to it.

To test this, Kotter assessed 24 companies. Each company paired with a similar sized company in the same industry – one high performing, one low. The alignment of their respective cultures to their strategy were examined through qualitative assessment, including interviews and observations and the culture/environment fit rated between 1 (poor alignment) and 7 (positive alignment) to examine whether culture has an effect on performance.

From this Kotter identified that where there was a unanimous positive correlation between environment/strategy and culture organisations were likely to perform well. Organisations that had strong, but misaligned cultures delivered poor performance.

This explains why an organisation’s corporate culture is so essential to the successful implementation of strategy and why I needed to assess how well our culture is aligned to both our existing strategy (and thus assessing how much of an impact our culture is having on our day-to-day performance), and how it might support us in the future strategy.

This is where Kotter’s next analysis becomes so essential.

Kotter identified that a strong culture “…can (1) blind people to the facts that don’t match its assumptions, even very smart, experienced and successful executives,(2) an entranced culture can make implementing new and different strategies difficult.”(p.36. 1992)

Since we are about to embark on one of the biggest transformation journey the Council has ever been a part of with a hugely ambitious 24 project transformation programme, this suddenly becomes an essential task to undertake. Not just to understand and assess the alignment of strategy and culture, but also to influence and change the corporate culture if it is out of alignment.

As a result I realised I would have to include adaptability of culture into the mix, working on the basic premise given by Kotter that “only cultures that can help organisation anticipate and adapt to environmental will be associated with superior performance.” (p.39. 1992)

Change

Creation and impact of strategically inappropriate culture (Kotter, 1992)

As I felt this was such an important point, I decided to summarise these findings into a simple diagram to help explain it to colleagues – hence the diagram below showing the relationships between these three factors on a rudimentary clock-face to represent time.

culture

My rudimentary illustration of Kotter’s cultural alignment theory

Where do I go from here?

So now we understand why culture is so important, the next thing I have to do is work out how I’m going to assess it. That will be the next blog I think.


 

References

Kotter, J, 1992 Corporate Culture and Performance, The Free Press, New York
Pugh, D, 2007, Organisation theory: selected readings, fifth edition, London Penguin
Lawrence. P and Lorsch. J, 1967, Organisation and Environment, Cambridge, MA, Harvard

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