Article 2: The Determinants of Corporate Culture

For an introduction to this series of articles, please view Why Banks Should Focus on Culture, Now More Than Ever., see also Article 1 in this series.

 

Corporate culture impacts performance in ways that are often invisible to those inside the company.  While culture can be evidenced through observable behaviours (resistance to change, lack of trust between departments, blaming and lack of accountability, single focus on individual gains, short-term focus versus longer term value creation, etc.) a culture is not simply the sum collection of the values and behaviours of its employees.  That would be totally unworkable and a recipe for chaos.  Instead, there are two major ingredients that cause people to behave in common and predictable ways, which then creates culture. As a reminder, our definition of culture is:

“the habitual ways we go about solving business problems and treating each other.”

The two strongest determinants of culture are internal business processes and the activities of the senior leadership team.

Business Processes: After 30+ years of working with senior teams on turnarounds and performance improvement we are convinced that corporate culture is greatly determined by the business processes the company adopts, not culture statements or values posters, and that repetitive behaviours (what we see as culture) are the result and not the cause of culture.

In essence, a business process, such as annual planning or departmental budgeting, or a management process such as the performance review or promotion process (not the ones in the handbook but how they are actually done in real-time) have a tremendous impact on shaping first individual, and then collective behaviour and ultimately the corporate culture.  People can give lip service to a set of values on the wall or a fancy mission statement, but can’t escape complying with internal business processes.  And those who don’t adhere to the internal business process are few and usually gone before too long.

Plus, poorly designed business processes do double damage by fostering “malicious obedience” and cynicism, while at the same time prompting time-consuming “workarounds” that hinder productivity and reduce performance.  The annual bonus process within most banks is an excellent example.  Not only is the process based on a false assumption (that the only way to keep high performers performing and thus run a profitable institution is to pay them big bonuses) but an inordinate amount of valuable senior management time is taken up every year in seemingly endless meetings with key employees trying to find a compromise between individual expectations (and often demands) and the size of the overall pie handed down from corporate.  In this case the unwritten process (individual bonus negotiations) has definitely shaped a key part of the culture of banking.

We believe it makes good sense for senior executives to look closely at the business processes they are using internally.  What we suspect you will find is that many of them are legacy processes, developed some time ago when business conditions were different and may not be fully appropriate for your current strategy or the pace of business today.

Leadership Shadows: The second key determinant of corporate culture is leadership, and specifically we mean the senior executive team. High performance leadership teams understand that their collective work processes (e.g., meetings, performance management, quarterly reviews, new project investment requirements, etc.) and their collective behaviour (teamwork, turf-battles, blaming, respect for others ideas, etc.) cast a positive or negative shadow across the entire organization.  And since employees tend to take their cues on what is important and how to behave from their leaders, negative activities and behaviour at the top foster negative behaviours far down into the organization, adversely impacting performance and productivity.

Organisations are shadows of their leadership…that’s the good news and the bad news!

 

Whether the leadership team is aware of it or not, the way they work together and how they manage the business casts a powerful shadow far into their organization. And actions speak louder than words!  When the leadership team says one thing and then behaves differently employees quickly figure out the real story. When a senior executive talks about the core value of respect and then promotes one of the most abusive managers, the real story of “what is important around here” quickly gets around.

When members of the leadership team come into the building and head straight for their offices, head down, not interacting with anyone, that’s the story that gets talked about in the canteen and the pubs, not the speech one of them gave on employee engagement and openness. The actions don’t match the words.  And an even more powerful shadow cast by the senior team is how they interact with each other.

If you want teamwork and collaboration on major client pitches as a core value and business driver, it better happen at the top or you won’t achieve it anywhere else, even with the best consultative selling training or cross-functional collaboration workshops. If two senior executives won’t support each other and openly bad-mouth each other (as is the case with many co-head arrangements currently in fashion), you can forget about any meaningful support and cooperation, let alone intelligent collaboration on major client deals.

With this understanding of the importance of culture on performance and the realization that culture is built through internal business processes and leadership behaviours, let’s look more specifically at the culture of banking today.

The next article in this series, Is the Culture of Banking Broken?, explores both the business processes and leadership activities that have shifted over the past 40 years to create the current culture of banking.

 

About johnrchildress

John Childress is a pioneer in the field of strategy execution, culture change, executive leadership and organization effectiveness, author of several books and numerous articles on leadership, an effective public speaker and workshop facilitator for Boards and senior executive teams. Between 1974 and 1978 John was Vice President for Education and a senior workshop leader with PSI World, Inc. a public educational organization. In 1978 John co-founded The Senn-Delaney Leadership Consulting Group, the first international consulting firm to focus exclusively on culture change, leadership development and senior team alignment. Between 1978 and 2000 he served as its President and CEO and guided the international expansion of the company. His work with senior leadership teams has included companies in crisis (GPU Nuclear – owner of the Three Mile Island Nuclear Plants following the accident), deregulated industries (natural gas pipelines, telecommunications and the breakup of The Bell Telephone Companies), mergers and acquisitions and classic business turnaround scenarios with global organizations from the Fortune 500 and FTSE 250 ranks. He has designed and conducted consulting engagements in the US, UK, Europe, Middle East, Africa, China and Asia. Currently John is an independent advisor to CEO’s, Boards, management teams and organisations on strategy execution, corporate culture, leadership team effectiveness, business performance and executive development. John was born in the Cascade Mountains of Oregon and eventually moved to Carmel Highlands, California during most of his business career. John is a Phi Beta Kappa scholar with a BA degree (Magna cum Laude) from the University of California, a Masters Degree from Harvard University and was a PhD candidate at the University of Hawaii before deciding on a career as a business entrepreneur in the mid-70s. In 1968-69 he attended the American University of Beirut and it was there that his interest in cultures, leadership and group dynamics began to take shape. John Childress currently resides in London and the south of France with his family and is an avid flyfisherman, with recent trips to Alaska, the Amazon River, Tierra del Fuego, and Kamchatka in the far east of Russia. He is a trustee for Young Virtuosi, a foundation to support talented young musicians. You can reach John at john@johnrchildress.com or john.childress@theprincipiagroup.com
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3 Responses to Article 2: The Determinants of Corporate Culture

  1. Pingback: The Cap Seller and the Monkeys: A Leadership Parable | John R Childress . . . rethinking leadership

  2. Pingback: TQM 2.0: Quality of Strategy | John R Childress . . . rethinking leadership

  3. Pingback: Why Banks Should Focus on Culture, Now More Than Ever | John R Childress . . . Rethinking

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