What’s Wrong With Culture Audits? Plenty . . .

man-with-audit-folder

Corporate culture is a hot topic!  It is discussed in boardrooms, MBA classrooms, blogging pages and even House of Parliament treasury committee hearings concerning the Libor rate fixing scandal.

It’s also an important topic since numerous studies have pretty well convinced the business world that culture impacts performance and a culture that aligns with the business requirements and fully engages employees can lead to dramatic success.

Thezappos sales disruptive-innovation culture at Apple, the employee-engagement culture at Google, the customer-service culture at Zappos, all provide tangible, bottom-line examples that “culture matters”. By making culture a strategic asset and designing the culture from the start, Zappos.com., a start-up on-line shoe retailer based in Las Vegas, Nevada  grew from zero to $1Billion in just 10 years.

Google receives 2.5 million applications for employment every year (6.849 per day).

Culture matters!

Time for a Culture Audit:

When CEO’s and senior executives begin to ask the following types of questions, they usually start thinking about conducting a culture survey:

  • What are the strengths and weaknesses of our culture?
  • How does our culture support or hinder business performance?
  • We have a new strategy, is the culture right to help us deliver?
  • Could our culture be a “hidden risk” to our business?

Important questions, especially now that the global economy is beginning to sputter back to life and companies are shifting from cost containment to active growth.

So, time for a Culture Audit.  Time to get a clear understanding of your current culture, and maybe even determine the elements of a “preferred” culture. Time for the organisational psychologists and culture consultants to come in.

And this is where the wheels start to come off for me!

wheels off

Did you know that there are over 70+ different culture audits available? Many developed by academics, psychologists and statisticians. Some developed by culture consultants. Although corporate culture has been intently studied for the past 50 years, there are still an enormous number of different culture surveys and audits. Even the experts can’t agree on how to measure it. And most culture consultants don’t really understand the full business ramifications of corporate culture; how it’s formed in the first place, what are the real levers for change, why culture is mostly invisible to senior executives, what’s the most effective culture change approach? But they all have their “proven” approaches.

Imagine you decide to buy a new car, but are presented with 70 different makes and carsmodels, all marketed as high quality, affordable, effective transportation. Deciding on which culture survey to use is like deciding which car to buy.  You need to understand two things very clearly: your needs, and the capabilities of the car.

Understanding Your Needs:

The first question to be answered is, why do you think you need a culture audit?  What tells you there’s a culture problem? And if it’s just for curiosity, I caution against it since conducting a culture audit and not doing anything with it tends to alienate employees.

But, let’s say you have one or more of the following clues that your culture could be a significant business issue:

    • Your company is under-performing its peer group on key metrics.
    • Executives and employees are starting to leave and going to your competitors.
    • In exit interviews you here things like, “I can’t work in this environment; I get no feedback on how I’m doing and no opportunities for development”.
    • The senior team is constantly fighting over resources and budgets and VPs tend to openly criticize each other.
    • Executive Assistants come and go, complaining of being treated like second class citizens.
    • Accident rates are above the norm.
    • Executing on the strategy is like pulling teeth, with numerous project overruns and missed deadlines.
    • The parking lot empties in a mad stampede at 4:59 pm sharp.
    • Innovation and new ideas seem to have dried up.

Or maybe you have developed a new product line and want to be certain the company has the agility and readiness to make it successful.

Okay, you have some good reasons to better understand your corporate culture. Which culture audit to choose? Which one is right for your needs?

Understanding Culture Audits

A culture audit is basically a questionnaire where employees evaluate each question on a scale, often from 1 to 6 or from 1 to 10.  Some even use a 100 point scale.  Each question is (theoretically) designed to describe some important aspect of business culture, and questions are often grouped into categories.  For example, one popular assessment has 13 categories (Fun, Professionalism, Communication, Participation, Organisation Structure, Conflict Management, Decision Making, Innovation, Individual Performance, Human Resource Management, Leadership, Goal Orientation, Customer Focus) with numerous questions in each category, each scored on a 100 point scale.  Employees answer the questions, sometimes twice, once on the “current culture”, and the second time on what they think the “preferred culture” should be.

What comes out is a combined set of averages for the whole company (or broken down by levels or by functions, etc.) that are then displayed in a visual or graphical manner, showing your company scores for each category.  Some culture assessment firms have enough normative data to show how you compare with the average of your peer group companies.

With multiple variations on the same theme, that’s pretty much how all culture surveys work.  Much like all cars tend to have 4 wheels, transmission, engine, exhaust, chassis with the differences being mostly in the styling, capabilities and accessories. Culture assessments may look different, but they all tend to work the same way.

And on face value, that sounds pretty reasonable.  Let the experts evaluate your culture using their “validated” model and give you a detailed report on the strengths and weaknesses of your corporate culture.

Not everything that can be counted counts, and not everything that counts can be counted.  ~Albert Einstein

And that’s exactly the reason so many senior executives (apart from HR) tend to roll their eyes when someone mentions doing a company-wide culture survey.  It might be logical and professional, but does it really measure our culture? And that’s the fundamental issue.

What’s Wrong with Culture Audits?

After consulting and advising in the area of senior team dynamics, performance improvement, strategy execution and culture change for over 30 years, I have a serious problem with the majority of corporate culture surveys and assessments. In fact, to me there are multiple flaws that make then pretty much useless exercises and a waste of time and money.

  • First, the scores are actually averages. But employees or employee groups are not equal and lumping then into averages tends to mask the real insights.  Does one set of employees have a greater impact on the culture than another?  We don’t know when  dealing with averages.
  • Second, it is assumed that each of the different culture categories have the same “weighting” or impact on the culture. Even the most basic business models of risk use a % weighting system to show that some elements of the business model may carry more risk than others.  Not so with culture assessments.
  • Third, there is no such thing as an overall company culture! Most companies are actually a collection of subcultures (coherent groups with common behaviours and ways of working).  There are no culture surveys on the market I know of that take into account subcultures and show you how they behave and how they impact performance.
  • Fourth, most culture audits deal with an idealised version of “employee values” under the mistaken belief that culture is a product of “shared employee values”.  Within today’s multicultural workforce, and in global organisations, different national cultures often view the same “value” (respect or accountability or open communications) very differently.  And most companies don’t take the time to define their corporate values in clear behaviours and actions. There are often as many different interpretations of a company value as there are employees.
  • Fifth, asking employees what their preferred culture should be like more often than not results in human engagement factors, but not strategic or competitive factors. A great place to work with poor business behaviours is a design to fail, just as a great strategy with a poor culture is doomed.
  • Sixth (and in my mind a critical flaw), most culture surveys tend to ignore the business strategy and marketplace dynamics that are impacting on the company and employees. If disruptive technology is rapidly changing the marketplace, what culture is required?  If there has been a recent merger or acquisition, what culture gives the best chance of realizing improved business value.
  • Seventh, how do you know the elements of the culture survey are really measuring YOUR corporate culture, and not some idealised representation.  For example, if you administered four different culture surveys to your company would any of them give the same results?  Adopting a generic business strategy is not a winning competitive approach.  Equally, acting on a generic culture survey may lead you in entirely the wrong direction.

A more useful approach:

Corporate culture is defined as the “accepted and frequent set of work behaviours” used by groups of employees to deal with each other, interact with customers, and solve business and work issues. People have personal values, organisations have accepted habitual behaviours and ways of working.

Since behaviours drive results and corporate culture is the collective set of behaviours used frequently by employees, then understanding YOUR specific culture requires understanding the frequent behaviours inside your company that drive performance and employee engagement.

Here is the way we help companies understand their corporate culture.  First we get the top two levels of the organisation into a workshop (senior team and direct reports), divide them into two random groups, and ask Group A to write down all the behaviours that caused the company to have a record year of results.  We then ask Group B to write down all the behaviours that occurred in the company that created a complete failure to meet year-end objectives.

In less than an hour both groups have a very specific list of real behaviours that occur inside their company.  And they are not just mirror images of each other, these are real observable behaviours seen among the senior team during meetings, within and between departments, in the stores with customers or on the manufacturing floor.

Next we ask the team to articulate their competitive strategy and strategic objectives for the year (in most cases these are already available).  We then ask groups A and B to define the behaviours that would ensure the company reaches (or exceeds) those specific objectives.  Not generic behaviours, but specific work related behaviours attached to each strategic objective.  For example, launching a new product line will require some different behaviours than reducing manufacturing costs or waste. Being specific is the key.

Once we have a robust list of behaviours attached to strategic and business success, it easily begs the important question; “Do we have these behaviours now? To what degree? Where are they most prevalent?  Which ones are not very often seen in this company? Why not? Which subcultures have the healthiest set of behaviours?”

Now it becomes relatively easy to design a customised assessment (survey) to determine the degree to which these important behaviours for business success are regularly seen in your company.  Your own specific culture audit!

The results that come back are insightful, relevant, and specific for your company.  And leadership is fully engaged and ready to engage with the information since they created the process, not some outside professor, psychologist or consultant.

Done properly, a custom developed culture audit of specific behaviours will provide you with a wealth of insights into how to make your corporate culture a competitive advantage and a great place to work!

Culture change is the replacement of one set of “accepted and frequent behaviours” for another.

John R. Childress

Author of LEVERAGE: The CEO’s Guide to Corporate Culture, and FASTBREAK: The CEO’s Guide to Strategy Execution, available from Amazon in paperback and eBook formats.

See the review of LEVERAGE in The Economist (January 9, 2014.

John also writes thriller novels:  novels.johnrchildress.com

About johnrchildress

John Childress is currently Visiting Professor in Strategy and Culture at IE Business School in Madrid and 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. 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 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
This entry was posted in consulting, corporate culture, Human Psychology, John R Childress, Organization Behavior, strategy execution and tagged , , , , , , , , . Bookmark the permalink.

3 Responses to What’s Wrong With Culture Audits? Plenty . . .

  1. angulam says:

    excellent post – very true indeed…..

    Like

  2. Frank Tempesta says:

    Wow! This is a book.

    Sent from my iPad

    >

    Like

  3. david says:

    John,

    Thanks for this down to earth and informative piece.

    Like

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