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“Creating the right culture will enable organisations to flourish and win in the marketplace.”

Dave Ulrich,
Professor and Author, University of Michigan

Ranked by Fast Company as one of the world’s top 10 creative people in business, Dave Ulrich, is considered as one of the top HR gurus and influential leaders in HR globally. He shares his views on organisational culture with Presence.

How would you define organisational culture, and why is it important?

The study of culture is not new. In a classic book, anthropologists A. L. Kroeber and Clyde Kluckhohn identified 164 definitions of culture... in 1952! The study of organisational culture has also received enormous attention with the classic maxim: “Culture eats strategy for breakfast.” Although Peter Drucker did not actually say it, he and many others have clearly supported this notion, with many books (over 100!) in recent years entitled “Culture (...fill in the blank)”: code, wins, decoded, is king, map, question… and so forth. As companies embark in change efforts, they should be clear about four overlapping concepts—purpose, values, brand, and culture. These four concepts come together, starting with purpose and leading to values inside and brand outside. The right culture then bridges internal values and external firm brand.

Research shows that corporate directors, financial auditors, and business executives at Davos believe that “culture” matters and is an increasing challenge in today’s organisations, particularly with hybrid work when people may not be face-to-face.

Everyone readily accepts that organisational “culture” exists and has impact. Toxic cultures have dysfunctions of hostility, mistrust, selfishness, scarcity thinking, and insensitive leaders who lower productivity, employee retention, strategic reinvention, investor confidence, and customer satisfaction. Abundant cultures have the opposite positive effects. Creating the right culture will enable organisations to flourish and win in the marketplace.

How has corporate culture evolved, and what do you believe are the most significant factors driving these changes?

As noted, “culture” has many definitions. Let me suggest three historical waves of looking at organisation culture and an emerging fourth wave.

#1. Culture as values and behaviours.
Individuals and organisations have values that shape behaviour. These values can be identified as an organisation’s culture, and the behaviours may be tracked to determine the cultural type.

#2. Culture as systems or climate.
A company culture shows up in how information, decisions, accountability, etc. are managed. These systems determine the climate of an organisation.

#3. Culture as patterns or norms.
Anyone entering a company recognises that unspoken rules or expectations of how work is done. These patterns become accepted ways of working. These three waves focus on what happens inside an organisation. They are the “roots” of the tree. They thrive when employees are together to share values, work processes, and experience common norms.

#4. Culture as identity in the marketplace.
An emerging view of culture is to ensure that it is the “right” culture, which means that the culture inside an organisation creates value for stakeholders outside. In this outside-in view, culture is about the value of the values to a customer or investor and the extent to which internal systems and norms increase customer share, investor confidence, or community reputation. It is less about the underlying roots of a tree and more about its leaves, which metaphorically change in different seasons.

How can leaders and all employees collectively shape and uphold the ‘desired’ company culture?

I have been involved with numerous culture change transformations. More often than not, they start with laudatory rhetoric but then fizzle with few sustainable changes. When we have seen culture transformation succeed, it starts with the business case for culture (why culture matters), then uses the outside-in definition of culture (what culture means), then gets implemented in five steps:

Step 1: Define the desired culture.
Ask internal leaders and external customers what your organisation should be “known for” to be effective. This identity becomes synonymous with the desired brand that encourages customers to buy and investors to invest. Work to create a high unity on the answer to this question.

Step 2: Build an intellectual, top-down agenda.
The desired culture needs to be communicated over and over again. Simple and redundant messages shape an intellectual agenda of what it should be.

Step 3: Encourage a behavioural, bottom-up agenda.
Cultural ideas and messages flow down—behaviours and actions flow up. Ask employee groups what they can do more of or less of to make the desired culture real in their day-to-day activities.

Step 4: Design and deliver a process, side-to-side agenda.
Culture gets woven into the organisation process around people, strategic decision-making, resource allocation, and other governance choices. The organisation processes should reinforce the desired culture.

Step 5: Create a leadership brand.
Employees often do what leaders model, and when leaders think and act consistent with customer expectations, their work reinforces the desired culture.

These five steps are not a perfect script for the culture change agenda, but they suggest a simple (not simplistic) playbook to approach culture change that creates value for customers and turns cultural aspirations into daily actions.

How can businesses assess the impact of their culture on their performance and success?

There are surveys to test values as culture. I like to do the following exercise to determine cultural unity. Ask senior leaders: “what are the top three things we want to be known for by our best customers in the future?” In one company with 12 members of the leadership team, there were 36 answers. When they were clustered into common answers, the top three clusters of response had 20 of the 36 answers, or about a 55% unity. The other 16 answers were positive images of what the organisation could be known for, but not exactly the same. The team then discussed what they wanted their identity to be. After a few hours, they were able to say with some unity and confidence the top 3 things they wanted their organisation to be known for by their best customers. This is a statement of firm identity as experienced by customers; but also of the culture as experienced by employees.

In the last 15 years, I have facilitated hundreds of these exercises. My rule of thumb is that the senior team should have about an 80% consensus on that question. Seeing the culture through the eyes of the customer defines culture as a critical business agenda that delivers value. It unifies the team to a common agenda of what matters most.

How will factors like remote work, technological advancements and diversity shape future corporate culture, and what should companies do to adapt and stay ahead of the curve?

Traditionally, people go “to work”, are “at work”, and return “from work.” With this mindset, work has a physical space and place boundary. The virtual work from COVID and technology may evolve this definition of work. While many have focused on the administrative requirements of working at home (e.g., find a dedicated space, use technology, dress for work, etc.), the lingering insight is not where work is done, but what work is done. Instead of asking “where are you working?” leaders may ask, “how does your work create value for our customers?”

The emerging boundaries for work may focus less on space and place and more on creating value for key stakeholders. Creating value for customers, investors, and communities outside the organisation can be done anywhere, in an office, at home, on an airplane, in a hotel, etc. The value of creating value for customers may become the focus of work. For example, it is not enough to have a culture based on values; the “right” culture means that the values inside a company create value for customers and investors outside. With a value boundary defining work, employee actions are not tied to a place, but value created for customers.

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