The importance of culture to corporate strategy

"A company," writes INSEAD graduate Martin Roll, "however big or small, cannot successfully implement corporate strategy without employees who believe in the mission and understand how to achieve it." This positive organizational culture is impactful: in his book, "The Culture Cycle," Harvard Business School Professor Emeritus James L. Heskett argues that the impact of organizational culture on profit can be measured and quantified, asserting that enabling purposeful organizational cultures can improve corporate performance by between 20% and 30% compared to culturally unremarkable competitors.

Organizations most successful in driving and implementing change share three underlying principles through which they embrace the culture, and use it as an enabler in the process:

  • They understand differences in global cultures: Understanding how an employee in Indonesia will react to a new strategic initiative compared to how an employee in Germany is critical in implementing change at the ground level. Adapt strategy to fit with market-level operations.
  • Understanding what culture means to different people: Organizational changes will impact different employee groups in different ways, and the change must be measured carefully.
  • Align change incentives with the culture: It is important that all forms of strategic planning imbibe culture as a factor impacting success, in addition to finance, manpower, and capabilities.

Culture cannot be underestimated in driving change, but it is important to be selective about the aspects of culture that needs infusing with the specific initiative. Any form of change is disruptive to some degree, so it is not necessary to precede every strategy-driven change with a massive transformational exercise in company culture. Aligning a company's strategy with its culture reduces the disruptive nature of the change, but it is still a change. As such, good leaders ensure that culture and strategy work in collaboration for success, but in a balanced and efficient manner.

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