A leading FMCG player was experiencing only limited success in new brands and products. Employees were working in silos. R&D was considered to be the sole team responsible for innovation and very few innovation ideas were coming from rest of the company. However, the CEO realised the necessity to bring customer centric innovation as a key to success in the market. This required a complete change in the organisation internally - a more open culture, collaboration with internal functions and external partners, easier exchange of ideas etc. A change in culture was, thus, a key to achieving strategy implementation. Consider another case. A mid-size, family-owned firm in the business of contract manufacturing was trying to professionalise itself. The firm realised that the key to achieving success in the business was to convince external players of its safe and high-quality manufacturing at competitive costs. It is, however, struggling to convey this message at the shop floor where, despite multiple communications, safety trainings etc business continues as usual.
Demystifying organisation culture
Whether the strategic focus is to respond swiftly to customer needs or to achieve manufacturing excellence, organisational culture is an important enabler in achieving business success. There is little consensus, however, on what culture actually means. In our view, culture is what beliefs and values people share. It is the glue which holds people together and determines how they respond or behave. Culture serves as a source of competitive advantage because of this perspective.
However, the term culture in today's corporate environment is largely associated with employee experience and engagement. Hence all initiatives - skip level meetings, reward and recognition, celebrations, events etc are designed around enhancing employee experiences. The narrative of culture building - employee engagement - used currently by organisations may not be able to address the linkage between business goals and employee. While it may help in accomplishing the people outcome of having a highly engaged workforce, it may not achieve the business outcome. Building an organisational culture that supports strategic objectives and drives the customer value proposition is more powerful in achieving sustainable competitive advantage.
Aligning culture and strategy
The discipline of market leaders classifies organisations into broadly three value disciplines - customer intimacy, product leadership and operational excellence. Once organisations, as part of their strategy assessment, have identified the value discipline they wish to pursue, the next step would be to build the organisational ecosystem and culture to support this discipline. Firms need to understand what forms of culture can exist and which is best for driving their chosen path. As per Competing Values Framework (CVF), organisations can be mapped on a 2x2 matrix of external vs internal orientation (X axis) and flexibility vs stability (Y axis) to determine the predominant culture of the organisation across four quadrants - clan, adhocracy, market, hierarchy. Our experience has shown that one can easily map the value discipline with the culture quadrants of competing value framework in order to determine what type of culture an organisation should build to drive a particular strategy.
Adhocracy: Organisations looking to offer innovative product and services need to be high on adhocracy quadrant of CVF as this quadrant helps organisations in driving risk taking and entrepreneurship required for a product leadership strategy.
Market: If an organisation is looking to drive customer intimacy as a value proposition, it needs to focus on creating a "market" culture characterised by attributes like competitiveness, achievement, market aggression and customer orientation.
Hierarchy: If an organisation is following the business discipline of operational excellence, the culture that best suits will be "hierarchy" on CVF. This culture will help an organisation in driving standardisation, control and stability required for building 'value for money' offering.
Clan: This quadrant is strategy neutral and can cut across all the three disciplines. It is the softer aspect of culture that is more associated with a specific kind of work environment and employee experience than a particular value proposition. This quadrant is important from the perspective of building employee engagement, development, sense of belonging and trust.
To build the culture that can support the chosen value discipline, multiple levers could be used. (see chart: Culture transformation)
Organisation structure: This refers to the way companies organise themselves in terms of businesses/ functions/departments and reporting relationships. Aligning structure to strategy helps in driving management focus and bandwidth to the desired areas. In one of our engagements on culture transformation with a large chemical multinational conglomerate, EHS was identified as a very critical area. The company's key customers from European markets insisted on very strong compliance to EHS norms. Changing the reporting relationship of EHS to directly report to the MD & chairman helped it in driving a culture of health and safety.
Leadership skills: Leadership is among the most critical levers to drive organisational culture. Companies need to identify leadership traits required for building a particular type of culture in order to deliver their chosen customer value proposition. Leadership behaviour sets the example for other employees to follow. Consider a real life example: A leading general insurance player at the start-up stage wanted to quickly scale up its business. It focused on hiring, developing and rewarding two leadership traits result orientation and entrepreneurship. The idea was to drive business goals in an external environment where volume and market share are important, time is a constraint and work environment is highly unstructured and ambiguous (typical of a start up with few and evolving processes). This requires leaders at all levels to make quick decisions, take risks, move fast and most importantly, achieve results. This helped in creating the competitive and entrepreneurial culture that was required.
Business processes: This refers to core business processes that are required for driving a particular culture. Innovation and commercialisation is critical for adhocracy culture whereas the process of competitive intelligence/analysis, solutions development, relationship management etc is required for driving the culture of competitiveness. Many companies use IT platforms for effective delivery of their customer value proposition. Similarly, tracking the right metrics also helps a company to determine their effectiveness in delivering value to their customer. These metrics help in defining success and failures in line with strategic priorities & goals and hence enforce a culture aligned to company strategy.
HR systems and working environment: This refers to mechanisms like rewards and recognition, values, performance management system, recruitment process, work environment. HR Systems play a critical role in shaping and re-enforcing the organisation culture. In a recent engagement with a leading agro & fine chemical player , TSMG helped its client in enhancing the clan culture required for creating collaboration and sense of belonging in the organisation through various people process interventions. It redefined values and competencies and incorporated people focus as a value that needs to be propagated. It also suggested various awards to recognise employees who demonstrate this and other values like trust, innovation etc. Managing people and providing inspirational leadership were introduced as major leadership skills required for career growth. KPIs around people focus, innovation and knowledge, collaboration etc were suggested and employees also started getting measured on values/competency as part of the PMS.
To sum up, organisations have to ensure the following things while embarking on any culture transformation initiative: Culture needs to be viewed from the lens of driving business strategy rather than just as an enabler for building healthy work environment and boosting employee morale and engagement. Triggers for culture change can range from factors like change in business model and strategy, customer expectations, market conditions etc to softer changes required for driving employee attraction, morale, engagement, productivity and retention. However, the harder narrative (for culture change) built around business strategy is more compelling and impactful than the softer people narrative of culture change. Organisations can use the discipline of market leaders and competing values framework to diagnose gaps and create alignment between strategy and culture. Transformation can be achieved using the levers of organisational ecosystem as outlined above.
Principal & Head, Organisation Effectiveness, TATA Strategic Management Group