Corporate culture and value statements are considered de rigour for all companies now, and we are all familiar with the consistent statements that are considered acceptable and in many ways incontestable – "openness", "trust", "honesty", "integrity", "embracing diversity" and "teamwork".
However, corporate culture is not a set of value statements embossed on the walls of the office or in the front of the company annual reports. Corporate culture is a direct creation of the actions and behaviours of the CEO and the senior management team.
Recent history is littered with examples of corporate scandals which arose because the senior management team's actions were at odds with their organisations' value statements.
From the excessive risk-taking cultures that brought down major banks during the global financial crisis to whistleblowing at Nike, Under Armour, and Guess during the #MeToo reckoning and cultural dysfunction at Uber and Wells Fargo, there are too many examples of rogue behaviours that have flown in the face of stated culture.
What determines a company's culture?
The real working culture of an organisation is important for several reasons, and not just to prevent the more extreme examples of corporate failure. It is about winning loyalty, success, and the ability to attract and retain talent, with engaged employees shown to be 17 times more productive than their lesser-engaged peers.
As the Great Resignation looms, with 38% of workers in the UK and Ireland considering leaving their employer over the next six months, it will become apparent which leaders' actions have been out of sync with their organisation's professed culture. Which management teams suffered from wilful blind spots that could be their undoing?
The single biggest determining influence on how decisions are made in any business is the culture of that business. That culture is set by the leadership and management style of the chief executive and the executive board. The true values and culture of a company exist independent of, and before they become codified in, fine words and pictures. Every company has its own culture, whether its explicitly stated or not.
Incentives drive behaviour
The management guru Peter Drucker once said, "culture eats strategy for breakfast".
Public declarations of mission and value statements have their place, along with commitments to behave ethically. However, what really drives employee behaviour in any organisation is observing the actions, not the words, of the senior management team. Which behaviours and actions are rewarded, and which behaviours are punished; who gets promoted, who gets passed over for promotion and who gets fired; who gets a positive mention in the town hall meetings; what do I need to do to earn the biggest annual bonus?
Why culture cannot be delegated
It follows that if culture is defined by the actions and values of the CEO and the management team, then the codification of those values into public statements and reward mechanisms cannot be delegated down to an HR team or group of enthusiastic employees. They can certainly provide feedback on the type of values and behaviours they would like the company to espouse, but that's not the same as correctly aligning the stated culture with actual culture. This exercise can only be led by the CEO, who has the responsibility to ensure that all company policies and reward mechanisms align with and reinforce the intended culture. Consistency of actions and behaviours is crucial. There is nothing more demotivating or alienating to a group of employees than working in an organisation where there is a large mismatch between the stated and experienced company culture.
The most effective cultures are intuitive, non-bureaucratic and have a strong sense of purpose. And they are led from the top.
As General Electric's Jack Welch observed: "Soft culture matters as much as hard numbers. And if your company's culture is to mean anything, you have to hang — publicly — those in your midst who would destroy it. It's a grim image, we know. But the fact is, creating a healthy, high-integrity organisational culture is not puppies and rainbows."
"And yet, for some reason, too many leaders think a company's values can be relegated to a five-minute conversation between HR and a new employee. Or they think culture is about picking which words — do we 'honour' our customers or 'respect' them? — to engrave on a plaque in the lobby. What nonsense."