Why culture is more important than strategy

Sep 20 2012 by Rene Carayol Print This Article

It can be tempting for businesses to over-emphasise the focus on strategy whilst inadvertently underplaying the power of culture. I would argue that culture is in fact more important than strategy. Culture is all about the psychology, actions and beliefs of a group of people.

I believe there are two definitions of the kind of culture that creates momentum for any business. The first one is that "culture is what happens when the CEO leaves the room". The second definition is "the way we get things done around here." It is all about the attitude of those working for your company. The most important thing about culture is that it's the only sustainable point of difference for any organisation. Anyone can copy your strategy, but nobody can copy your culture. So why would you leave it untended?

The best businesses are the ones that have a culture that has grown to be bigger and stronger than any one individual. If your culture is strong then it gains power through inspiring your people to conform to it. It becomes the thing that links everyone together, no matter what department they're in. If your people become engaged with the company, the strategy is more likely to be 'owned' by all and focused upon.

Culture is ITG's biggest weapon; it is the fuel that drives the whole business forward. In employing new talent you have to be discerning in what you're looking for. I would suggest that it is better to take attitude over skills every time. We hire for attitude, we train for skills. It is more beneficial to hire someone with the right mind-set who will fit in with the culture of your company, than someone with strong skills and great experience, but an inappropriate mind-set.

The banks have been going wrong because they are perhaps far too focused on individual success rather than a team based culture. They've become far too profit-centric and far less customer-centric.

If people weren't already aware of the importance of culture then the Barclay's and HSBC situation has certainly brought it to light. Companies should be performance driven and values led. Many of the banks were simply performance driven.

No industry is exempt from the importance of culture, which is a key part of a brand's reputation. The selling off of Lloyds' 632 branches to the Co-operative Bank may well prove this. Co-op stands for values. Virgin Money's acquisition of Northern Rock will again bring their values to the fore. I think that we're starting to see clear shifts now. If you ask people the question 'Who would you want to bank with, Lloyds bank or Google?' They'd probably choose Google. If you said 'Royal Bank of Scotland or Apple?' They'd probably choose Apple.

We are going to see some interesting collaborations in the future, where the 'front end' might be a supermarket and the 'back end' might be a traditional bank. It will take many years for the banks to lose the stigma of the last five years. The biggest shift we're seeing is from product-centricity to customer-centricity. The companies that just push products will wither away; the companies that have clear values and seek to discover what the customer wants, and then deliver it, will win.

Some companies have managed to get the balance of being performance driven and values led spot on. Google is one of those companies. They are hugely performance-driven but if you speak to their people, they love working for them. One of Google's mantras is, 'Don't be evil.' I think they have been able to embed this in their organisation with much success. Virgin, and maybe more surprisingly McDonald's, have also managed to nurture a strong set of values throughout their organisations.

Culture has to originate somewhere though. It doesn't just happen. It is a leader's responsibility to identify a cultural vision for the company, live and breathe it themselves, and then help to steer the rest of the company in the right direction. Culture comes directly from the behaviour of the leaders, and it is their duty to involve and inspire the whole of the organisation.

The role of the chair is an important part of this leadership. I think that the role of the chair has changed a lot over the last ten years. The chair in the current economic climate has a very different role to the chair in the good times. I would say that in the good times the role of the chair tends to be 'steering' the strategy, steering the ship and giving some 'air cover' to the chief executive. It's never, ever about running the business.

In the recent downturn the chair gets much more involved, especially with governance - I wear my governance 'hat' a lot more and I've got a more prominent role around values and culture. In the downturn culture becomes all the more powerful. I would say it works better to appoint a chair who is external to the company. An internal chair would be far too familiar with the 'day to day' running of the business. The chair should be the voice of independence who can judge the cultural direction of a company objectively. An external chairman combined with an internal chief executive can create the 'dream ticket'.

The rise of the discerning customer and the fragmentation of the media have made culture even more important. Anyone with a mobile phone and internet connection is now effectively a member of the paparazzi, a photographer and a blogger.

The messages individuals and consumers are exposed to have changed. Before, if one customer was really upset with your product or your service they would write you a letter, or maybe even email you. That kind of complaint was containable. One tweet, however, can easily hit 100,000 people. You can no longer simply say "Oh we'll deal with that next week." Businesses must now wear their 'hearts on their sleeves' and demonstrate their values openly and honestly.

The culture of a company relies on there being a clear set of values, strong leadership and a sense of transparency and honesty between the company and the public. These factors will be the ones that differentiate your company in times of austerity and increased competition. Of course strategy is important but this must be accompanied by a strong culture if lasting success is to be won. To become truly durable your company must inspire every single one of your people and win a place in the hearts of the public. By far the best way to achieve this is through culture.


About The Author

Rene Carayol
Rene Carayol

Renť Carayol is a broadcaster, business and leadership speaker and author. Formerly a board director of Pizza Hut and IPC Media, today he is Chairman of the Inspired Thinking Group and a Visiting Professor at Cass Business School.