How corporate function shapes culture

Cultural failures can have disastrous effects. Leaders need to examine how well their business operates – and pay particular attention to the impact of their own actions

Extensive studies confirm that corporate culture contributes directly to an organization’s effectiveness. But while corporate leaders know in the abstract that they affect culture, they often don’t know how to go about changing it. 

What these leaders overlook is that their decision making has a direct impact on their organizations’ culture. When employees experience a gap between a company’s values statements and the decisions and actions taken by leaders, culture suffers. Studies of major cultural failures, such as the actions that led to NASA’s Columbia Space Shuttle explosion, Deepwater Horizon’s oil spill, the Brumadinho dam collapse, and, more recently, the series of events seen at Boeing, all lead back to earlier leadership decisions that inadvertently set the stage for catastrophic events to unfold.

Less-publicized but still tragic occurrences follow the same pattern. Employees could see problems emerging, yet critical information didn’t reach the decision makers who had the power to avert disaster. Leaders turn out to have been isolated from what was actually going on, because the culture of the organization led people to stay quiet. In day-to-day cases, this shows up in poor morale, low productivity, and high turnover. In the worst cases, it results in major catastrophes.

Examine culture via organizational functioning

Leaders don’t wake up in the morning thinking, “Today I’m going to undermine trust in our organization.” Rather, they make decisions, take actions, and respond to situations without realizing the effect they’re having on other people. 

The way leaders think, the decisions they make, and the behaviors they engage in reverberate through their organizations and set a tone, which is first perceived as climate and then assumed as culture. The principles that underlie their thoughts and actions form the ethos of the organization.

 Leaders need an operationalized understanding of how good they are at creating cultural infrastructure and how their leadership is influencing it, for better or worse. It’s one thing to say leadership creates culture, but it’s another to know how to make a better culture a reality.

One effective starting point is to examine existing culture through the lens of how the organization functions: in other words, to consider organizational culture as “how we get things done.” Think of the attributes that make an organization function well: the uninhibited flow of communication, the necessary support for goal achievement, trust in leadership, and a sense of organizational justice. Each of these predicts positive outcomes at statistically significant levels, so it makes sense to start your culture improvement initiative by taking a critical look at how you’re currently doing on each front.

1. How well communication flows

Does information travel upward or do employees feel the need to protect themselves by limiting information? Effective decision making depends on leadership getting good information. A leader needs unfiltered information prior to making decisions. In all aspects of business, getting good information from the people closest to the work is essential.

What you can do Re-frame what you want to hear by asking the right questions and learning to listen. “What are the most important challenges you are working on? What barriers stand in the way at this point? What is your strategy to fix it?” Play back what you hear and let it sink in. Be willing to know the real story without shooting the messenger. 

2. Whether there’s a perception of organizational support

Goal attainment often requires support. There may be a lack of skill or knowledge, or the goals people are given don’t align with the resources provided. Are workers free to ask for help when they need it? Are they able to access support without looking bad?
What you can do Asking “How can I help?” or “What do you need?” can start the conversation that turns out to be pivotal. Create an atmosphere that welcomes real conversation. After the Columbia Space Shuttle failure, NASA leaders were taught to ask in meetings, “Is there another point of view on this in the room?”  

3. Employees’ trust in leaders

A leader’s ability to inspire trust is essential to a culture that will support high performance. If your employees were asked the question, “Do you trust your leaders?” what proportion would say yes? It is a simple but crucial question: studies have shown that organizations with high scores have better business outcomes. 

What you can do Beware of the percentile answer when gauging this feature. How your organization compares to others is irrelevant and, in fact, can throw you off the track. One company that assessed this cultural attribute found they were at the 80th percentile when compared to other organizations, meaning that of 10 organizations assessed, they were about as good or better than eight of them. But the raw score told a different story. Just over 35% of employees said they trusted their supervisors; 65% said they didn’t trust them. Interpreting the 80th percentile as a good score was a mistake.

4. If decisions are made fairly

The perception that “decisions that affect me are made fairly” is a central element of a strong and effective culture. The underlying principle in play is reciprocity, meaning “I tend to respond in a manner similar to the way I’m treated.”

What you can do Often, leaders don’t see the impact of a given decision on the perception of fairness in the organization – that is, on the culture. Often, it is not what leaders do, but how they do it that matters. Say that an executive leader is terminated. The decision may be made carefully and be fully justified. But what the organization remembers – the culture – is how it was done: respectfully or humiliatingly? How leaders manage change is often as or more important than the change itself.  

Companies’ performance across these attributes can be measured and monitored. How these critical aspects of culture are seen and operationalized will reveal most of what you need to know about the culture of the organization, and where change is needed. When each of these cultural attributes are part of how the organization functions, it has set itself up to achieve critical qualities of an effective organization: cooperative performance and positive outcomes. 

Thomas R Krause is chairman of Krause Bell Group and the author of If Your Culture Could Talk: A Story About Culture Change