In business, growth rarely follows a sharp straight line.
Like everything in life, be it relationships, health, or career, there are purple spots and slowdowns; periods of strength, stagnation and decline.
To stay on track or get back on track, businesses may need to occasionally hit the reset button and invest in capabilities and capabilities.
It often takes time for the impact of this investment to be felt and move the bottom line.
Other times, the benefits are never realized.
This is usually due to cultural issues.
A good corporate culture has the ability to drive productivity, innovation, and performance, but a bad culture can derail even the strongest, best-thought-out plans.
Hence the management’s popular slogan, culture eats strategy for breakfast.
It is relatively easy to identify and address gaps in a company’s capacity and capability.
Cultural issues are much harder to identify, although the symptoms are usually obvious, including poor office discipline, disengaged employees, and prolonged underperformance.
For CEOs and boards of directors, addressing cultural ill health is difficult for opposite reasons.
CEOs and senior leaders are too close to the issues and largely responsible for defining corporate culture, therefore often complicit or blind to the issues.
On the other hand, councils are not intimately involved in day-to-day operations.
They are responsible for the strategic direction and governance of a company and oversee financial performance, but they rely heavily on CEOs for information. A board’s ability to hire and fire CEOs almost guarantees that they don’t get the full picture, if there are internal issues.
When it comes to business health, CEOs and boards are typically familiar with the four components of the balanced scorecard system: financial performance, customer value proposition, internal processes, and organizational capacity.
However, they are not in a strong position to accurately assess cultural health; arguably the fifth element of any truly balanced assessment.
Strangers and Insiders
For companies that consistently perform poorly financially, despite all the ingredients for success, including a clear vision and strategy, a compelling value proposition, skilled people, and tailwinds, cultural issues may be at play.
To orchestrate a cultural revolution, companies can do several things, starting with bringing in an outsider.
Hiring experienced external senior managers helps maintain the honesty of an organization’s culture.
It opens the door to objective observations, new ideas and diversity of thought.
The presence of a new leader can also give others the courage to speak up.
A lot of research shows that diversity increases the bottom line, but while organizations are generally quite successful at achieving diversity in the back and middle office, progress has been slower at the C-suite level, where it can arguably have the greatest impact. the given leadership determines the culture.
For example, in 2020, a financial planning firm within AZ NGA recruited a new managing director to help the CEO run the business. As a result, this company set out to review its strategy, compensation model and customer pricing with these and a series of other initiatives, resulting in a V-shaped recovery in business performance, more engaged employees and satisfied customers.
Some reasons many companies prefer to promote internally are to reward staff, show a clear path for career progression, and maintain culture.
This is admirable, but if the culture is poor, you risk perpetuating the same ineffective methods and ideas.
Another thing CEOs and senior leaders can do to improve the culture is to be completely honest and transparent with each other and with boards.
CEOs should actively seek staff feedback and encourage directors to do the same to create an environment with no surprises, no excuses.
Staff, especially those who work closely with the management team, will certainly have an opinion on corporate culture and leadership.
Their opinions and suggestions should be taken seriously.
While this exercise is likely to deliver some uncomfortable truths, CEOs and directors can learn a lot if they lower their defenses and invite feedback. They should be more worried when people stop communicating and question the status quo.
For CEOs who learn they are part of the problem, stepping back isn’t necessarily the solution. This may mean listening more to staff, leaning on the board for advice, and hiring an experienced outside leader.
A smart, engaged business leader who is backed by a CEO and board to drive positive change is often enough to influence culture and build momentum.