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If Culture Eats Strategy, Why Haven't More Companies Joined The Club?

July 19, 2017

 

As well as being a line from Culture Club's 1982 hit Time (Clock of the Heart) "In time we could've been so much more" is often the lament of CEO's and owners of small and mid-sized companies the world over. As businesses start to grow, most hit a revenue ceiling they never seem to be able to overcome, and the principles never figure out why. They never recognized (or cared) that they had a bad culture, or couldn't scale the good culture they had. They don't understand that they never joined the "culture club."

 

A few weeks ago, I wrote about the growing role of culture as a differentiator for BtoB companies. With prospects struggling to differentiate on features and benefits in crowded BtoB markets, they are beginning to use characteristics that can be distinguished, like brand, values, and culture to guide their buying decisions. Here, we are discussing the role culture plays in company growth or lack of growth. As small businesses grow, most hit a revenue ceiling and never break through, they just bounce around at a particular revenue volume. This inability to break through the revenue ceiling is because the company cannot scale its (good) culture, or it has a bad culture, in the first place.

 

Jason Kiler, the former CEO of HULU, argues that it's the inability to scale culture which holds companies back. Kiler defines culture as "how you behave when no one is looking." He uses examples from his days at Disney and Amazon. Don't dismiss these as incomparable to your business. It is worth investing twenty minutes of your time to review his Greylock presentation. Kiler talks about having to be deliberate and explicit about culture. Not just writing down the values and principles, but walking that talk. As companies grow Kiler maintains that you must find mechanisms that will enable the scaling of culture.

 

The challenge in scaling a healthy culture is one thing, but having a "bad" culture is worse. The "garden variety" shortcomings which inhibit growth, are symptoms of a sick culture; weak processes, poor fiscal management, lack of marketing or sales strategies, or poor discipline and execution. These are all legitimate causes of stagnation. But these are not causes; they are symptoms of weak cultures and culture comes from the top of the organization; the leadership. Companies with great cultures don't tolerate the persistence of these symptoms. They seek out the causes and are disciplined and brave enough to ask the tough questions. They create challenging and innovative environments that express their mission, values, and principles. Then they live up to these, day in and day out. Finally, they invent mechanisms that will enable them to scale these "good intentions," as Kiler says.

 

I have lived through examples of this. In our company, we hit a revenue ceiling and then faced the challenges of the 2001 .com meltdown, the great consolidations in hi-tech of 2005, and then the financial meltdown of 2008. We didn't get to test that revenue limit often enough, but I have no reason to suspect that we could have broken through that ceiling. The culture was important to me both personally and as the CEO, but I'm not sure I knew what it meant. We did some things that I thought of more as the "personality" of the company, not realizing that they were the same thing. For example, we were passionate about superior performance and rewarding people for achieving it. We leased a Porsche 911 (later a Mercedes Coup), and the top performer got to drive that car for the following month. What it said about the culture of the company was that we were competitive, we valued high-performance people, and we recognized and rewarded our team. We ensured the recognition and awards were encouraging, inclusive and good natured. We did it in a fun way where everyone had the opportunity to participate (we presented to the winner at a monthly meeting and then took everyone for Happy Hour). We wanted people on our team that thought the same way.

 

Is this a "mechanism," that would have enabled the culture to scale? In that form, probably not. It should have at least prompted the conversation around how to reward and recognize high performance as part of the values and principles of the company. I did not go the extra distance to examine those values and principles closely enough and then live up to them.

 

Kevin Brownsey, Founder and Partner of RedPill Consulting, is "bloody annoyed" at the fashionable status culture has acquired, maintaining that "…the emergence of culture as a C-Suite priority has created confusion about what we mean by it." Brownsey continues "the problem is most of the experts don't get it at all. Culture is not a set of observations and displayed behaviors. These are the consequences of culture. Culture is deeper. For example, when the individualistic-competitive culture has to become a collaborative-connected culture we have to re-think our definition of what "competitive" means."

 

Culture has acquired a vogue status. In some cases, it's masquerading as a way of achieving differentiation. In others, there's an honest desire to understand the values and principles that make a company tick, enabling it to grow. Being thoughtful about your culture will attract the customers and employees you want and repel those you don't. It will determine your success at breaking through the revenue ceilings you will encounter. To achieve lasting success, you must be deliberate, disciplined and genuine about culture, while being courageous in confronting poor, or barren cultures.

 

So, why are you waiting? Join the "culture club." As Jason Kiler says; "Cultures don't have to be all motherhood and apple pie." I say, I agree and maintain that a robust cultural formula must include a dose of emotion. And as the leader of Culture Club, Boy George says (or sings); "dreams are made of emotion."

 

 

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