Linking Culture to Tangible Organizational Growth
This article was originally published in HR Professional, April 2019 edition.
Research has shown that an organization’s culture is linked to its performance. James Heskett and John Kotter, in their book, Corporate Culture and Performance, make a compelling case. They demonstrate that organizational cultures that facilitate adaptation to a changing, disruptive world are associated with stronger financial performance than those that don’t. For example, over an 11-year period, the average increase in revenue growth for 12 firms they studied with performance enhancing cultures was a startling 622 per cent versus only 166 per cent for 20 firms without performance enhancing cultures.
Interestingly, “performance enhancing” cultures involved elements such as distributed leadership and valuing employees, while maintaining a strong customer-focused orientation. With these core foundational building blocks, leaders and key contributors were better able to shift their thinking and behaviours as needed to meet the evolving needs of their customers, as well as adapt to changes within their market environments.
Yet, 2018 research by Gartner has found that “only three in 10 HR leaders are confident that their organizations have the culture they need to drive future business performance.”
So, what is the critical link between culture, performance and growth? The fact of the matter is that while culture is important, mindsets matter more; particularly when it comes to the ability to continuously adapt and grow through change and disruption. Organizations need to increase their ability to shift organizational mindsets to position their organizations for future success. As such, the objective ought to be for leaders to transform their organization’s culture into a mindset that drives improved business performance. A 2018 article published in Business Wire seems to agree with this perspective:
“Rather than focussing on what type of culture a company should have, business leaders should turn their attention to how they can get their culture to perform.”
Shifting organizational culture to an adaptive mindset that supports and aligns with the organization’s evolving strategic imperatives is essential to sustained growth, improved performance and long-term success.
CULTURE vs. MINDSET
Culture may be defined as the shared set of values, beliefs and tacit assumptions that influence behaviour within the organization. Organizational mindsets serve as worldviews or ways of framing and engaging with the world, which shape the attention, selection and utilization of facts, information and knowledge used by organizations as they strive to fulfill their unique purpose and strategic mandate. Culture could be likened to the personality of the firm, whereas mindset could be described as its cognitive style. Like an individual’s personality type, there is a stability to culture which makes it harder (though not impossible) to shift, whereas mindsets are more malleable and can be adjusted with conscious, intentional effort. Just as individuals each possess a distinct personality type and a unique cognitive style, organizations also possess a distinct culture and unique cognitive style or mindset. Until now, far less attention has been given to understanding or assessing the organization’s mindset, whereas culture diagnostics have been around for many years.
THE ORGANIZATION’S INTERNAL ENVIRONMENT
As human resource, talent and organizational development practitioners well know, it’s important to understand the organization’s internal environment to better support and execute organizational change, innovation and transformation efforts. However, until now, culture diagnostics were essentially the only tool available. Imagine trying to understand the rich inner landscape of the human mind with a personality test as the only method. Think of the array of tools now available to help us understand the unique operational style of individuals such as emotional intelligence, learning styles and thinking styles. With the complexities of organizational life, it is important to have an array of methods to assess the internal environment of organizations. Assessing and quantifying the organization’s mindset is critical, particularly when trying to increase the organization’s capability to adapt and thrive through disruption by strengthening its ability to innovate and change more effectively. When it comes to figuring out how leaders can “get their culture to perform,” quantifying the organization’s mindset is a practical, effective method. It’s like leveraging one’s cognitive style to think and act differently while still maintaining their core personality type. It’s not one or the other, both are important. One might argue that an organization’s core personality (its culture) can’t be changed. However, its mindset – how it thinks, feels and chooses to respond to maximize performance and achieve sustained success through disruption and accelerated change – can be shifted. Mindset is the catalyst for transforming culture into improved business performance. Measuring the organizational mindset is key.
LINKING MINDSET TO GROWTH METRICS
Given the importance of understanding and assessing organizational mindsets, it is essential to access validated tools that are specifically designed to do just that. For example, the Organizational Growth Indicator (OGI) is a tool that is being used at a global level to support business leaders in multiple industries assess their organization’s ability to adapt, change and innovate more effectively. While quantifying an organization’s mindset is an important first step for leaders, it is equally important for them to make the critical connection between mindset and their organization’s actual business performance. The OGI successfully correlates key factors that influence an organization’s ability to change and innovate, and links those factors to actual performance data, such as revenue growth.
Yes, that’s right, actual revenue growth. In today’s high flux business environment, leaders need tangible, quantifiable metrics to validate their gut feelings and to strengthen their ability to make sound business decisions. Although, it stands to reason that the metrics they use ought to be meaningfully connected to the actual performance of their businesses. Purely descriptive measures that identify organizational types are helpful and metrics that link to the organization’s readiness for change and its actual ability to make adaptive shifts is even better. After all, the spirit and intent of all transformation efforts are to tangibly and meaningfully position the organization to be better not in theory, but in practice.