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Spotlight Series / The Culture Factor The Link Between Culture and Outcomes Our research and practical experience have shown that when you are evaluating how culture affects outcomes, the context in which the organization operates-geographic region, industry, strategy, leadership, and company structure-matters, as does the strength of the culture. (See "Context, Conditions, and Culture.") What worked in the past may no longer work in the future, and what worked for one company may not work for another. We have arrived at the following insights: When aligned with strategy and leadership, a strong culture drives positive organizational outcomes. Consider the case of a best-in-class retailer headquartered in the United States. The company had viewed its first priority as providing top-notch Spotlight Series / The Culture Factor customer service. It accomplished this with a simple rule-Do right by the customer-that encouraged employees to use their judgment when providing service. A core HR training practice was to help every salesperson see customer interactions as an opportunity to create service stories that become legendary. Employees were reminded to define service from the customer's perspective, to constantly engage customers with questions geared toward understanding their specific needs and preferences, and to go beyond their expectations. In measuring the culture of this company, we found that like many other large retailers, it was characterized primarily by a combination of results and caring. Unlike many other retailers, however, it had a culture that was also very flexible, learning oriented, and focused on purpose. As one top executive explained, We have freedom as long as we take good care of the customer." Spotlight Series / The Culture Factor Furthermore, the company's values and norms were very clear to everyone and consistently shared throughout the organization. As the retailer expanded into new segments and geographies over the years, the leadership strove to maintain an intense customer focus without diluting its cherished culture. Although the company had historically focused on developing leaders from within-who were natural culture carriers-recruiting outsiders became necessary as it grew. The company preserved its culture through this change by carefully assessing new leaders and designing an onboarding process that reinforced core values and norms. Culture is a powerful differentiator for this company because it is strongly aligned with strategy and leadership. Delivering outstanding customer service requires a culture and a mindset that emphasize achievement, impeccable service, and problem solving through autonomy and inventiveness. Not surprisingly, those qualities have led to a variety of positive outcomes for the . Spotlight Series / The Culture Factor company, including robust growth and international expansion, numerous customer service awards, and frequent appearances on lists of the best companies to work for. Selecting or developing leaders for the future requires a forward- looking strategy and culture. The chief executive of an agriculture business was planning to retire, spurring rumors about a hostile takeover. The CEO was actively grooming a successor, an insider who had been with the company for more than 20 years. Our analysis revealed an organizational culture that strongly emphasized caring and purpose. As one leader reflected, You feel like part of a large family when you become an employee at this company." The potential successor understood the culture but was far more risk-averse (safety) and respectful of traditions (order) than the rest of the company. Spotlight Series / The Culture Factor Given the takeover rumors, top leaders and managers told the CEO that they believed the company needed to take a more aggressive and action-oriented stance in the future. The board decided to consider the internal candidate alongside people from outside the company. Cultural dynamics are a frequently overlooked factor in postmerger performance. Three external candidates emerged: one who was aligned with the current culture (purpose), one who would be a risk taker and innovative (learning), and one who was hard-driving and competitive (authority). After considerable deliberation, the board chose the highly competitive leader with the authority style. Soon afterward an activist investor attempted a hostile takeover, and the new CEO was able to navigate through the precarious situation, keep the Spotlight Series / The Culture Factor company independent, and simultaneously begin to restructure in preparation for growth. In a merger, designing a new culture on the basis of complementary strengths can speed up integration and create more value over time. Mergers and acquisitions can either create or destroy value. Numerous studies have shown that cultural dynamics represent one of the greatest yet most frequently overlooked determinants of integration success and postmerger performance. For example, senior leaders from two merging international food retailers had invested heavily in their organizations' cultures and wanted to preserve their unique strengths and distinct heritages. An assessment of the cultures revealed shared values and areas of compatibility that could provide a foundation for the combined culture, along with important differences for Spotlight Series / The Culture Factor which leaders would have to plan: Both companies emphasized results, caring, and order and valued high-quality food, good service, treating employees fairly, and maintaining a local mindset. But one operated in a more top-down manner and scored much higher on authority, especially in the behavior of leaders. Because both companies valued teamwork and investments in the local community, the leaders prioritized caring and purpose. At the same time, their strategy required that they shift from top-down authority to a learning style that would encourage innovation in new-store formats and online retailing. As one senior leader said of the strategic aspiration, "We need to dare to do things differently, not play by the old rule books." Once they had agreed on a culture, a rigorous assessment process identified leaders at both organizations whose personal style and values would allow Spotlight Series / The Culture Factor them to serve as bridges to and champions for it. Then a program was launched to promote cultural alignment within 30 top teams, with an emphasis on clarifying priorities, making authentic connections, and developing team norms that would bring the new culture to life. Finally, structural elements of the new organization were redesigned with culture in mind. A model for leadership was developed that encompassed recruitment, talent assessment, training and development, performance management, reward systems, and promotions. Such design considerations are often overlooked during organizational change, but if systems and structures don't align with cultural and leadership imperatives, progress can be derailed. In a dynamic, uncertain environment, in which organizations must be more agile, learning gains importance. It's not surprising that results is the most common culture style among all the Spotlight Series / The Culture Factor companies we have studied. Yet during a decade of helping leaders design aspirational cultures, we have seen a clear trend toward prioritizing learning to promote innovation and agility as businesses respond to increasingly less predictable and more complex environments. And although learning ranks fourth within our broader database, small companies (200 employees or fewer) and those in newer industries (such as software, technology, and wireless equipment) accord it higher values. Consider one Silicon Valley-based technology company we worked with. Though it had built a strong business and invested in unique technology and top engineering talent, its revenue growth was starting to decline as newer, nimbler competitors made strides in a field exploding with innovation and business model disruption. Company leaders viewed the culture as a differentiator for the business and decided to diagnose, strengthen, and evolve it. We found a culture that was intensely results focused, team based (caring), CKAGE ation of enjoyment and learning)