Organizational culture: risks and opportunities for the future
One of the challenges for investors is assessing the risks and opportunities before they invest in an organization. In addition to financial information, they need to check non-financial factors as Environmental, Social, and Governance (ESG) scores, but also organizational culture. Culture can range from positive (including a very positive bottom line) to toxic. The great resignation is an example of a culture-related risk, partly caused by pressure from shareholders to deliver profits that might exhaust employees.
But how can you get an idea of an organization’s culture as an outsider? As a busy top executive in the top corner office, do you know how the culture is experienced by employees in other locations? You can do interviews, anthropological research and focus groups, but a faster way to assess organizational culture is to use a validated culture survey.
Culture impacts everything
Culture impacts everything: human capital, performance, innovation, agility, competitiveness, engagement, recruitment and retention, your corporate reputation, and the enthusiasm for ESG, from sustainability to diversity, equity, and inclusion, to integrity. Culture is an asset or a liability.
Just remember the cases of Kodak and Fuji, or Nokia versus Apple. The moral? An entrepreneurial culture that’s open to new ideas and taking action wins. Volkswagen’s Dieselgate happened within a culture that (over-)emphasized competition and meeting targets, regardless of other criteria. Their culture didn’t appreciate reflection, vulnerability, mutual support, or asking true questions.
Think back to last year, when Amazon and Microsoft employees demanded climate solutions, Facebook staff protested against right-wing extremism, and Acitvision Blizzard staff stood up against harassment. GenZ and the Millennials want a culture that’s more “woke” (more about that in another article soon), a culture that takes political and social sides. GenZ and Millennials choose purposeful organizations, both as professionals and as customers.
Culture conservers what worked well in the past. But how to be future-fit in the VUCA-world? It's volatile, uncertain, complex, and ambiguous. We experience constant, non-linear change - think of the pandemic that surprised all of us. Black Swans (unlikely events with big impact) will continue to happen. With the climate risks we see, the war in Ukraine, new pandemics underway and super inflation, what will happen next?
Is the current culture keeping an organization stuck or helping it adapt? That's a crucial question for both investors and leaders.
Competing Values Framework
One of the ways to assess organizational culture is to use a validated culture survey like the OCAI (Organizational Culture Assessment Instrument, © Kim Cameron), based on the Competing Values Framework (CVF). The CVF is developed by Robert Quinn and Kim Cameron and consists of four culture types. You can read more about the OCAI here.
In the long run, you need features of all four culture types. The current culture profiles is a mix of the four “archetypes” in the CVF.
In short, the four culture types are:
Create Culture (Adhocracy Culture)
A dynamic and creative working environment. Employees take risks. Leaders are seen as innovators and risk takers. Experiments and innovation are key. Prominence is emphasized. The long-term goal is to grow and create new resources. The availability of new products or services is seen as success. The organization promotes individual initiative and freedom.
Collaborate Culture (Clan Culture)
A friendly working environment. People have a lot in common, and it feels like a family. Leaders are seen as mentors. Loyalty and tradition count. There is great involvement. Emphasis on long-term Human Resource Development. Success is defined as addressing the needs of the clients and caring for the people. The organization promotes teamwork, participation, and consensus.
Control Culture (Hierarchy Culture)
A formalized and structured workplace. Procedures direct what people do. Leaders are proud of efficiency-based coordination and organization. Functioning smoothly is most crucial. Rules and policies keep the organization together. The long-term goals are stability and results, paired with an efficient and smooth execution of tasks. Reliable delivery, continuous planning, and low cost define success. The personnel management has to guarantee work and predictability.
Compete Culture (Market Culture)
A results-driven workplace that emphasizes targets, deadlines, and getting things done. People are competitive and focused on goals. Leaders are hard drivers. The emphasis on winning is key. Reputation and success are the most important. Market dominance, achieving goals, and great metrics are the definitions of success. Competitive prices and market leadership are important. The organizational style is based on competition.
Organizations can score the OCAI in 15 minutes and use the culture profile as a great conversation starter to gain more insights and actionable ideas to improve. The same way, investors can assess the culture profile for possible risks and opportunities - and start a conversation with the organization.
The culture model is descriptive and neutral. It does not prescribe the best culture profile for a given organization - they get to decide which mix of culture types will make them future-fit and successful. Also, all four culture types have merits and useful features in theory. However, too much of a culture type can turn into its shadow in reality. For instance, too much of Compete culture might lead to employee burnout. An over-emphasis of Create culture may lead to starting too many projects, but not finishing with results.
Looking at the current and preferred culture profile (a mix of the 4 culture types) you can gauge possible culture risks and opportunities. Of course, you can’t be sure until you have a dialogue (a constructive, open conversation) with the organization’s executive team.
Some risk and opportunity indications based on the CVF culture profile mix are:
1. Compare the current culture profile to the industry - risk or opportunity?
2. The strength of the current culture profile - an indication of the shadow side? Also check: a strong, outdated culture can hold you back
3. Check the congruence of the culture profile: incongruence can indicate conflict, confusion, leftovers from the past and lack of effort to develop the culture
4. Assess the preferred culture profile for future-fitness in the VUCA-world
5. Assess the gap between current and preferred - is this an indication of discontent and the need for change?
6. If there’s a small or no gap: that can be a risk if they need to change. Don't they see this?
This can be an interesting conversation and check-up for both organizational leaders, staff, and investors.
Which culture types do we need to be future-fit?
That is the question everyone asks. What do we need in this VUCA-world? What does the collective intelligence say? We checked the scores of 21,000 American managers and employees (and those worldwide) that scored the OCAI online. The trend between the USA and the world is the same. Everyone, leaders and staff, no matter where they are located, wants and needs to move their culture profile upward in the CVF (see the profile image). People vote for more flexibility-oriented culture types, like the people-oriented Collaborate culture and the entrepreneurial Create culture type.
That’s the current collective consensus, and looking at the VUCA-state of today’s world it makes sense. We need collaboration, learning, renewal, agility. (Supported by smooth processes and results, but this emphasis is clear).
Check where your organization or your next investment is at. Is it (too) strongly based in the stability-oriented types, such as the process-oriented Control culture and the results-oriented Compete culture type? Do people indicate that they want and need to shift to the flexibility-oriented culture types or not?
The culture profile is an insightful starting point for a conversation, for organizational leaders, staff, and investors. How can we improve the way we do things around here? How to benefit from a future-fit culture that brings opportunities and how to diminish culture-related risks? Engage the organization and start working on a successful, sustainable future.
© Marcella Bremer, 2022
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