Some of the world’s largest and most ambitious companies, at times, struggle to survive, to turn around underperformance and to beat an outperforming competitor. The culprit consistently seems to be not their strategy, but their culture. There are statements like “people are not taking accountability”, “we are not changing fast enough”, “there is no sense of urgency”, etc.
So, what is it that separates companies in this situation from others? What is it about the culture that allows some companies to adapt and thrive over long periods of time, while others struggle with performance and survival? Essentially, the companies that have been struggling are victim to four deadly sins.
Various companies get caught up in navel-gazing, i.e. being inward-looking rather than external—a narcissist trap. There are many tell-tale signs of this. Management meetings start by talking about processes and internal policies. Projects are focused on internal issues. Targets are set as being incrementally better than the previous year. Soon such companies take their eyes off external realities, from real customer needs, from evolving competitive strategies, and become focused on internal fights and issues.
One of the most repeated sins is territorialism or organisational silos. People who should be talking to each other don’t, because they are not in the same reporting hierarchy. Getting collaboration to work is nearly impossible. People may be doing the best for their function or role, but not for the company as a whole. The reason is straight-forward—there is no metric to measure collaboration, and often it comes at a cost to the metrics we do measure. So collaboration gets delegated upwards, pushing simple operating topics to the executive committee, and crowding out real issues of strategy and direction.
Many companies have people who are crippled by fear—fear of speaking up and fear of failure! The systems are designed for control and for preventing any wrong rather than for unleashing good. In such companies, people never take chances because they feel it is better to have not tried than to have tried and failed. Little new ever happens in such companies. People prefer mediocrity rather than outperformance, and are often more afraid of their boss than the truth. They would rather be quiet or agree than raise critical issues that could change the future of the company. Such organisations forget to listen and learn; they forget to experiment and change.
The last sin is arrogance—the belief that we know best, and what has worked in the past will work in the future. Often you can sense this when people say “yes, but this does not apply to me”, “our industry is different”, “but aren’t we winning”, “we have always done it like this”. Arrogance is the single biggest block to any form of learning and change—it is like a learning-repellent. In such organisations, it is impossible to get alignment to drive any change because there are enough people lost in the successes of the past.
So, what can leaders do about these four deadly sins that seem to be at the root of all underperformance and failure? Haven’t many companies failed in trying to change culture? Are we not better off trying to find a great new strategy, making some all-in type bet, hiring a new CEO, or something more tangible and visible? All evidence of corporate failures shows that these are exactly the kinds of actions taken by companies that end up failing, not turning around. There is no escaping the question of culture, and it is the role of the leaders to influence the culture.
Changing culture requires the ability of leaders to act in ways consistent with culture. No slogans, no rocket-science or big programmes. Just consistent action.
Culture is created by who you hire, who you fire, who you promote, what you talk about in meetings, who you call out as heroes, what you celebrate, what stories you narrate, where you allocate resources and what you measure—acts that translate intent into action for the whole organisation.
Now, if consistency in action is all it takes, why does it not happen? There are two reasons. One, quite often leadership teams are not aligned on what culture they really want. For example, a leadership team of a company that had been working on a transformation together for nine months was asked to write down the three biggest changes they were trying to drive. When they started sharing this with each other, it became clear that even after nine months this group of leaders was not aligned on what was critical and how they had to talk about it to their people. There is no chance that anyone else in the organisation would understand, if they could not.
Two, leaders find it hard to make the trade-off at moments of truth to back the very culture that they say they want. What if you have a strong performer who instils fear in his people and doesn’t let them talk? What if you have a star (in his area) who never collaborates or encourages his people to share resources? What if you have an urgent issue and there is a quiet person who wants to say something counter-intuitive? In such situations, what do you do? Do you act consistently with your culture or do you act to make the problem temporarily go away?
How about redefining failure? Failure isn’t about missing a stretch target or a KPI—no one wants to do that deliberately—it is about failing to try something new, failing to seek or provide help, failing to look outside rather than inside, and failing to learn something new. Just this redefinition can be a powerful signal to reset culture.
Leaders always have a choice—either to align behind the culture they want and consistently act in a way that reinforces it, or not wish for a different culture. Remember, the right culture is key to success and outperformance, and leaders have to commit to it. This is the most important rite of leadership.
The author is a senior partner, heads BCG’s People and Organisation Practice in BCG Asia Pacific and BCG’s Global Leadership and Talent Center based in Singapore