Why good culture is so important in business
What is business culture? In the simplest terms, it is the culmination of behaviours and attitudes of individual people within a company that gives the firm its distinctive identity. The late London Business School professor Sumantra Ghoshal called it “the smell of the place”. A healthy culture can be a core driver of positive business outcomes – whether that’s making money, retaining staff, or managing risk.
Why is it so important? Some cultures are better than others. A healthy culture is one that harnesses the human potential in the organisation in the pursuit of business goals.
Take the example of risk management. A compliant, fear-driven culture, where the rule is to follow the hierarchy, may be less sustainable than a more open culture, where people are encouraged to speak out, take ownership of their projects, and be entrepreneurial in what they do within the parameters of risk management. A dependency can develop in an overly hierarchical culture, where employees may become dependent on leaders. Employees may also be reticent to act on emerging risks if they fear they will be blamed. Indeed, there are correlations between an open culture and good risk management.
One of the ways a culture manifests itself is through the values and principles that an organisation espouses to guide its daily behaviours, attitudes and business practices. If a business has defined these clearly, they can be used as a benchmark for everything. When you recruit people, you can hire against things that are important for perpetuating the culture you value. At Investec, for example, we recruit people who are not scared of authority, happy with ambiguity and to challenge the status quo, and who don’t shy away from conflict. This is because one of our foundational values is “open and honest dialogue”.
Leaders need to fully embrace and embody the culture and its attendant values. If you simply pay lip service to your culture, it will erode. People need to be rewarded for living the values implicit in your culture. For example, if collaboration is a value, that needs to be rewarded. If a culture is experienced as grounded in authentic values, it can be a key differentiator and competitive advantage for the business. And like a product or service, a culture can’t be all things to all people or it loses authenticity. But once a culture is viewed as authentic and becomes self-reinforcing, it can be a key source of differentiation. It is far less effective, for example, to inform clients that you’re a relationship-focused business than for your employees to live this through their behaviour. It is very hard to sell something you don’t believe in.
Building a culture within a company and ensuring that it has a real impact on the business’s outcomes is about engaging with complexity. Ultimately, culture evolves over time and locates at the heart of the business.
This article is provided for information purposes only and should not be construed as advice of any nature. The views and opinions expressed are subject to change without notice.