Dick Clark, CEO of pharmaceutical giant Merck, was asked about business strategy vs. organizational culture, and was quoted as saying, “The fact is, culture eats strategy for lunch. You can have a good strategy in place, but if you don’t have the culture and the enabling systems that allow you to successfully implement that strategy, the culture of the organization will defeat the strategy.”*
It’s all too common: An exciting new executive is appointed with great fanfare only to leave after a short and rocky tenure. Or the merger of two companies is pitched to investors as guaranteeing great synergies, and they never materialize. The cause of these failures often seems obvious. The executive had the right knowledge and experience but simply couldn’t grasp the way things were done in the new organization. The combined balance sheets and product lines of the two merging companies looked great, but there was no way the highly collective one was going to blend well with the individualistic other. In other words, it was all the fault of “culture” and “cultural fit.”
The problem with blaming culture for these types of failures is that we’ve never been completely sure what culture means. The same is true when things go well. Chief executive officers—and the people who write books about them—are quick to celebrate corporate culture and its importance in times of success. But their stories, while inspirational, are essentially anecdotal. When we talk about culture, we talk in generalities. No wonder when it comes time to make basic nitty-gritty decisions that determine a company’s fate, like the choice of a key leader or the decision to merge, discussion of culture often fades into the background along with other “soft” concerns.
The good news is that this is changing. Organizational psychologists, armed with more data and more powerful analytical tools, are developing detailed and useful models of corporate culture.
They are learning to identify the qualities that define a culture—for example, openness and emphasis on performance—and measure and quantify them in reliable ways. This is providing a framework for comparing a company’s culture with the inclinations of contenders to be CEO, or for comparing the cultures of two companies contemplating a merger. Measurement tools, such as Russell Reynolds Associates’ Culture AnalystTM, uses survey questions to uncover the distinguishing characteristics of companies. The Culture Analyst can also then go on to calculate an external candidate’s degree of fit to a company’s culture profile.
Organizational psychologists and consultants are working with clients to hone in on the aspects of culture that are most important to their businesses. In one case, a CEO wanted to strengthen discipline within his organization by bringing in managers who were inclined to foster and maintain discipline. To do so, he was willing to hire candidates who were less concerned with interpersonal relationships, even though most CEOs wouldn’t want to sacrifice that with their managers. He was pleased to learn that his top candidate’s culture profile showed he was strong on discipline and was mid-level (but not too bad) at relationships. At another company there was concern that a senior executive candidate had appeared “too independent” in an interview. A subsequent measurement of the candidate’s cultural preferences confirmed that they didn’t match up with the company’s rules-oriented ways.
A question that often comes up is whether a candidate should match the company’s current culture or the culture the CEO is aiming for as he or she changes the organization. Until now, a good amount of guesswork went into figuring that out. We can now clarify these two different profiles of a candidate to help inform CEOs about who is entering their organizations. This is important partly because a new executive who will stand as a cultural pioneer will need added guidance and cover.
New insight in these areas would be welcome under any circumstances, but they are particularly needed as we all begin to prepare for economic recovery and try to learn from the mistakes of the recent past. Many of the problems that led to the downturn, such as C-suite hubris, executive groupthink, lack of vigilance about strategy and poorly managed CEO succession, were ultimately matters of corporate culture. Not surprisingly, regulators, investors and industry groups are demanding that companies pay more careful attention to their top-level executive selection decisions—not just in terms of qualifications but also in terms of really understanding what kinds of people are in charge and what sort of culture emerges when they are put together in a room.
Of course, there will always be a subjective element to senior-level talent decisions, just as investors will always reach different conclusions from the same balance sheet. But providing a more rigorous and commonly understood framework for the discussion of corporate culture will go a long way toward keeping culture front and center in important strategic deliberations while they are taking place—and not just in hindsight.
*Quote taken from a ManagementToday.com news article by John Weeks, INSEAD, which appeared online on June 1, 2006.
Dean Stamoulis, Ph.D., leads the global Executive Assessment practice at Russell Reynolds Associates. He is the author of “Senior Executive Assessment: A Key to Responsible Corporate Governance.”