Corporate Culture Impacts Strategic Planning

Corporate culture has a significant impact on your business. It can be a major obstacle to the firm’s ability to reach its potential.

The impact of corporate culture is felt at all levels of an organization. In practical terms, corporate culture can be thought of as the habits and customs of the organization, how stuff gets done, what topics get discussed, and what gets swept under the carpet.

Most firms do some kind of annual strategic planning, in some form or another. Corporate culture impacts the effectiveness of that planning process, the quality of the decisions made, and the organization’s ability to implement the business strategy.

If the company does not encourage open-minded discussions, challenging the status quo, and asking tough questions, all strategic planning efforts are futile.

Is your company’s strategic planning an annual two-day retreat at the country club? Do you leave the retreat each year thinking that you should have been able to accomplish more, but didn’t? Did nothing groundbreaking get discussed? No controversial topics got explored and the same old topics got rehashed, without any clear decisions?

If this is what happened, you should worry about your firm’s corporate culture as an obstacle to success.

Your Corporate Culture Impacts Decision Making

Here are a number of characteristics describing a firm’s culture that can lead to weak decision making, flawed business strategies, and poor execution.

If you recognize your firm in any of these, you should start thinking about engaging a consultant who can help you create a healthier, more productive organization.

Ego

Corporate culture is difficult to change, but ego in the executive suite may very well be the most difficult to deal with because it usually involves the owner/founder/CEO.

An owner with a big ego thinks they know it all, does not allow for contrarian points of view, does not ask open-ended questions, is not open to criticism, and does not solicit input. Often, the other executives are no more than worker bees, yes-men and women. Their experience and insights are not valued and underutilized.

It is not hard to see how a company’s performance can be jeopardized if the person at the top does not allow for input from others. Any strategic planning decision will simply reflect the owner’s opinion, right or wrong. The business strategy is usually rather grandiose, not well-thought-out, and lacks buy-in from other stakeholders in the organization.

Lack of Insight

Past successes can lead to management becoming complacent. They start taking future success for granted. Often, the company is too much focused on day-to-day operations and putting out fires. They tend to neglect to develop a longer-term perspective. Executives do not monitor business conditions as well as they should, if at all. Changes in market conditions, customer behavior, technology, the economy, are not noticed, or too late.

Failure to develop insight into what’s happening in the marketplace prevents management from seeing new opportunities or anticipate threats to the business.

Delusion

Delusion leads to wishful thinking and a pie-in-the-sky mindset. This attitude often results in a business strategy not based on reality. Managers are kidding themselves by setting unrealistic goals and expectations.

A company that suffers from delusion is likely to experience setbacks during the implementation of the strategic plan because of the overreach during the planning stage. In the end, the business strategy is likely to fail.

The negative experience of this failure then sets the tone for any future strategic planning efforts, creating an environment in which management lacks the courage to make confident, bold decisions.

Overconfidence

A string of breakthrough successes can lead to overconfidence if it is believed to be the result of the skills and talents of the management team. However, it may just have been plain luck, not business acumen.

Overconfidence leads to a mindset where gathering market intelligence, analyzing the data, careful decision making, and considering any threats or downsides are considered unnecessary and a waste of time.

An overly confident management team often produces a business strategy that is seriously flawed. The strategy is doomed from the start. Skillful implementation is not enough to save the day.

Indecisiveness

An indecisive management team usually gets stuck in a drawn-out, long-winded planning process. Common symptoms are overthinking, over-analyzing, too much talking, and second-guessing everything. Setting priorities and making strategic decisions becomes very difficult.

If a business strategy is created at all, the implementation may never get completed, let alone started. As can be expected, missed opportunities and poor performance are the results.

Indecisiveness reflects a weak management team not capable of cutting through the clutter and making decisions.

Lack of Courage

Lack of courage to make confident decisions lead to a bland, risk-averse business strategy. A bias towards an operationally-focused culture in which people are punished for mistakes contributes to this attitude. Often, management has adopted a ‘Not-Invented-Here’ thinking and is resistant to change. The lack of managerial courage can be the result of an overreaction to previous business initiatives that failed.

Risk-averse strategies are usually no more than ‘me-too’ approaches or a continuation of the status quo. In both cases, longer-term business performance is jeopardized.

Groupthink

In a company where groupthink is the norm decisions are made with an uncritical, tacit acceptance of the common point of view. Groupthink can occur if the owner has a dominant personality and does not tolerate candid discussions. It’s safer to conform to keep your job than to speak up. Contrarian opinions are not brought up or quickly shut down. Challenging the status quo and asking tough questions are seen as career-killers.

Groupthink can also occur as a result of a lack of diversity on the management team in terms of experience, background, and skills.  As a result of their similar backgrounds and experience, people on the planning team tend to have the same perspective. They agree quickly, without challenging anything or digging deeper.

The result of groupthink is a weak, poorly thought-out strategic plan that will likely fail.

Oversimplification

Oversimplification happens when management is impatient and wants to move too quickly to the implementation of the strategic plan. As a result, not sufficient time and effort is spent on properly identifying and addressing the key issues and opportunities. Gathering intelligence, analysis, formulating, and evaluating strategic scenarios are rushed through or skipped altogether.

Oversimplification leads to a poorly thought-out business strategy and premature implementation.

Departmental ‘Silos’

Strong departmental “silos” in an organization leads to poor communication between departments and insufficient involvement of key people in strategy development and decision-making. Strategic planning needs to include key people from throughout the organization, such as Manufacturing, Engineering, Sales & Marketing, and Finance. Developing a business strategy is not just for the boardroom.

The result of limiting strategy development to the executive team is that the new business strategy lacks the necessary buy-in from the rest of the organization, especially those responsible for implementing the strategic plan.

In this business environment, it is unlikely that the strategy will ever get implemented successfully. No matter how sound and well-thought-out it actually may have been. The lack of buy-in and poor communication between departments severely jeopardizes the company’s ability to achieve its strategic goals.

Too Much Focus on Operations

Managers who are overly focused on operations can suffer from strategic blindness. Their preoccupation with day-to-day activities prevents them from seeing the bigger picture. They fail to adopt a strategic, longer-term perspective based on a solid understanding of the dynamics of the marketplace.

An operational mindset results in premature implementation before any business strategy has been fully developed. Strategies created from an operational focus tend to be incremental, essentially maintaining the status quo, rather than game-changers. In addition, business initiatives are often more tactical in nature than strategic. As a result, significant new opportunities for growth are missed.

What to Do About a Negative Corporate Culture

Be frank, did you recognize your organization in any of these traits?

If so, you need to be aware that these negative traits seriously limit your firm’s ability to reach its potential. You should start thinking about working with an executive coach or consultant who specializes in culture change, team building, and team communication.

Before you do any strategic planning make sure that your firm’s culture supports the process as well as the implementation of the strategic plan. Encouraging open communication, facing facts, asking tough questions, challenging the status quo, and an ability to make bold decisions are necessary to move the business forward in a dynamic, competitive marketplace.

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Don’t let your firm’s culture stand in the way of success.