Corporate culture has a significant impact on your business. It is, in essence, your company’s DNA. Attitudes, mindset, communication, and how decisions are made are all, for the most part, driven by corporate culture. A negative corporate culture can be a major obstacle, standing in the way of the firm’s ability to reach its potential.
The impact of corporate culture is felt at all levels of an organization. In practical terms, we can think of corporate culture as the habits and customs of the organization, what gets discussed and how, which topics get wiped under the carpet, and how stuff gets done.
Most firms do some kind of annual strategic planning, in some form or another. It is important to recognize that corporate culture impacts the effectiveness of the strategic planning process as well as the quality of the decisions made and the implementation of the business strategy.
Management guru Peter Drucker reportedly said, “Culture eats strategy for breakfast.” In other words, if the corporate culture does not encourage open-minded discussion, clear strategic thinking, and rational decision making, and committed implementation, all strategic planning efforts are futile.
Is your company’s strategic planning an annual two-day retreat at the country club that feels pretty much like a rerun of last year’s retreat? Nothing groundbreaking, insightful or controversial gets discussed. The same topics get rehashed, over and over, without any clear decisions. If you basically just ‘check the box’ on strategic planning you should take a good look at the corporate culture and its deep impact on the business.
Culture Traits that Impact Strategic Planning
Here are a number of corporate culture characteristics that lead to not only an ineffective strategic planning process, but also weak decision making, a flawed business strategy, and poor execution.
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 he/she knows 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 the rest of the organization.
Lack of Insight
Past successes can lead to a management team becoming complacent. They start taking future success for granted. Often, these companies are overly focused on operations and day-to-day problems. 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, all impact the business.
If management fails to develop real insight into what’s happening in the dynamic marketplace, they are not able to see new opportunities nor can they anticipate any threats to the business.
Delusion leads to wishful thinking and a pie-in-the-sky mindset. This produces a business strategy that is not grounded in reality. Management is fooling themselves by setting unrealistic goals given the reality of the marketplace and the company’s capabilities and resources.
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.
And the negative experience of this failure may then set the tone for any future strategic planning efforts, creating an environment in which management lacks the courage to make confident, bold decisions.
Breakthrough success 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 and careful, rational decision making and considering any negative aspects is considered unnecessary and a waste of time.
A business strategy created by an overly confident management team is often seriously flawed. No matter any gallant attempts at proper execution, this strategy is doomed from the start.
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. Management is unable to set priorities and make strategic decisions.
If a business strategy is developed at all, the implementation may never get completed, let alone get started. As can be expected, missed opportunities and poor performance are the results.
Indecisiveness is the opposite of an owner with a strong ego who knows it all and makes all the decisions. It reflects a weak management team with an owner not capable of cutting through the clutter and making decisions.
Lack of Courage
Lack of courage and an inability 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 failed business initiatives in the past.
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.
In a company where groupthink is the norm decisions are made with an uncritical, tacit acceptance of the common point of view. Contrarian opinions or concerns are not brought up or quickly shut down. Nobody challenges the status-quo and asks tough questions.
Groupthink happens when there is not enough 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.
Groupthink can also 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.
The result of groupthink is a weak, poorly thought-out strategic plan that will likely fail.
Oversimplification occurs when management is impatient and they want 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.
Strong “silos” in the organization can lead 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
A management team that is 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, the 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
Let’s be frank, did you recognize your organization in any of these corporate culture 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 the corporate 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.
It should be clear that any of the negative corporate traits described in this article can have a detrimental impact on the success of any strategic planning effort. Don’t let corporate culture hurt your firm’s chances of success.