Culture in the Business Environment

Article Written By: Peter Hendley-Hall

Organizations are judged on their financial performance and therefore, by default so are their management teams. The key for managers is understanding how financial success is measured, impacts on operational performance and options available to make positive sustainable change.

Traditional Approach

Typically managers tend to think in two dimensions when trying to address the problem. What do I need to change in my operations to achieve the desired financial results? Timescales may be tight and sometimes the short term needs may outweigh the long term aspirations. Sometimes short term measures can damage the long term capabilities of an organization. This can become a vicious circle where the law of diminishing returns is compounded by the diminishing options available. If you look at the diagram link below you will see a dotted line defined as the Minor Loop where the financial demands of revenue, profit, cash flow and equity are served by changes in operations of the business. This can be successful but it is a path littered with hazards.

Minor Loop Evidence

This is not simply an opinion it is backed by research conducted by Cameron and Quinn who stated that the three most typical change initiatives conducted by organizations in what could be described as Minor Loop were:

Restructuring

Quality Initiatives

Process Initiatives

Of these at least 75% failed, stalled or did not achieve the desired benefits. A summary of their findings is below.

Only 20% of TQM initiatives met their quality objectives and 40% were a complete flop

A survey of senior managers who had been involved in downsizing found that 74% indicated that productivity, morale and trust had since deteriorated

A survey across 1742 companies in the USA and Europe found that 85% found little or no gain from their effort in re-engineering processes.

Alternative Approach

So if this problem exists you may wonder if there is an answer to it. The answer is yes and it hides in plain sight. The third dimension is the organization itself and its culture. The reason it hides in plain sight is that people are generally aware of it but it is difficult to really define, let alone do anything about it. We now have instruments and methodologies that bring culture into focus and allow organizations to do something about it.

An organization's effectiveness will impact on its operational capability and consequently its financial performance. In bringing in the organization dimension it adds a multitude of options and can provide a shot in the arm to the minor loop challenge described above.

The organization is generally the origin of the business performance but is often overlooked as the area where true transformation can take place. The Major Loop described on the diagram link below shows how it can take place. It even provides benefits against the external issues that can plague operations and finance.

Major Loop Evidence

If you are still not convinced a ten year study by Kotter and Heskett found that organizations who actively managed their culture significantly outperformed those who did not. We would ask you to look at the main findings below and consider what those findings might mean for your organization.

Revenue growth of 682% versus 166%

Net income growth of 756% versus 1%

Stock price increase of 901% versus 74%

Job growth of 282% versus 36%

Companies listed on the Fortune 100 Best Companies to Work For significantly outperform the Sandamp;P 500

About the Author

Peter Hendley-Hall is the CEO of DCI an organization that specializes in helping firm improve bottom line performance through corporate culture management. To find out more visit www.dudleyconsulting-inc.com or e-mail info@dudleyconsulting-inc.com. Major/Minor Loop Diagram link: http://www.dudleyconsulting-inc.com/CultureinBusinessEnvironment.jpg

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