The Value of Corporate Culture

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Billionaire Warren Buffett has long espoused the value of Corporate Culture. At the recent Berkshire Hathaway annual general meeting, he told the audience of 40,000 that “Culture is everything at Berkshire,” and in a recent memo to his top managers, Buffett highlighted 5 lessons for building corporate culture:

  • Put ethical practices ahead of profit. “We can afford to lose money – even a lot of money. But we can’t afford to lose reputation – even a shred of reputation”.
  • Be committed to the culture, “If you see anything whose propriety or legality causes you to hesitate, be sure to give me a call.”
  • Remember the value of a strong business culture because culture, not rules, determines how an organisation behaves.
  • “Culture has to come from the top. It has to be consistent. It has to be … rewarded when followed and punished when not.”
  • “Everyone else is doing it” is nearly always a poor rationale for business action.

 

 

Buffett believes that great culture comes from choosing team members with excellent character. When recently appointing their successors, Buffett and business partner Charlie Munger made their decision by reviewing the personal character of the candidates, as well as their prior business successes, to determine their level of excellence and suitability.

  • A study by John Kotter and James Heskett in the United States of a number of public companies found that a strong corporate culture increased profit by 682% and stock prices by more than 900% over a number of years.
  • The Boards of Boral and Orica recently decided to replace their CEOs due to culture mismatches – because the long term value of the right corporate culture outweighed the short term benefit of financial performance.
  • Recently the new AGL CEO, Andy Vesey, said that his strategic road map comes from employees themselves and their recognition of the need for change. “When I talk to people they want to be part of this journey, they want to continue to be vital. That’s what I call unlocking growth, – I just want to give people a chance to get there.”

I find these comments really refreshing as they show that real change only comes from the top down.

 

 

So what is corporate culture?

A widely-held definition is that it is a set of values shared by a group of people that does not change when membership of that group alters. The values are experienced as “the way we do things around here,” both the explicit and implicit.

The roles that we hold are dynamic and we are not defined by these roles. i.e. we are not the role. It is through the role that we can demonstrate and exercise leadership and change towards a common set of goals. Building the right environment to ensure everyone is clear about the purpose and vision, and understands the organisation’s direction and the ethics and integrity required, will have significant impact on the organisation’s culture.

With all good intent and for many complex reasons this does not always create the right culture for everyone. Sometimes, the individual and culture just don’t match. Therefore it is critical that people can reconcile and align their own values so they can make a choice on how they can commit and contribute to the organisation so they can learn and grow – maximising their potential whilst knowing there are trade-offs and hence the need to make career decisions to stay or go. Additionally, the right cultural fit is not always comfortable and should be challenging at times to ensure growth is experienced.

When cultures are toxic, symptoms start to arise within the system such as high attrition rates, low engagement scores, increased sick leave, and even worse, illness, fraud and in extreme cases eventually corporate collapse. e.g., Enron and Lehman Brothers. What we constantly observe across both the private and public sector, small companies and large ASX corporates are executives who are unaware of the connection between their own leadership style and the culture of the organisation. They will change their executive team, restructure or install a new system and process to manage certain behaviours – instead of really understanding what is going on underneath. They collect more data so they can justify the gaps in the system.

Why? For reasons such as:

  • Lack of self-awareness
  • Narcissism
  • Fear – as they don’t know how to have courageous conversations

At Stephenson Mansell Group we have been fortunate to work with a number of large national and international corporations led by strong, supportive CEOs and their teams to implement real and lasting cultural change. We work with each individual and group of individuals to enable them to build their competency to have real, rich and meaningful conversations with their colleagues – whether it is a boss, peer or direct report.

These programs have been developed in conjunction with the University of Cape Town. They involve working with groups from the CEO and their top team down, bringing real issues to their groups and exploring their concerns and opportunities (i.e. to be listened to and responded to on a line of enquiry so they can resolve and achieve their own answers). This process creates a huge amount of trust and empathy which is the connection required to mobilise the workforce to greater engagement and productivity.

For further information, please refer to our website at smgrp.com.au

 

So, here are my questions for you?

1. How would you describe the culture of your organisation?
Friendly, exciting, a learning environment, challenging, innovative, having integrity, professional, results focused, collegial, best practice, command and control, having autonomy, providing freedom within boundaries?

2. Does the culture align with your personal values?  How are they the same? How are they different? Can you reconcile the differences?

3. As a leader, how do you try to influence the culture?

4. What conversations do you have with your colleagues, team and manager about how to ensure your culture is aligned with your business objectives and strategies?

5. What can you personally do to influence the behaviour you want to encourage?

5 tips for how you can influence the culture around you:

1. Speak honestly and openly.

2. Stay calm and pick your timing to have strategic conversations with your leaders by asking clear questions.

3. Build strong relationships so you can have constructive conversations, give feedback openly and align your key messages.

4. Seek feedback on your own style from others. Listen, ask for examples and then share your reaction and responses to the feedback.

5. Observe how your manager is influencing the organisational culture, both positively and negatively i.e. their emotional state, strategic thinking skills, engagement and fellowship, clear direction – and identify where there are gaps. Talk with them about the impact of what they are doing well and what they could do differently, stop doing and continue to do!

 

Passion and Purpose

I have dedicated my 35-year career to enabling people to change and embed long term sustainable change in their workplaces. At Stephenson Mansell Group, we would be delighted to talk to you about organisational culture and what you and your teams can do to make positive, real and sustainable change.

 

 

Best regards,
Virginia Mansell

About the author: Virginia Mansell, Executive Chairman, Stephenson Mansell Group.

Virginia Mansell is an expert and thought leader in executive coaching, mentoring and leadership.  She is the author of The Focused Executive, an important resource for CEOs and senior executives determined to perform at their very best. The 2nd Edition is now available with a new chapter on high performing teams.

In 1998, Virginia established The Mansell Group to provide coaching and leadership development services.  In 2005, she merged this business with The Stephenson Partnership to create Stephenson Mansell Group, arguably Australia’s longest-established executive development firm.  Over the last fifteen years, the Stephenson Mansell Group has worked with 5000 executives in more than 500 organisations in Australia and internationally including 30 of Australia’s top 50 companies.

In addition to her own experience as a business leader, Virginia brings to her role over 30 years in human resource management, counselling psychology, psychotherapy and organisational consulting.

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