What you need to know about culture

Culture eats strategy for breakfast. While the truth of that statement is contested, it's clear that culture matters. Your role as a leader is to manage culture. But what is it? It's more than the vibe. It's more than the values. Here's what you need to know.

What is culture?#

Put simply, culture is "the way things work around here". Put more formally, culture is the system of socially transmitted patterns of behaviour, norms, beliefs, and values of a particular group.

One way to think of culture is as a pyramid. Each layer is more deeply embedded and less visible than the last: artifacts, behavioural norms, and values and beliefs — the underlying assumptions of the group.

Artifacts are what you see, hear, and feel. How are new employees welcomed and milestones celebrated? What stories do you tell from the company's past? What's the physical environment of your workplace? Each of these are artifacts of culture.

Behavioural norms are how a group acts. These norms may be formal or informal. Consider formal norms such as HR policies, the company dress code, the official performance review process. And compare this with the informal norms of how disagreements are resolved, and how group members communicate.

At the bottom of the pyramid of culture — its foundation — are basic underlying assumptions. These are values: what the group values, what they aspire to be. And they are beliefs: what the group believes to be true about the world and their place in it. These underlying assumptions tell the group who they are, how to act, and how to interpret the world.

Where does it come from?#

You can think of culture another way: everything a group has learnt as it evolved. To survive, the group must learn how to respond to change. It has to deal with the outside world. And it needs to figure out how its members should interact. How the group overcomes these challenges shapes the culture.

Especially in young organisations, leaders guide culture.

Let's walk through how an organisation's culture forms. It often works like this. A group forms to solve a particular problem or respond to a crisis. A leader emerges — often but not always the literal group's founder. This founder has her own values, beliefs, and way of seeing the world. And so she leads with those assumptions.

She might believe that "direct marketing is the most effective way to make our product sell well". And so the company focuses its early efforts on marketing.

If acting on these beliefs leads to success, the group will adopt them. See this for yourself in established companies with visible founders: the company's beliefs often reflect their founder's beliefs.

Leaders aren't the only group members who shape culture. This pattern of individual assumptions becoming shared assumptions happens at many levels. Each of us has our own beliefs we carry into new groups. And often we share these beliefs with other, larger groups.

Consider the broader context in which any group sits. Your company sits within a nation. Your team sits within its occupation. Every culture is embedded in a larger culture. You're shaped by the norms, beliefs, and values of all the groups you belong to — and you bring those with you. A Swedish company based in Sweden and founded by Swedes will have a very "Swedish" culture.

Why does it matter?#

Culture is "the way things are done around here". And that has important implications for your organisation's performance. What people believe drives what they do. And what they do drives your organisation's performance.

Recent technical challenges notwithstanding, Southwest Airlines have been a consistently successful company in a difficult industry. The reason? Southwest believes that employees, not customers, come first. They empower their staff. They invest in hiring and training. They retain their talent through economic downturns when others make layoffs. These beliefs result in their employees delivering exceptional experiences for customers.

Culture can be a source of sustained competitive advantage. Your competitors can copy your products, your policies, your positioning. But they cannot copy your DNA. Other airlines have copied Southwest's practices. But they can't copy the values and beliefs that ultimately drive Southwest's success.

Culture can also be a source of dysfunction. Let say you lead a startup. You move fast and break things — that's part of your culture. It's what made you successful. But what happens as you scale to thousands of employees? What happens when your strategy requires you to enter a regulated industry? When your strategy or the environment change, you might find that your underlying assumptions are no longer true.

You interact with culture no matter what role you play in an organisation.

When vetting an organisation, learn what they value. Are you aligned?

After joining an organisation, discover how things are really done around here. What are the unwritten rules to follow?

When leading an organisation, understand the critical link between culture and other elements. How does culture fit with the internal and external environments?

And if you uncover dysfunctional parts of the culture, change "the way things work around here".

Culture isn't the organisation, but it gets close. Manage it right and your culture is a source of organisational success. Mismanaged, your culture sets you up for failure. Either way, culture matters.