Culture is probably a word you hear often if you follow blogs on entrepreneurship or read articles on business and management. What is culture exactly and how does it affect the company and its leaders?

Corporate Culture and Successful Leadership

 

Culture is probably a word you hear often if you follow blogs on entrepreneurship or read articles on business and management. What is culture exactly and how does it affect the company and its leaders? 

In general terms, culture is how things are done, how decisions are made, and how the company is operated.  According to Frances Frei and Anne Morriss at Harvard Business Review:

“Culture guides discretionary behavior and it picks up where the employee handbook leaves off. Culture tells us how to respond to an unprecedented service request. It tells us whether to risk telling our bosses about our new ideas, and whether to surface or hide problems. Employees make hundreds of decisions on their own every day, and culture is our guide. Culture tells us what to do when the CEO isn’t in the room, which is of course most of the time.”

In addition to understanding culture, one must also recognize that for leaders and managers to thrive in an organization, they must inherently grasp and believe in the culture.  Let’s look at 3 main cultures we run into today and how they flourish in old-school and new-school companies.

Most entrepreneurial companies are started by a small group of individuals who have a few additional employees.  The management style and subsequently culture is often autocratic or dictatorial.  The owners feel empowered given they started the business, often created the idea, still own the business, and of course hold all the risk.  Many times, employees feel they are working for the entrepreneur as a person and not necessarily the company.  If John Smith owns Wreckers-R-Us and is in the day-to-day management, then many of the employees will say I work for John Smith, as opposed to I work for Wreckers-R-Us. 

In order for the business to grow the founder normally must begin to release some control.  Many times, they will automatically instill policies, procedures, checklist and the other forms of control. However, they must be careful not to create a bureaucratic environment that could stifle the growth plans.

Larger corporations are sometimes much more rule dependent and even slower than their smaller counterparts and this often breeds a very bureaucratic atmosphere.  Think about the federal government, large corporations, and even highly regulated industries.  Primarily these are large, slow moving entities with, on average, poor customer service. 

Max Weber was a member of the classical school of management, and his writing on bureaucracy is characterized by hierarchical organization, action taken on the basis of written rules, and bureaucratic officials requiring expert training.  Career advancement depends on technical qualifications judged by an organization, not individuals. The style of leadership first began with the industrial revolution when, according to Weber, society was being driven by the passage of rational ideas into culture, which, in turn, transformed society into an increasingly bureaucratic entity.

The leader of the bureaucracy is often referred to as the company man or company woman. The bureaucracy does not reward risk-taking, and thus the CEO probably was risk adverse on the way to the top. Contrary to the previous culture the identity of the employee is working for the company as opposed to working for a specific person.  Many people love this culture because things do not change rapidly and for the most part it is predictable.  Potential downsides exist in the fact of the sheer size and risk aversion that continually dampens the customer experience and overall agility. 

A collaborative company is another culture and leadership style that we see more and more of today.  In this scenario the boss is seen more as a coach and they work hard to develop their employees.  The boss or leader has a softer approach to management and the primary goal is to serve the customer and do it well.  The identity of the employee is linked to working in a team atmosphere or workgroup as opposed to an entrepreneur or the company.  Equally, the person is closer to the department and the success of their team.  This culture measures outputs (customer service, rankings, etc.) rather than inputs (headcount, time-clock, etc.) and changes occur by persuading the team that change or even a complete new direction is a good thing. 

One major value is solving problems together, whereas two or more minds are better than one.  Like the autocratic environment, risk taking is rewarded and learning is accomplished by trial and error.  Most would agree the collaborative approach is the best overall, however, one major hurdle is actually achieving a collaborative spirit has proven to be difficult. 

Perhaps an easier way to view and analyze a company’s culture is grouping the company into an “old-school” versus “new-school” bucket.  The old structure tends to be more hierarchical or bureaucratic, while the new-school companies are very matrixed and organized as teams and are more collaborative in nature.  Imagine the difference between corporate meetings at somewhere like General Motors compared to meetings at a place like Google.  On extreme opposite ends of the spectrum we are comparing room full of suits to people in shorts and sandals. 

The core principals of the old-school companies are much like the bureaucratic culture mentioned above.  Primarily made up of standards, rules, specialized, alignment, planning and control as well as the use of flashy rewards (company car, retirement watch, etc.). Think of industrial plants, big-box retailers, and perhaps the Federal Government. 

A new-school company is most likely more broadly organized or setup in a matrix whereas departments now function as teams and you may report to several people. These teams are armed with decision making ability and collaboration is key and redistribution of power breeds flexibility, innovation and boosts the overall employee engagement.  Suggesting that rather than a ‘top down’ approach or hierarchical structure, authority should be moved down the organizational chart and out to the teams.  Think of companies like Amazon, Facebook, Southwest, and Google, not just for the cool employee perks we all hear about, but for the team environment, risk tolerance, and nimbleness.

Additionally, one of the most important differences between an old-school and new-school company is how they approach management and leadership. This topic actually dates back 40 years when an innovative management consultant, Robert Greenleaf, wrote his pivotal piece, "Servant Leadership." He claimed the servant leader is servant first and then the conscious choice brings one to aspire to lead.  Greenleaf believed that institutions should serve people, not the other way around.  He also felt that he was on the threshold of an important paradigm shift in the collective American response to formal authority. 

Is leadership any different from management?   In fact, they are vastly different and while leadership is an important part of overall management, the two terms should not be used interchangeably. Today's more modern company requires its executives to be excellent leaders of people and not just great managers of things.  Leadership of people is essentially a separate and sometimes complex subject that must be learned to reach our pinnacle as successful financial executives. We can relatively quickly learn how to manage things, but the difficult intricacies of leadership are far more challenging to master.  In addition to this, the company culture plays a heavy role in the tone at the top or maybe there isn’t really a top.

In circling back to the three types of culture discussed herein, while managers can certainly perform well only in autocratic or bureaucratic mindset, leaders must often be collaborative as well.  Take for example a manager instructing the workers on exactly what to do next.  In the background, the manager assumes he or she has the most knowledge and understanding of what needs to happen and when it needs to happen.  In the same scenario with a leader at the helm, he or she may spend time collaborating with the team to chart the best path forward.  We can think of leaders as moving the ball forward to innovate and defy the norms, while managers are often simply maintaining the average, however that may be defined. 

As Greenleaf pointed out, influence and inspiration separate leaders from managers, not power and control.  Nevertheless, to be a great leader, you must also be a great manager.  One must intrinsically manage time, talents, and many other resources while also devoting efforts to moving the team forward. 

As Peter Drucker is often quoted as saying, “culture eats strategy for breakfast.”  Undoubtedly, A cohesive blend of leadership, management, strategy, and culture is the true formula for success, no matter the company or its underlying culture.

 

Brent McClure is a Trusted Business Advisor, Strategist, CPA, speaker and often times a CFO.

Feel free to reach Brent at brent@brentmcclure.com