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 / Summer 2013 / Issue 71(originally published by Booz & Company)


Culture and the Chief Executive

CEOs are stepping up to a new role, as leaders of their company’s thinking and behavior.

It is striking to see how many chief executives see their most important responsibility as being the leader of the company’s culture. According to Ginni Rometty, CEO of IBM, “Culture is your company’s number one asset.” Her counterpart at Microsoft, Steve Ballmer, has said, “Everything I do is a reinforcement or not of what we want to have happen culturally.” In another typical remark from the C-suite, Starbucks Corporation CEO Howard Schultz has written that “so much of what Starbucks achieved was because of [its employees] and the culture they fostered.” Researchers such as former Harvard Business School professors John Kotter and James Heskett have also found consistent correlation between robust, engaged cultures and high-performance business results (as described in their book, Corporate Culture and Performance [Free Press, 1992]). But most business leaders don’t need that evidence; they’ve seen plenty of correlation in their own workplace every day.

Recognizing the importance of culture in business is not the same thing as being an effective cultural chief executive. The CEO is the most visible leader in a company. His or her direct engagement in all facets of the company’s culture can make an enormous difference, not just in how people feel about the company, but in how they perform. Schultz described the CEO’s role this way in his book Onward: How Starbucks Fought for Its Life without Losing Its Soul (Rodale Books, 2012): “Like crafting the perfect cup of coffee, creating an engaging, respectful, trusting workplace culture is not the result of any one thing. It’s a combination of intent, process, and heart, a trio that must constantly be fine-tuned.”

A company’s culture is the collection of self-sustaining patterns of behaving, feeling, thinking, and believing, the patterns that determine “the way we do things around here.” At its best, an organization’s culture is an immense source of value. It enables, energizes, and enhances its employees and thus fosters ongoing high performance. At its worst, the culture can be a drag on productivity and emotional commitment, undermining long-term success. Most companies are so large and complex that the culture acts in both ways at once. Indeed, the culture of a large company is typically made up of several interwoven subcultures, all affecting and responding to one another.

If you are the chief executive of a company that is sailing with the wind and leading in its competitive race, that’s a sign that your culture is in sync with your strategy. This makes your company much more likely to deliver consistent and attractive profitability and growth results. You can tell you have such a culture because people are confident and energized. They can justifiably take pride in the results of their work. As CEO, your role is to keep the ship on course and ahead of the competition. This requires generating regular behavioral reminders about the values, aspirations, and engagements that underlie your company’s success and reinforce its strategy.

However, if your company is heading into stormy waters, facing the kinds of disruptive competition or unexpected market changes that affect every industry sooner or later, then a program of normal reinforcing leadership won’t cut it. A culture that no longer aligns with your strategic and performance priorities needs a lot more attention—from you and other senior leaders.

Many CEOs understand in principle that cultures are multidimensional, slow to change, and troublesome to control—and thus that influencing them requires care and thoughtful engagement. This is particularly true for global companies led by people of diverse backgrounds. When confronted with a cultural challenge in real life, however, chief executives tend to forget this principle. Instead, they revert to conventional managerial tactics, but with more rigor. They turn up the volume on the inspirational messages. They raise the bar and set stretch goals with new statements of the vision, mission, values, and purpose of the company. They bear down on costs and castigate people for complacency. They may also see culture change as primarily a functional responsibility, to be delegated to experts, either inside or outside the company. More often than not, these approaches leave the deeply embedded cultural behaviors largely unchanged. Only an enlightened CEO can break through that kind of cultural inertia.

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