Many businesses, large and small, are struggling with performance issues that are being labelled as problems of business culture. Culture, however, is merely a product, an outcome, of quite a simple catalyst, one, which we seem unwilling to name.

 

Active Knowledge Question:

Do you know how to create the right culture in your business?

 

Business Culture – A Topic Of Concern

There is much discussion about culture and governance in the big business end of town these days. Yet culture is just as important for the smallest of businesses. In simple language, culture equals performance and, therefore, it impacts everyone in business.

At The Big End

In the European Union, new regulation around general data protection that came into effect last month has generated a flurry of activity in inboxes around the world. Driven by new privacy policies being released, these new regulations are a response to concerns about the ‘business practices’ of many companies in the social media and digital space.

Meanwhile, in the USA and other countries, Facebook and Google will continue to be under scrutiny for some time to come as their ‘business practices’ are examined by various oversight bodies. In Australia, the financial services industry and its practices are being examined through a Royal Commission with the image and practices of the industry taking a beating.

At The Small End

Then there is the CEO of a small business turning over $10m per annum trying to understand why staff are clocking off early and their managers are not holding them to account.

The common thread through all these businesses is the impact of culture.

 

The Elephant In The Board Room

The elephant in the boardroom, and in business generally, is why businesses exist. It is the fallacy that has led many a business astray and the key cause of all the problems that we are presently seeing. It is the catalyst of ‘bad culture’.

The greatest fallacy of our time is that businesses exist solely to profit. A profit-first motive feeds self-interest, politics, and short-termism. It saps the competitive strength out of any business.

Yes, of course, you must make a profit to grow your business and be sustainable. But it mustn’t be your reason for being in business. Today and always, businesses exist to compete.

I think almost every public company board would see generating more profits for the shareholders as their role and the purpose for which a business exists. This is simply bad strategy, as profit is an outcome. The focus must singularly be on making the business more competitive and, if this is achieved, then profit will be the outcome. More competitive means more profit.

The responsibility for culture starts and finishes with leadership. Leadership control all the agents that create, craft and shape the culture that exists within a business. But leadership must name the elephant and, honestly, get it out of the room. Once the elephant is gone, they will then be able to address, and fix, if necessary, culture.

 

The Five Agents Of Culture

There are five key agents that will create, craft and shape the culture within a business. Get these right and culture will not be a problem. And culture will become one of the agents of competitiveness in your business.

The five agents are:

1. Purpose
2. Motive
3. Worthy leadership
4. Organisational design
5. Competitive engine

Purpose

Purpose is misunderstood by many business leaders and is often interchanged with vision, mission and the profit motive. It is the business’s reason for existence. Profit is the least effective reason for a business to be formed or continue to exist.

If correctly crafted, purpose is one of the most powerful tools a business leader has to muster commitment, passion and the focus, of all the people working within and with their business. It becomes the window through which endless opportunities for growth may be discovered.

Purpose must deliver meaning and focus on customer value and, therefore, direction. It forms part of  the reason why people come to work in your business each day and, therefore, sets intent, which characterises culture.

Motive

Motive is what gets you out of bed each day. People need a reason for being and for doing things. Businesses can’t expect to compete effectively, or even maximise their profits, with a workforce who are there because they have no choice.

Businesses are made to compete. To deliver the greatest value they can to their customers and to meet their needs. To do this they need everyone to contribute at their best all the time. This calls for a motive that will draw out the best in everyone. The opportunity to excel, to be part of a team, a business, that is ‘doing good’ and achieving real success is what draws this contribution to the forefront.

A profit-first motive says: ‘We are here to maximise the profit for our shareholders and your role as an employee is to help us achieve that outcome. You are a cost, which, therefore, must be minimized. While we need you to work hard, we really don’t want to pay you more than we have to.’

A business that is able to provide its people with a purposeful and fulfilled life, where there is a real meaning and personal reward for the effort they put in, will attract the most talented people who will give their all.

But make profit your motive, and you will draw the worst out in everyone as they each look for what is in it for them.

Worthy Leadership

Worthy leadership is the single most important determinant of competitiveness, and, therefore, the success of your business. Everything flows from leadership.

The ceiling to the success of your business lies in your leadership team’s level of worthiness, with the lowest dominator setting that ceiling. That is, your weakest leader sets the limit to your success.

A worthy leader is not determined by the technical competencies they possess but by their personal strengths and weaknesses. It is the quality of character that businesses must seek in their leaders.

It must be remembered that when it comes to competitiveness, the key relationship a leader has is with their employees – not their shareholders, bankers, creditors or other stakeholders. Their prime responsibility is to their employees and it is against this relationship that the measures of trust, loyalty and the like are made.

This is why character is so important in leadership. It is far more important than qualifications and experience.

Self-interest is the one action that is most likely to undermine worthy leadership. If a leader is in it for what they can get out of it personally – whether that is more money, more power, more benefits – then everyone will follow suit.

Leaders set the tone of culture.

Organisational Design

The design of your organisation shapes the culture that you are seeking to create in your business. The elements of this design are:

• How you choose to compete.
• How you structure your business.
• How decisions are made.
• What guiding principles are set.
• What performance measures are set.
• What and how rewards are provided.

All of these elements must be carefully crafted and monitored as they are the day-to-day operational elements of a business that influence culture.

Competitive Engine

There exists within your business, whether you recognise it or not, a competitive engine  that determines whether your business performs well or continuously trips over its own feet. It is operating every moment of every day and influencing every aspect of your business’s performance. Your every action impacts how this engine runs, again whether you recognise it or not.

The engine is formed the moment you begin to think about starting your business and continues its entire life.

The competitive engine asks the question, how have you chosen to compete as a business? It incorporates many of the above agents but sets the framework to view the business as a competitive engine. What is it that determines how competitively fit your business is, and how can you make it more competitive?

The engine represents the core driver/momentum of the business. It’s how leadership believes they can make the business more successful and, therefore, what elements they are going to ‘work’ to achieve greater success.

The view of the engine fundamentally crafts culture as it depicts where leadership is going to focus and draw everyone’s attention.

If you had to choose one agent, the cornerstone, that will set culture on the right path, then it is motive. The right motive is that businesses are made to compete. Profit is an outcome, not a motive.

 

Most importantly, leadership decides and sets what the motive is in their business.