Organizational culture is one of the most important and yet misunderstood aspects in business today. Culture has profound impact on a business organization's performance. For example, a Harvard Business School study documented the significant impact of culture on performance. Heskett and Kotter documented the dramatic differences between companies with good cultures vs those with poor cultures on key performance measures. For example, the companies with good cultures achieved 756% growth in net income during the same time period that companies with poor performing culture saw just 1% net income growth.
Given the importance of culture on performance, one would assume that those of us in business would have an excellent understanding of what culture is. While this seems obvious, it is not the case. Most of us have an incomplete understanding of organizational culture. We assume that culture is:
- The artifacts which can be seen in the organization. These artifacts include the behaviors which can be seen. It also includes how communication is delivered, the workplace is organized as well as how practices and processes deployed. While declaration is given that those artifacts are the culture, less consideration is given as to why those artifacts occur. Said differently, identifying what the cultural artifacts are is useful, however, meaningful change can occur only after determining why that culture occurs.
- The values of the organization. It is common practice for executives who seek to change or improve their organization’s culture to use exercises to develop the exact wording for the desired values and principles of the organization. The assumption is that by identifying and claiming these new values that they will now occur in the culture. While this is a popular approach to culture change, it seldom works out for any length of time.