Organisational Culture and Business Strategy
As discussed in the previous chapters, organizational culture is a system that unites the members of an organization with shared assumptions, beliefs, values, and traditions. An organization’s culture is a platform that allows the formulation and implementation of a definite strategy.
Further, an organization’s strategy should be clear, simple, rational, and logical. It should help in positioning the organization in the marketplace in such a way that it is able to gain maximum competitive advantage. The strategy represents the direction an organization takes for attaining its goals and objectives.
Table of Content
- 1 Organisational Culture and Business Strategy
- 2 Aligning Culture With Strategy
- 3 Strategy Culture Compatibility
- 4 Impact of Culture on Business Strategy
The relationship between organizational culture and strategy is explained by Peter Drucker as a strategy that is at odds with a company’s culture is doomed. Culture trumps strategy every time – culture eats strategy for breakfast.
The message is clear: culture is important for the success of an organization. Therefore, any strategy that the organization formulates should take its culture into account. If strategy and culture are not moving harmoniously in the same direction, the strategy will fail.
Therefore, corporate culture is considered the strongest factor contributing to an organization’s long-term success. The success of any strategy is dependent on the people and their cultural diversity. Strategy and culture when aligned with the organization’s mission and vision, lead to the achievement of expected results.
We can derive the following points with regard to the relationship between strategy and culture:
- A business strategy identifies a direction and feasible route for attaining the goals of a company, while culture is the emotional and organic habitat existing within the company, where strategy strives to exist and prosper.
- Strategy is like the headlines of a company’s testimony, while culture represents a common language that is needed to embrace and explain the company’s testimony in terms of its mission, vision, and future expectations.
- Strategy is about the intent and inspirations of a company, while culture helps in determining and measuring the company’s desire to engage, execute and excel.
- The strategy establishes the rules and regulations for playing the game, while culture stimulates the morale to play the game.
- A strong strategy is critical for differentiation, while a vibrant culture is the main factor for delivering a strategic advantage.
- The culture of an organization is built each day and whenever culture embraces strategy, its execution is scalable, repeatable, and sustainable.
Aligning Culture With Strategy
Philips and Sony, Pepsi and Coke, and Mars and Hershey are direct competitors in their respective industries. All of them have different strategies and follow different cultures. Evidently, successful corporations around the world have succeeded because they were able to align their cultures with their strategies.
An organization can align its work culture with its business strategy in the following ways:
- Maintaining consistency in processes, procedures, and attitudes to hold the values true
- Building a culture based on trust and ownership
- Encouraging employees and teams to come up with innovative ideas and practices
- Making small and valuable changes in the processes periodically
- Using effective and open communication practices for encouraging employees to give their input and feedback
Types of Strategies for Alignment With Organizational Culture
The main types of strategies implemented by organizations in alignment with their organizational culture are as follows:
Organizations that implement this strategy have a culture that focuses on the development and encourages creativity and risk-taking.
Such a culture has an inherent ability to embrace change. The prospector strategy enables organizations to emphasize on innovation and constantly search for new opportunities in the marketplace.
Such organizations ensure that employees are active participants in the formulation of the business strategy.
Organizations that have a hierarchical culture and emphasize a set routine and standardization for functioning follow this strategy. Such organizations give more importance to technical know-how and focus less on initiatives and out-of-box thinking.
The defender strategy is common in organizations that function in a narrow and clearly defined market segment. They function in mature and stable markets and try to defend their market value and share by exploiting existing technologies and processes or by making slight improvements to them.
Such organizations do not focus on research and innovations and are averse to risk-taking.
Some organizations follow a culture that is a mix of innovative/creative and hierarchical cultures. They try to seek a balance of creativity and stability, i.e., they encourage research and innovation and at the same time follow conventions.
Such organizations diversify risk. They focus on both unexplored and stable markets. They function in two market environments. The first is dynamic and the second is relatively stable. Such organizations follow the analyzer strategy because they analyze the market and take calculated risks.
These organizations are successful in operating effectively in a stable environment; in a dynamic environment, they critically analyze the actions of their competitors. This allows them to choose an effective strategy for surviving and succeeding in the marketplace.
Organizations that do not have a defined culture of their own tend to follow this strategy. Generally, such organizations run on the whims and fancies of a few individuals in management. They lack stability, and random changes are common.
Instead of planning for the future, these organizations let changes happen. Because of poor planning and lack of vision, they are not able to respond to situations and circumstances in a positive way.
So, these organizations do not have a specified corporate strategy and usually deal with situations as they occur. These types of organizations usually are not able to grow and make a mark in the marketplace. They either change or perish.
Strategy Culture Compatibility
It is important for an organization to ensure that its culture is compatible with its business strategy. Strategy–culture compatibility is indispensable to the achievement of organizational goals.
This compatibility also allows organizations to take appropriate decisions on the basis of their priorities and vision and mission. Therefore, it is very important for an organization to assess its strategy–culture compatibility.
After proposing a new strategy to achieve its goals, an organization will typically evaluate the strategy to see if it fits into the organization’s culture. The organization needs to take specific decisions in case the strategy seems out of sync with its culture.
An organization that is serious about its goals may go to the extent of making drastic changes in its culture. However, such a course of action is best avoided because it may challenge the stability of the organization.
Instead, organizations may opt to establish a new structural unit for implementing the strategy. They may also outsource the work or find a partner to implement the strategy in case they are keen on implementing it.
In any case, no organization takes the risk of implementing a strategy that goes against its culture.
Impact of Culture on Business Strategy
The culture of an organization is said to reflect the shared beliefs, values, philosophies, traditions, and norms prevalent within an organization. It establishes a foundation for the business strategy. For a successful implementation of any strategy, it is essential to align it with organizational culture.
Therefore, the organization should establish goals and objectives to support a culture that embraces the organization’s strategy in the future.
Organizational culture is said to be the driving force for an organization and is essential for determining how the organization does business. Thus, it impacts the process of developing and implementing the business strategy.
Culture has an impact on various aspects of an organization. These aspects in turn influence business strategies. Culture impacts the business strategy of an organization in the following ways:
When an organization that has developed a business strategy does not share it with its employees, a culture of suspicion and distrust is created among employees. It becomes difficult for the organization to retain employees in such an environment. Such a negative culture impacts business strategies adversely as the employees do not believe in the management practices
Incentive Pay Strategy
In an organization, productivity and performance improvements when employees are rewarded periodically and incentives are given to them. At times, this creates a culture of expectation, so the incentive program needs to be carefully supervised and administered by the management.
An incentive strategy encourages employees to achieve certain performance levels in order to be eligible for the incentives. Therefore, a well-managed incentive program can help the organization to achieve its goals and objectives as well as its business strategy.
The organizational culture that employees subscribe to helps in creating focus among the employees. The vendors, clients, and strategic partners get a unified impression of the organization when employees abide by the same culture.
This consistency in the culture across stakeholders helps the organization to choose and define a business strategy that can readily be adopted by the organization. Such business strategies have a better chance of success.
An organization that is planning to expand and make changes in its structure generally faces resistance from the employees. A culture that resists changes can have a negative impact on the business strategies implemented by the organization. For instance, staff complaining about regular changes may not be able to fulfill the expansion goals of the organization.