The importance of company culture becomes clear when things go wrong and suddenly everyone is asking for the CEO’s head on a platter. A failure to innovate, poor governance and a lack of cohesion between divisions are all signs that something is rotten within an organisation. Putting it right isn’t easy, but change can only come from the top.
Jeremy Small, Group Company Secretary of insurance company Axa UK, says: “It is clearly the domain of the CEO to show how people are expected to behave in the company. As we have seen from several corporate scandals, the leader’s behaviour is the key to establishing the culture of a business and may determine its fate. The extent to which the CEO either demonstrates particular behaviours or accepts them in others will establish the organisation’s culture.”
If strategy is to be executed effectively, then it’s essential to get this right. Chris Merry, CEO of professional services firm RSM Tenon, says: “The CEO has a crucial role in defining culture whether he/she likes it or not. It always amazes me that, no matter how large or geographically diverse the organisation, one person can have such a massive influence on its culture.”
That said, there are a number of other elements at work, both internal and external. Gary Kildare, Chief HR Officer for Global Technology at IBM, says: “There is no question that they have a significant role to play – but it’s my opinion that in today’s networked world, CEOs need to involve the whole organisation in setting the culture, and to think about including clients and other key groups as well. Everyone should identify with and feel that they can impact the culture.”
Matt Crosby, Director at consultancy Hay Group, argues that although CEOs may try to define culture, it’s the staff, especially those who are customer facing, who really create the mood of the business. “That’s not to say that CEOs shouldn’t define their target culture, as they absolutely should – we see intractable cultures that ‘eat’ the strategic ambitions set by the executive all the time,” he adds.
This is a crucial point, agrees Jeremy: “The biggest challenge facing any chief executive is to understand the culture that is needed for the company to achieve its strategic aims. Increasingly, this will lead to a transformation so that through its people the organisation can adapt to market developments, technological innovations and ever-changing customer expectations.
“The most significant shift currently is towards increased empowerment and responsibility; in many sectors, a command-and-control approach will no longer work as effectively as it may have done in the past. This change has been talked about for a while, but it now really seems to be underway.”
If a shift is indeed happening, human resources directors need to provide CEOs with the necessary levels of support. Jackie Dubery, Director of HR and Corporate Services for the Agriculture and Horticulture Development Board, says: “You create the structure and allow people to work within it. It should define what’s happening in the organisation today, not three years ago. HR has an overview of every part of the business, so HRDs can offer a great advantage to the CEO to help them keep their finger on the pulse of the entire organisation.”
Adrian Gunn, CEO of recruitment firm Matchtech, says: “I can articulate where the business is going, what the short and medium-term business goals are, then the HR person has the strategic capability to understand the people strategy and have the practical skills to implement it.”
On a pragmatic level, it’s about ensuring pronouncements on ‘culture’ are put into action, rather than sounding like contrived platitudes about business performance which only inflames cynicism.
Gordon Headley, Chief HR Officer of Tullow Oil, says: “It’s an overriding role of HRDs to guide and direct people on [culture] and to nurture it. HRDs need to fully understand what the CEO has a vision for and what they are talking about, or else there will be a disconnect and people simply won’t get it.”
This is why CEOs must lead by example, otherwise they will be found out very quickly. Matt says: “The problem is that culture is slippery and difficult to change, and perhaps more so now than ever before, as staff have become wise to, and jaded about, ‘culture change’ interventions.”
M&A activity certainly highlights this scepticism. It’s a time when CEOs need to be at the top of their game in order to placate fears about the future, normally among staff in the acquired business, and to devise a plan for integration. Ian Bowles, CEO of Allocate Software, says: “We’re effectively eight companies that have come together over a four-and-a-half year period, so you can’t say: ‘This is the culture of the company,’ and everyone has to comply.
“I’ve set out five or six values that I thought were really important and discussed them with the management team. You then need everyone to ‘walk the talk’ or their behaviours will undermine the culture of the business. As we bring in new people, the collective culture evolves.”
From the CEO’s point of view, if the culture is right, then there should be less need to micro-manage and fight fires as people can be trusted to execute and behave appropriately. But it’s not something that they can afford to take their eye off either, and the onus is very much on them to ensure they keep ‘getting it right’ as the business changes.
Culture, after all, is one of the most important intangible assets that a business possesses and, rightly or wrongly, if things are judged to be slipping, the quickest way to make a difference nowadays is to replace the CEO.
Ignore at your peril.