WTF is Culture, Anyways?
“Culture eats strategy for breakfast.” — the heavily quoted Peter Ducker
Sounds cool. Feels true, in the intangible way aphorism-like phrases do. But what does it actually mean? To start by defining terms, let’s say that culture is the norms and rituals of a group and strategy is what people are incentivized to do by the business.
With these definitions, it seems like the behavior of people in an organization would influenced primarily by their incentives. That‘s what controls who gets more or less money or power, and who gets promoted or fired. How can cultural norms or rituals rival that power?
Organizational Culture and Leadership by Ed Schein argues that the most powerful element of culture is the deep-rooted assumptions a group has about how the world works. These assumptions shape the group’s behavior in the way personality shapes the behavior of an individual person. While there are other aspects to culture that sometimes draw more attention, they are symptoms, and these beliefs are the root cause.
How do these assumptions come about? Groups form to accomplish specific goals. In the old days it was for food and safety, and now groups form and stick together for many reasons. Political organizations, religious organizations, businesses, and social groups — the shared purpose is their glue. As a group tries different ways to achieve that shared goal, they build assumptions about what works and what doesn’t.
When a group initially forms, the world-view of the early leaders have a huge impact. Most successful founders have strong world-views impose on their organization. If those underlying assumptions work, they become “the way things are done here.” Google was founded by engineering PhDs, and adopted elements like the value of debate, of learning, and advancing technology. Artifacts of this are the university campus vibe, the foosball tables, and 20% time, where devs theoretically can spend time on their own side projects. Adopting those artifacts doesn’t create Google culture — they are just symptoms of the underlying cultural assumptions. You could rip out the foosball tables and everything would be fine, but questioning the value of open debate would cause consternation and anxiety within the organization.
The magic of culture is that it tilts massive organizations toward making decisions with a similar set of assumptions that the founder would — even when members have never even spoken to that founder! This is true even after the founder for decades.
The downside of culture is that it calcifies. As the organization progresses towards its stated goal, it gets feedback on whether progress is being made towards it. The group culture starts out squishy, but as time passes and progress is made towards the goal the culture solidifies. As time passes, even when the culture starts working against the organizations purpose, it becomes harder to change.
The definition of culture as a group learning what works over time also helps explain the gap between how companies say they want to work and how they actually do. At Hewlett-Packard in the 90s, “the HP way” focused on low-ego team efforts, but ambitious engineers realized working independently and claiming credit was a faster way to get promoted. One company I worked at that claimed to be all about the user, but the efforts that were celebrated improved the company bottom line, even at the expense of user experience.
When this happens, the leaders of the company are not necessarily hypocrites. They often genuinely believe in the values they are professing. What happens is the feedback loop changes — what causes success for the organization isn’t what leaders wished it was. If doing things one way triggers positive feedback for the org, people within the culture will start to do more of it.
Businesses, at the end of the day, must make money to survive. That is their reason for being and it drives their incentive systems. Over time, businesses will optimize for their business model. This is poetically described as the invisible asymptote, a math term where a curve continually approaches a fixed line without ever touching it.
If the environment changes such that the culture impedes this, either the culture will bend or the business will break. The examples of behavior violating stated principles is not a recipe for success. This creates currents of dissonance that eventually flow into every aspect of the group, eroding cohesion and trust. Cultures and business models can be changed, there are increasing examples of companies pulling this off like Microsoft and Apple.
In summary, the essence of culture is a group’s assumptions on how they achieve their collective goal. It helps explain:
(1) Why culture-blind strategies can fail — people struggle to go against assumptions they may not even know they have.
(2) Why culture can be so hard to change — time calcifies assumptions even when they are no longer true.
(3) A major source of dissonance in groups — what people wish worked is differs from what actually works, and deep down groups reward those that ensure their survival.
Pretty solid real-world application for a textbook with a title as dry as Organizational Culture and Leadership. It also has great frameworks to analyze culture and change it I may touch on in the future.