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Culture & Profitability: Home at Last?

Posted on October 07, 2011 by: David White


Well the danger on the rocks is surely past
Still I remain tied to the mast
Could it be that I have found my home at last?
– Steely Dan

As a culture researcher and practitioner I was excited to read James Heskett’s interview HBS Working Knowledge, September 28) in support of his new book (Culture Cycle: How to Shape the Unseen Force that Transforms Performance). In it he renews claims of a link between profitability and culture, a question that has fueled leaders’ interest in organizational culture for over four decades. And so, like Ulysses invoked in Steely Dan lyric, could it be that, after a 40 year quest we finally are “home” on this great question?

On the basis of this interview, unfortunately, I think not.

Dr. Heskett continues to put forward a position that remains, regrettably, unsubstantiated in the culture literature, at least in academic disciplines also seriously concerned with organizational culture such as psychological anthropology and social psychology. The first is that culture is an object of normative control to be shaped and changed by CEOs through values, hiring practices and the like, much in the same way a CEO might shape brand strategy or the budgeting process. The second is that culture is shaped by founders. Oh that it were that simple! Unfortunately, there is little evidence in these literatures that culture responds in a linear and direct fashion to leader intervention. And there is even scarcer evidence that founder values are sustained, intact at least, in a culture beyond the first few years.

The problem concerns both definition and measurement. The definition problem  is the  same one that has vexed anthropologists for 100 years: what is culture? Is culture a variable to be changed, or a force to be reconciled in change? (for those interested, Joanne Martin wrote a useful book on this very problem, adding even more complexity  — and rigor – to this question).

Unfortunately, most management thinkers have not dodged the bullet: ‘culture research’ continues to posit reductionist definitions (culture is values, culture is norms, culture is attitudes, culture is employee behavior, etc.) and then put forward unassailable “proof” that variables like hiring practices, leader values, etc. will conclusively and indelibly shape that culture and, therefore, by simply pulling the culture lever all good things will follow. I suppose if you reduce culture to one variable and then “measure” it, you too could make a claim that you are changing culture.

Even if we accept Dr. Heskett’s definition of culture as ‘the way we do things around here’ – a contemporary working definition posited by many researchers and practitioners, myself
included – then there is also the measurement problem: culture researchers must  reasonably account for how they know what they claim to know. Culture variables such as dominant professional culture, dominant national/regional culture, task and regulatory environment, historical inflexions in firm history, market forces, multinational fiduciary structure, and other variables surely shape ‘how one does things’. Yet, what accounts for what?

Exactly. Isolate for me, please, the dependent and independent variables in that question.

Simply put, the culture problem is much more complex than much of the management literature would have us believe. Yet year after year management books continue to be published making claims to the contrary (which is why Stanford professors Jeffrey Pfeffer and Bob Sutton have led the so-called “evidence-based management” movement, arguing for more rigor and academic research and less intuition and gut in management).

I am not suggesting culture does not exist or shouldn’t be addressed by leaders and change agents. It should.

But it’s a question of what you privilege and how you privilege it. From our perspective, it starts with a culture definition that is less reductionist and more operational (i.e. culture is not just what people believe or say but what people – and organizations – do). From there it follows that culture interventions are less formulaic and more systemic and contextual. The most effective interventions will use the latest and most broad based inter-disciplinary thinking and evidence and tailor it to the needs of the organization in its environment. Meaning, the work of changing culture is multi-modal, all-encompassing, and sustained.

Which, of course, is exactly what many leaders don’t want to hear.

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