If organization culture is so difficult to identify and influence, why do we bother with it at all? In this video, we'll discuss the three reasons why organization culture is critical for any leader. First, a strong culture can be a source of competitive advantage. Second, a strong culture can be an obstacle to organizational agility. Third, organizational culture is increasingly seen as a crucial control system for preventing unethical behavior and corporate scandals. Netflix is a good example of using organization culture as a source of competitive advantage. Its strategic success is directly related to its innovative, high-performance culture, which they've managed to maintain as the company has grown. Usually, the increased complexity that fast growth produces is dealt with by introducing more processes and procedures, or in other words, increased bureaucracy. Netflix was very aware that this could pose a threat to its culture and therefore, to its success. So they made a conscious decision to safeguard their culture by creating a manifesto. This document describes the behaviors Netflix likes to see in its employees based on its core philosophy, people over processes. This manifesto has become so renowned that it has been shared more than 18 million times. Please have a look at it yourself. I find it quite inspiring because it encourages its employees to imagine every person at Netflix as someone you respect and learn from. This focus on learning speaks to its innovative culture which Netflix combines with a high performance culture. This particular combination can be difficult to copy which is precisely why culture can be such an important source of competitive advantage. You may be able to copy particular assets or product features, but organizational culture is much more difficult to copy. The second reason why organizational culture is important is that it can be a hindrance to organizational change and agility. This is long been recognized in management research. It was the management guru, Peter Drucker, who coined the famous saying, "Culture eats strategy for breakfast." You can have the best strategy in the world, but if your organizational culture works against it, your strategy is doomed. Yet, recent research suggests that leadership teams don't really pay enough attention to organizational culture. An NGO study of 450 CEOs, CFOs, and board directors shows that only one in five believed they spend the right amount of time discussing culture, and 40 percent of board members believe they don't devote enough time or that culture simply isn't valued as a discussion topic at all. It's not surprising then that particularly when it comes to merges and acquisitions, the business landscape is littered with examples of post-merger integration failures due to culture clashes. The merger between Daimler and Chrysler comes to mind, for example. These two organizations were never integrated into anything that approached a cohesive whole, and the potential synergies that were used to justify the deal went unrealized because of a severe culture clash. Another example is the Air France, KLM merger. Although this merger was originally deemed a success, it has recently unraveled due to continuing culture differences. The French are accusing their KLM colleagues of only being concerned with money, and the Dutch considered the French too aloof to work with. Talk about a cultural stereotype. Finally, the third reason why organizational culture is so important is for preventing unethical behavior and corporate scandals. It used to be that whenever a corporate scandal erupted, people would quickly point to the so called bad apples. The individuals who just ignore the rules in favor of self-gain. For example, it was Nick Leeson alone who was blamed for bringing down the famous Barings Bank. It was Jerome Kerviel alone who was jailed for the loss of close to €50 billion through irresponsible and illegal trading at Societe Generale in France. Yes, the latter example of holding the board responsible for organizational culture is quite problematic. Because if management tends to find it difficult to influence culture, the board is even further removed from the coalface of the organization. From this position, can they really help instill a culture that will balance the pressure from maximum profit against corporate social responsibility? This is still very much an open question. To conclude, I've discussed three reasons why organizational culture is of critical importance to any leader. First, culture can be a source of competitive advantage that is difficult to copy, and therefore, more sustainable. Second, culture can be a hindrance to organizational change even if your strategy requires it. Third, culture can help prevent unethical behavior and corporate scandals.
