Working closely with the human capital director, he set about developing a “market shaper” culture - an organisation perceived as driving the evolution of the sector - to stimulate more innovation and external orientation. At town halls with staff, he said he saw culture as a driver of transformation, and strengthening the corporate culture was one of his five Day One transformation initiatives, alongside reinforcing the core business, mastering efficiency, retuning the real estate development engine, and accelerating data-driven transformation.
The COVID-19 pandemic tested, but didn’t break, the strength of the connection Ismail was building between strategy and culture. It was straightforward to make the most urgent decisions, which were to preserve cash and to communicate more frequently with employees and stakeholders. Strategic decisions required more deliberation, given their complexity and materiality, and considering the uncertainty of the longer-term effects of the pandemic. Ismail also wanted to ensure that the steps he had taken to develop a culture that supported a mutually beneficial ecosystem with his tenants would survive. Freezing rents was a critical strategic decision that signaled this commitment. His efforts worked, and business at the mall bounced back in 2021 to beat pre-pandemic levels.
A fresh imperative to actLike Ismail, other leaders currently face making decisions about where they choose to play and how to win (their corporate strategy) as well as how to encourage their employees to make - and shape - that journey with them (their organisational culture) at a time of considerable change. Customers have moved further online, and competitors’ positions have shifted. Some, like the platforms, have strengthened; others have weakened or disappeared. At the same time, organisational cultures need to evolve to enable a new hybrid of virtual and physical working arrangements, and to recognise higher expectations of a better work–life balance.
In this context, it might be tempting to focus on developing strategy more than culture, or vice versa - the latter if you believe “culture eats strategy for breakfast,” a quote misattributed to Peter Drucker (it seems it was actually said by a hospital CEO). Focusing exclusively on either strategy or culture would be a mistake. A strategy that describes a “big picture” vision without specifying what it requires of the organisation’s culture is destined to fail, especially if it doesn’t build from existing strengths. Likewise, evolving a culture without recourse to a clear, compelling strategic direction risks wasting effort, if not disruption; improving engagement, well-being, and productivity helps only if you’re serving the needs of your current and future customers in a way that others can’t or won’t.
The goal should be to master the connectivity between strategy and culture. They both should be anchored by capabilities - the “key activities in which you must invest disproportionately and perform distinctively to underpin your theory of competitive advantage,” according to author and CEO advisor Roger Martin. Prioritising and investing in key capabilities must be supported by management systems and resources. In other words, the connection between strategy and culture has to be embedded in the management system and the allocation of resources, because together these support the decisions to invest in the critical few behaviours that disproportionately drive performance. Examples of capabilities include understanding customers (as in the case of Majid al Futtaim), partnering with suppliers, and building strong brands.
At the heart of this endeavor is an appreciation and incorporation of the perspectives, mindsets, and skill sets of others. Every organisation faces a unique set of challenges and context. There are strategic moments in an organisation’s journey that have a disproportionate impact on outcomes. Getting them right creates a multiplier effect on other activities as people learn new ways of working and increase their advocacy for the programme of work. Terence Mauri, founder of Hack Future Lab, a network of technology industry leaders, calls these “imprintable” moments. They include:
Strategy development. If you want your culture’s defining traits to be inclusivity, empowerment, and collaboration, the strategy process must reflect this desire. Opening up strategy development to participation, away from the typical top-down, closed approach, is a crucial act. It might involve running “dream sessions” in which employees envision the future of the company or contests designed to encourage participation and co-creation from customers, suppliers, and partners.
Negotiations with important third parties (such as suppliers, partners, and agencies). If you want to encourage more curiosity as a cultural trait, negotiations should involve sufficient time spent understanding the interests of the parties involved and exploring a range of options for mutual gain.
Recruitment of key talent. The messages imparted to recruits in the selection and onboarding process should reflect the strategic priorities (as communicated to the candidates), while the interviewers (and others involved) should demonstrate the desired traits and behaviours.
Critical conversations with employees. There are important moments with employees - if they are new to the organisation, underperforming, ambitious, or looking for a change in roles - in which it’s vital to discuss and clarify strategic priorities and expectations for performance and behaviour.
Crisis performance. In crisis situations, be honest about the scale of the problems, transparent about how long it will likely take to recover, clear about the actions you want people to take, and positive about opportunities ahead in line with the strategy. People remember the words and sentiments of leaders in times of crisis far more than in other moments.
Launch of new services, products, or experiences. A launch is one of the most high-profile actions in the eyes of customers, let alone employees. It should exemplify the strategic direction of the business and showcase the culture the organisation is looking to evolve.
Performance review. Creating the structures that incentivise performance in line with the organisation's strategy requires careful design, consultation, and implementation. Short-term, individualistic performance measures will rarely enable a strategy founded on collaboration.
Managing to focus on each of the imprintable moments individually should not be that difficult. Focusing on all of them consistently and coherently is much harder, yet it is critical if you want to embed new organisational norms and behaviours that support the strategic intent. Below are four actions that leaders need to take to help navigate that journey successfully.
Start in the right placeIdeally, you develop strategy and organisational culture together in a connected, integrated approach from the beginning. You experiment, learn, and iterate as you align your strategic direction with the behaviours that will help you get there. Indeed, in a recent online poll I conducted with 300 executives, 56% said that they used this approach; 30% said strategy came first.
Sometimes it is necessary to put more emphasis on one aspect before connecting the two. A toxic workplace, an ethical issue, or a poor relationship with a supplier may require paying immediate attention to culture, especially if important stakeholders, such as investors or regulators, express their concerns. This requires interrogating the causes, taking remedial action, dealing with the immediate impacts, and starting to build new ways of thinking and working. In this scenario, developing a new strategy might need to wait until there is sufficient cultural progress.
At other times, the strength of competitor activity (e.g., in launching new products or services, or in pursuing aggressive pricing policies) or the dynamics of customer behaviour may require a company to make strategic choices before working on the evolution of the culture.
If you’re taking on a leadership role, ask the following questions about your organisation’s context:
- Given what is happening in our business now, do we have the capacity to adopt an integrated approach?
- If we’re facing difficulties, to what extent do they relate to strategy or culture?
- What are the most important decisions we can make to fix the issue, or at least create some momentum?
- What are the implications of delaying work on strategy or culture, and how material are they?
Create a common languageThe work involved in developing strategy is often undertaken by people whose roles, backgrounds, and styles differ from those of the people involved in evolving culture. Typically, the HR team leads on culture, while the strategy or marketing team leads on strategy. And the teams work independently of each other, which results in a lack of coherence, a loss of ideas, and a reduction in buy-in.
To improve on this pattern, connect and combine specialists in culture and strategy, whether in an integrated team or in coordinated work streams. The strategy people should share emerging hypotheses, possibilities, and choices, while the culture people call out the strengths, limitations, and problems of the existing culture. They both should be complemented by what Jon Katzenbach of the Katzenbach Centre at Strategy&, PwC’s strategy consulting business, calls the authentic informal leaders (AILs) who champion the evolution of the culture, from their position of influence across the organisation. AILs also become trusted advisors in the strategy process, model future behaviours, and advocate for the strategy.
This is the approach used by Lindström Group, a leading European textiles rental company based in Finland, in the development of its 2025 strategy. The strategy team, led by Kati Järvi, worked with HR to enable both teams to renew their leadership principles, which played to the strengths of its culture (“we care”) and their aspirations for its development (“we dare”) in order to support the execution of their strategy.
Connecting strategy teams and HR teams is a good start, but it’s not enough. It’s necessary to create a common language for them to use, as advocated by Charles H. Kepner and Hirotsugu Iikubo in their book
Managing Beyond the Ordinary. Develop a glossary of terms and concepts that are integral to the approach. Start at the basics of what we mean by strategy and culture and move to specific terms, such as values, traits, and behaviours (in culture), and advantage, value proposition, business model, and capabilities (in strategy). Include terms that apply to both, such as weak signals of change, a term coined by Rita McGrath, a management professor at Columbia Business School. A weak signal of change is the first indicator of an emerging issue that may become significant in the future, whether outside the organisation (e.g., customer behaviours, regulatory interventions, technology developments) or inside (e.g., employee sentiment).
If you’re embarking on an effort to link strategy and culture, ask yourself:
- Who are the people we need to assemble to drive this work forward, and how well do they represent the skill sets, backgrounds, and constituents in the organisation?
- What are the most important terms and concepts, and have we defined and illustrated them?
- How much effort are we putting into upskilling people to master the frameworks we’ve selected to develop strategy and culture?
A version of this article appeared in the Spring 2022 issue of strategy+business.