Corporate Culture or Strategy: Which Matters the Most?

Corporate Culture! I so love this topic! Is it really an “either or” situation? Is corporate culture more important than strategy? Or is it the opposite?

Numerous people have written blogs and articles about this topic over the recent months, including Faun deHenry, someone I respect and follow. Here is Faun’s post from 2012 that I like to share regularly.

“Culture Eats Strategy for Breakfast” has been thrown around daily by many people. However, Peter Drucker originally made this statement and discussed organizational culture’s ability to impact strategy in the context of discouraging leaders and managers from making radical changes to their corporate culture or implementing strategies that were inconsistent with their existing culture.

Jack Welch said after his experience with GE’s acquisition of Kidder Peabody, “Culture matters!”

In 2003 a group of researchers at Harvard Business School completed a ten year study examining management practices at 160 organizations. They found that culture can enhance or prove detrimental to corporate performance. Organizations with strong performance-oriented cultures witnessed far better financials growth.

We know that strategy matters as well. Companies with good strategies prosper. Those without good strategies perform poorly or, at worst, close their doors.

Bob Frisch in his article “Culture Vs. Strategy is a False Choice” mentions several companies with winning strategies and corporate cultures — Southwest Airlines and Zappos. He also includes companies that are known as strong performers without superior corporate cultures — McDonald’s and Walmart.

However, what about having a strong corporate culture as part of your business strategy? During a recent Twitter conversation Fred Cuellar (@fredcuellar) suggested this to me in one of his tweets. “My money is on culture as a strategy! Environment regulates behavior!”

Leslie Bradshaw, President, COO, and Co-founder for JESS3 said it best in her video for 30 Second MBA as she describes the importance of culture for her organization.

“…Culture is actually the fiber that brings us all together so that we can execute against the strategy once we have it.”

Fred and Leslie are on the right track and it’s similar to an approach that was used by Ken Olsen in building DEC (Digital Equipment Corporation). The company’s strong innovation culture helped propel it to stellar heights during the 60’s, 70’s, and part of the 80’s.

It was also the same culture that, when the technology arena changed, prevented the organization from adopting a successful strategy that would allow it to compete effectively in the new technology marketplace.

DEC’s strong corporate culture “ate” every new idea, proposal, and strategy that didn’t fit its existing paradigm. The result: DEC went into a downward spiral and was acquired by Compaq, which was acquired by Hewlett Packard.

The relationship between corporate culture and strategy goes further and deeper than most corporate leaders imagine. Not only that, but in volatile markets, the connectedness between these two can be fraught with complications.

If your organization is an incumbent in an industry that has a disruptive newcomer, adaptability becomes paramount. Yet, strong corporate cultures are typically less adaptable. To use Edgar Schein’s analogy, strong corporate cultures possess antibodies that protect them from “foreign” ideas or proposals. Therefore, it is critical that leaders heed Drucker’s warning and remember the lesson of DEC as they attempt to change a corporate culture so that it can function harmoniously with a new strategy.

Culture and strategy must fit and work together to move an organization’s performance forward. Without harmony between culture and strategy, the organization suffers and, eventually, dies.

Posted by Faun deHenry at 13 March 2012, 2:25 PM
Categories: Change:organizational change


Katharine Halpin founded The Halpin Companies in 1995 to fill a void she saw everyday in her CPA career.  Everyone was focused solely on the financial and legal aspects of transitions and transactions and Katharine knew this was just not right.  She is passionate about making mergers, acquisitions and c-suite transitions be opportunities to grow shareholder value.

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