A 2022 Gallup survey revealed that employee engagement in the U.S. saw its first annual decline in a decade – dropping from 36% engaged employees in 2020 to 34% in 2021. This trend continued into early 2022, falling further to nearly 32%. The drop is significant, since employee engagement has been trending up in recent years. Engaged employees are involved in and usually enthusiastic about their work and workplace. Actively disengaged employees are disgruntled and disloyal because most of their workplace needs are unmet.
The relationship between Business Strategy and Company Culture
According to the findings of this Gallup survey, Organizational culture and values are critical to guide business decisions. The survey adds that employees need to see the intended culture and values lived out daily. Employees can see the organization’s values lived out through decisions, which builds trust in leadership.
That brings us to the question – What is the relationship between Business Strategy and Company Culture? We’ll start by delving into Business Strategy.
Business strategy – explained
Business Strategy provides direction to your organisation to meet its goals even as you prepare to face challenges from your business competitors, evolving customer preferences as well as market dynamics. It’s akin to a compass that will help you navigate through changing market realities. A good business strategy does more than just provide direction. It helps you assess your SWOT (Internal strengths and weaknesses as well as external opportunities and threats) – where you are today and where you want to be at a particular point of time. A good business strategy helps you improve your systems and processes as well as understand and leverage differentiating factors that make your organization unique. It helps you manage your teams better with clear communication.
Business strategy ensures you track your goals, keeping tabs of key performance indicators (KPIs) that will determine the progress and growth of your organisation. A well-defined business strategy helps you assess success and identify activities that fell short of your expectations or targets.
What is organizational culture
Organizational culture is the way in which people in an organization relate to each other, their work and the outside world, in comparison with other organizations. Your Organizational Culture shows how your organization works: how to things get done, the interactions between people, and employee relationships to their work and the outside world. The best organizations often place equal emphasis on strategy and culture. Such organizations create a culture that motivates their teams. Organizational Culture is what differentiates your business, so it is important to know the various factors that contribute to your company’s culture.
A business plan needs a healthy company culture to support it
Creating a formal business plan, however, is just the first step on the journey to achieving success. You need to establish a healthy company culture that supports your strategy and puts it into action. No plan can succeed without the participation and support of your team. After all, people are the strongest driving force behind great results from any plan So, how can you consciously gear your Organizational Culture towards supporting your overall business strategy? Why is it crucial for accomplishing great results to have the two aligned?
The relationship between Business Strategy and Company Culture
Many organizations make the mistake of separating strategy from culture. This is not ideal, since both strategy and culture impact each other. Business strategy tends to be left in the hands of top management given the perception that it is associated with rational decisions, logical actions and overall company direction. The Human Resources (HR) department or middle management is tasked with building culture. This can be counterproductive because middle-level managers and the HR team are often not involved with strategy discussions. They might not be able to design the matching culture that will best support the overall busines leading to misalignment across different departments of your organisation.
Organizational culture and business strategy go hand-in-hand. Company culture can’t be considered as a lower priority as it’s what gives the strategy momentum and action. While the strategy provides guidance, culture is what motivates everyone in your company to have the same purpose of driving the business forward.
A large group of German people or employees from a specific organization in comparison to a another similar-sized group from a US corporation can demonstrate differences in National Culture. However, the behaviour of this group of people would not represent German or American culture as a whole. In this case, it would be wrong to assume that the culture of their organization is identical to the dominant culture of their country. This is because it involves two different levels of society. The company would have a culture of some sort; this is what we call Organizational Culture.
How Organizational culture enables business strategy:
- Stimulates employee engagement, encouraging them to execute strategies with active participation
- Determines risk taking ability: Company culture determines how much risk your business can take – from investing in new technology and changing business processes to dealing with competitors and clients.
- Communicate expectations from employees: by developing a resilient company culture, you can easily communicate what’s required from employees in order to effectively adapt and deal with challenges.
- Greater participation from your teams: Company culture emphasises your organisation’s values to help every team implement your business strategy not only with excellence, but also with integrity, purpose and passion.
- Consistent quality: Organisational culture unites your workforce to deliver consistent quality work for all stakeholders.
Hofstede Insights can help you build an effective and sustainable organizational culture that complements your Business Strategy.
Reach out to us to discuss the challenges faced by your organization and practical steps to align your Culture and Strategy.