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A global survey of business leaders and employees by PWC in 2021 revealed that the pandemic has revealed that Organizational culture played a big part in lending companies a competitive edge during this challenging phase. At Hofstede Insights, we believe that leaders determine a great deal of what happens in an organization. This is particularly true while shaping the culture of an organization. Any significant change starts with the leadership walking the talk. This has a trickle-down effect on how any serious attempt at change is effective across the organization and through rank and file. We’ll start by defining Organizational Culture even before we outline the role of a company’s leadership in building an optimal culture.

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 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.

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Leadership across the world sees Organizational culture as a key component

In 2021 PWC surveyed 3,200 leaders and employees in over 40 countries. The overriding consensus is that a strong Organizational Culture drives better business outcomes. 69% of senior leadership surveyed credit much of their success during the pandemic to culture. More than two-thirds of respondents believe that a strong Organizational Culture helps change initiatives happen. Similarly, almost 70% who said that their organisations were able to adapt over the past year also reported that their culture has been a source of competitive advantage. Interestingly 67% of survey respondents said culture is more important than strategy or operations.

Leadership sets the tone

Leadership practices can be both positive and detrimental to the overall success of the organisation. When leaders walk the talk and align their actions with the strategic vision of the organisation, they will explicitly and implicitly encourage their employees to do the same. One great way to focus on this is to connect the organisational practices with the strategy. If leadership is able to show they are carrying out practices that align with the strategy, others will follow their lead.  If an organisation is looking to implement a more easy-going culture and wants to implement a less formal dress code, the management team should be the first group to take action. If they continue to wear formal suits, it might discourage the rest of the team from switching to the new dress code. While you might see grass roots change occasionally, most lasting change comes from the positions of leadership where change can be aligned with the overall vision of the organisation. It’s the leadership team that sets the organisational strategy and decides upon the Optimal Culture.

The two types of organisational transformation.

Indirect Change:

This sort of change occurs when modifications are made to current organization practices.  Changed organization practices ‘indirectly’ changes behaviour of people within the organization. These changes can be realized at various layers of the Culture ‘Onion’ below

A good example is change in Rewards & Sanctions systems. This promotes certain behaviours and discourages some others. This indirectly changes people’s behaviour and consequently changes the culture of the organization.

Direct Change:

Top leadership behaviour  plays a crucial role in shaping an organization’s culture.

While changing systems and processes indirectly changes behaviours of most people in an organization, top management behaviour change can only happen directly.  In other words leaders themselves need to ensure that they are ‘walking the talk’ i.e. their behaviour is in alignment with the behaviour that is required to build the “optimal Culture” they want to build. To measure this fit, we use a tool called Executive Match that provides detailed insights into how well a leader aligns with the Optimal Culture of the organisation according to their colleagues, subordinates and themselves. Hofstede Insights provides Executive Coaching services which have been found to be the most effective method to align top leadership behaviour .

Reach out to us to find out about how our programs and solutions can help in your company’s transformation journey.

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