Historically, the language of value creation has been solely associated with the results of a numerical exercise. For many of our growth-oriented Private Equity clients, there is an equally important focus on talent, people, and culture in anticipating the opportunity for value creation. Fundamentally, value is driven by the work done by individuals and teams with specific knowledge and talents – which is why having the right people, surrounded by the right culture, is critical for value-added growth.
Understanding Culture and Strategy
Culture and strategy are critically intertwined. Without the culture to support it, no strategy can truly be effective. When there’s a gap between the two, the instinct may be to try to change culture – but it can’t be changed rapidly, and, indeed, it might be the strategy that needs the shift. The key is to understand how the two are related, and how they can feed off of each other to lead to more success.
The Harvard Business Review expands this idea even further, with the idea of a “purpose-strategy-culture triangle.” Under this theory, culture lays the groundwork for an organization (and its people) to pursue its purpose and successfully implement strategy to that end. In turn, those cultural qualities and strategic choices can drive value creation at every level. Without a strong alignment of all these factors, value creation doesn’t happen; instead, goals tend to get mired down in frustrations that are costly in both financial and human terms.
None of that positive value creation can happen without the right people in place.
Cultural Fit vs. Cultural Change
Hiring often deals with ideas of a “cultural fit” – but is that always the best approach to drive success? A culture fit means someone will fit into your organization right now, as it is, but sometimes, a change-centric approach is necessary. This is particularly true when, in your discussions of strategy, you realize that your company’s culture is not fully aligned with your strategic goals.
In many cases, it may be helpful to do a careful evaluation to determine if you truly have the right culture for your goals. During this process, pay careful attention to the perceptions of employees as well as managers. It is quite common for managers to have a completely different or disconnected view of culture than the actual employees, which in turn often leads to a crisis of trust or even a full-fledged crisis of retention.
Typical evaluations might focus just on employee satisfaction, but the questions that are the most important go beyond that. Your analysis might look at factors like:
- How are priorities determined, and how is that communicated to everyone?
- What level of risk does your company encourage?
- Does your company encourage decision-by-consensus, individualism, or something in between?
- Is your company structured (both formally and informally) in a strict hierarchy, a “flat” structure, or something in between?
- How are conflicts resolved, both formally and informally?
- What processes are in place to gather and act upon input, both formally and informally?
Looking at the answers to these questions, in conjunction with the competencies needed to achieve the goal you’d like to set, can help determine if your culture is currently aligned with your goals.
When change is needed, a positive approach, rather than a negative one, can be particularly powerful. Rather than try to enact a top-down, large-scale culture change, researchers from PwC suggest that “leaders should identify elements of the existing culture that support the company’s strategy and are sources of pride, and magnify these elements.” Similarly, those leaders can approach the “problem spots” with the same, close-look approach, looking for specific elements and concrete steps to address them.
What kind of leader, then, is best suited for this kind of change? Looking for change agents in leadership recruitment can be a challenge, especially because it’s easy for leaders to get caught up in the idea of large-scale transformation. In reality, as one CEO told the Harvard Business Review, “The way you change behaviors is by changing behavior.” Leaders’ greatest power to influence culture comes from leading by example and by modeling the behaviors and cultural norms they hope to emphasize. Researchers from McKinsey, for instance, suggest a four-pronged approach to make lasting, effective change:
- Fostering understanding and conviction
- Reinforcing changes through formal mechanisms
- Developing talent and skills
- Role modeling
Ultimately, strong, creative, and responsive leadership can drive a positive culture, and, in turn, support a strategy that drives significant value creation. Culture truly matters– it’s all about putting the right people in the right place and fostering an environment that supports the achievement of business goals.
By Joshua Jones
About the Author
Joining the organization in early 2018, Joshua leads the executive search efforts for the Private Equity team. He is a recognized thought leader in the recruiting industry, quoted in the Wall Street Journal and other publications. Joshua’s 15+ years of business experience in both public and private companies, along with deep relationships within various Private Equity communities, provides clients the broad range of knowledge they need to find transformative leaders. Clients consider Joshua a trusted partner who takes the time to understand their organization and adds value beyond executive search engagements.