Organizational Culture and Business Performance

Written by Larry Fehd, CEO & Founder / HPS

Imagine your organization’s culture functioning similar to the operating system of your computer. The characteristics of your culture (operating system) significantly influence the performance and desired outcomes of your key business initiatives (software). If your operating system is functioning at less than optimal levels, it will impact human performance and bottom-line business results.

What does a high-performance culture look like?

Each year Fortune magazine publishes a much-anticipated article on “The 100 Best Companies to Work for in America.” The millennium edition described these 100 best companies’ unique characteristic in one word: culture. Not every company on the list had the same or even similar cultures. In fact, the cultures were quite different and varied from industry to industry. There was, however, a common theme among each of these 100 best companies’ cultures. That theme was effective leadership. The employees working for these companies said that they “felt respected and valued and their leadership demonstrated an interest in them personally and concern for their professional success.”

What is the relationship between culture and business performance?

John Kotter, distinguished author and Konosuke Matsushita Professor of Leadership at the Harvard Business School, published some very interesting findings in his and James Heskett’s best-selling book Corporate Culture and Performance. Kotter states,

“The primary function of leadership is to produce change, and if culture encourages that activity throughout the hierarchy, it will produce a great deal of risk-taking, initiative, communication, and motivation.”

Next month, we will feature an article on Customer Service/Loyalty and Competitive Advantage. Watch for this article and you’ll discover that culture plays an integral role in delivering the exceptional customer experience and represents yet another unique competitive business advantage.

If you read the article The HPS Mobile Enterprise™ in a previous issue, you will more fully appreciate the concept and inter relatedness of various components of the business enterprise. Like all other components, culture and customer service are inextricably linked. If you’re still not convinced, check out Leonard Berry’s and Neeli Bendapudi’s article, “Clueing in Customers,” in the February issue of the Harvard Business Review. These distinguished marketing professors conducted a five-month study at the Mayo Clinic whose culture and “walk-the-talk” (operating system and software) consistently demonstrated that “the needs of the patient come first.” The impact of the Mayo Clinic’s culture on productivity and bottom-line business results speak for themselves.

Organizations develop cultures because they are made up of and led by people. The culture of an organization reflects its beliefs and purpose. When a leader fails to evolve and align culture with business strategy, the organization will evolve a culture by default. A culture that does not align with business strategy and serve the needs of key stakeholders will struggle to achieve fullest potential and will only attain mediocre to average performance and business results at best.

Leadership has been described as the single most influential ingredient in creating a high-performance culture. History has long demonstrated that leaders characterized by arrogance, internal needs focus, and layers of bureaucracy undermine culture, organizational effectiveness, and business results.

Once a culture is formed it becomes hardened like granite, and changing it can be a lengthy and difficult proposition. Therefore, creating and sustaining a vibrant and robust culture should be a very deliberate process. Care should be taken when attempting to change a culture, as it can have dramatic impact— detrimental if not carefully planned and facilitated—on the long term viability of the business enterprise.

Excerpts from Tom Watson’s (former chairman of IBM) 1962 speech at Columbia University are still germane in the new millennium.  “The basic philosophy, spirit, and desire of an organization have far more to do with its relative achievements than do technological or economic resources, organizational structure, innovation, and timing. All these things weigh heavily on success. But they are, I think, transcended by how strongly the people in the organization believe in its basic precepts and how faithfully they carry them out.” These precepts comprised the operating system or culture of this organization more than forty years ago and are probably still true for IBM and most all organizations today.

Larry Fehd


Larry Fehd is CEO and founded Human Performance Strategies (HPS) in 2000 following a successful career with Johnson & Johnson where he led executive leadership, team and organizational development. He is masterful at helping clients to break through inertia and the status quo.  He conceived the new and proprietary concept of Invitational Leadership™. He envisions the future of leadership as a passage beyond inertia and status quo and works with clients to develop invitational leaders at all levels of the organization.  He consults to a diverse group of U.S. and international clientele, and speaks and writes about, building high-performance leaders, cultures, teams and organizations.

(512) 415-0748

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