How Wall Street Should Define Culture

“Culture,” the new buzzword of the financial recovery, has transformed from an ethereal, abstract otherworldly word to a blunt instrument for finding fault on myriad qualitative matters affecting the organization. When an individual, merger, or organization fails, culture takes the blame. We use the word fairly arbitrarily, citing it to explain why things don’t change, won’t change, or can’t change. It’s that subtle yet powerful driver that leaders strive—often futilely—to influence.

No one seems to know what it means, what it looks like, what symptoms indicate it works, or how to measure it. The new rabbit that both leaders and regulators want to chase, culture jumps from one issue to another before it disappears down a hole, only to resurface with the problems it spawned while in hiding.

Organizational improvement starts with a new definition of culture: BAR, Beliefs, Actions, and Results. Beliefs reflect those perceptions that leaders consider “correct.” Over time, the group learns that certain beliefs, or values, work to reduce indecision and doubt in critical areas of the organization’s functioning—all leading to actions (decisions) and the results of those actions.

When leaders continually and constantly grapple with the tough questions and develop a list of standards that serves as more than a mouse pad, these beliefs serve as the bedrock of the organization’s strategy and provide guidelines about how and what to change and what everyone needs to learn in the process. Defining culture is only the first step, however. Measuring it offers more challenges.

Leaders can’t measure organizational culture the way we assess chlorine levels in a swimming pool, but if they start with a list of criteria for evaluating the environment around them, they move closer to controlling it. Notice these:

• An inability among senior leaders to articulate the organization’s strategy
• Excessive risk taking
• Fines and other adverse regulatory or legal events
• Financial losses
• “Workarounds” or other deviations from protocols
• Persistent customer complaints or the loss of key customers
• Turnover among high potential
• Resistance to innovation
• An inability to learn from mistakes
• A tolerance for code of conduct violations

Measuring things like how often people go to happy hour together or where they rank themselves and others on a happy-to-grumpy scale will provide no useful information.  Not one shred of evidence exists to indicate that happy employees act more ethically than unhappy ones, but theorists persist in measuring this and other interesting but irrelevant data.

Knowing what to look for and then making decisions to act on the information can turn things around, however. Success is about ideas—not style—and leadership is about tying those ideas to core beliefs, making the right decisions, and expecting dramatic results. Only when leaders understand this new paradigm will they be able to raise the BAR and initiate major strategic and tactical change programs that will position their organizations for success.