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COMPANIES THAT IGNORE THE CULTURE CHALLENGE WON'T SURVIVE

Restructuring and transforming the way work is done during a time of global uncertainty is the biggest challenge companies face today. The pandemic has expedited the cultural and workplace trends recently seen in the market. Firms face increasing internal and external pressures to fight systematic racism and discrimination must revisit how these business goals and priorities are aligned with their stated values.



I call this the Culture Challenge. Creating alignment between your company’s cultural values and norms starts with building self-awareness and feedback systems. Each of us instinctively knows when an organization or person is “walking the talk”. It’s never been more important to provide an environment of psychological safety.


Research indicates that stronger cultural norms that reinforce stated values are significantly associated with higher profitability and cultural values do not themselves guarantee a successful outcome.[i] Why is it then that firms often fall short?


Too often, firms miss the opportunity to institutionalize processes and structures that support psychological safety, as well as diversity and inclusion initiatives. Done properly, this will lead to innovation, increased performance, reduced errors, and a competitive advantage.[ii]


Additionally, firms can also focus on the intrinsic motivation provided by new processes and an effective culture. As Daniel Pink discusses, there is a mismatch between what science knows and what business does as it relates to motivation. By incorporating elements of his approach - increased autonomy, supported mastery and purpose/value alignment- into the structural DNA of the company, firms can support their employees and benefit from their increased performance.[iii]


Alongside the Culture Challenge, companies will face a significant challenge keeping up with the rapid change in technology and AI. Many challenges come up throughout various touchpoints of the business process. Everything from understanding the different applications for distinct parts of the business in order to carefully select the right ones- such as automating processes or optimizing feedback loops-, to staying on top of data privacy, regulations and ethical implications, to planning for and implementing the new technologies. With the increasing amount of consumer technologies in our spaces, the relationship we have with them will change as they become more embedded in our environment.


Empathetic technologies, for instance, which use an understanding of our internal state to decide how it will respond and make decisions, will engrain more emotion AI in the technologies we use every day.[iv] Emotions are powerful; they form our life experiences, filter what we remember and influence what we choose to do. As a result, anything that has the ability to shape our emotional state has the potential to offer significant benefits - but not without considerable risks.[v] Understanding how to weigh the pros and cons of implementing these technologies, as well as how to actually implement them will be a future challenge to consider.


As a further illustrative example, mergers and acquisitions are going to be a high growth strategy that many companies will leverage in the next 10 years. However, currently 60 to 90% of all M&As fail to create expected value. Culture is a dominant barrier to integration and value creation.[vi] Start-up M&A is growing rapidly, driven by the search for new technology, talent, capabilities and innovation.[vii] However, reports indicate 47% of key talent leaves within the first year, and 75% within the first three years.[viii]


The pressure of integrating more advanced technology systems with their associated complexities, combined with the high value leakage rate will pose as a further challenge for businesses in creating sustainable growth through M&A. Without addressing the Culture Challenge - improving feedback systems, D & I, and psychological safety - these companies are unlikely to succeed.


Corporations have an opportunity here: in order to capitalize on technological advances, such as forms of AI, without succumbing to its risks, firms need to take one step back to evaluate ways to restructure and transform the way work is done. This will best set up their foundational cultural strategies in order to take two steps forward and be ready for what will come in the next 10 years.


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[i] Graham, John, et al. “Corporate Culture: Evidence from the Field.” Mar. 2017.

[ii] Edmondson, Amy C. The Fearless Organization: Creating Psychological Safety in the Workplace for Learning, Innovation, and Growth. John Wiley & Sons, 2019.

[iii] Pink, Daniel H. DRIVE: the Surprising Truth about What Motivates Us. Canongate Books LTD, 2018.

[iv] Crum, Poppy. “Forbes Insights: AI That Understands Your Body Language.” Forbes, Forbes Magazine, 1 Mar. 2019

[v] Thompson, Nicholas. “When Tech Knows You Better Than You Know Yourself.” Wired, Conde Nast, 2018

[vi] Lewis, A, and D McKone. “So Many M&A Deals Fail Because Companies Overlook This Simple Strategy.” Harvard Business Review Digital Articles , 2016.

[vii]Krouskos, Steve. “How Can You Reshape Your Future before It Reshapes You?” EY UK, EY, 15 Apr. 2019

[viii] Steiner, Joshua, et al. 2018, Driving Transaction Value through Focus on Human Capital

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