Research Shows That CEOs Should Not Adhere To Company Culture

Several companies claim that they want to adhere to a specific kind of company culture.

Wikipedia defines company culture as encompassing “values and behaviors that contribute to the unique social and psychological environment of an organization”.

Investopedia defines company culture as, “the beliefs and behaviors that determine how a company’s employees and management interact and handle outside business transactions.”

As has been uniquely stated many a time, the term ‘company culture’ or ‘corporate culture’ is an implication and not a definition. It is used to define a value or set of values or standards that employees set for the company overtime.

However, this definition may not be perfectly accurate.

Small organizations have a culture too. Organizations with few employees or one employee have a culture too. Even companies with no employees have their own culture. This culture is defined by the owners when the firm was first conceived as an idea.

Firm owners thus set out a set of values, visions and future plans for their firm. In retrospect, employees who fulfill the criterion of the culture defined by their employers are integrated into the workforce and those who do not fulfill the specified standard are weeded out or not even considered for the job in the very first place.

Have you not heard of situations where employees were rejected for a job post on the basis of being under-qualified? Similarly, an employee may be rejected for being over-qualified. This proves beyond the shadow of a doubt that qualifications have to be in line with the company’s culture for you to assimilate into the system.

Nonetheless, although employees don’t bring culture, they surely determine the future of the firm and are crucial to the success of any firm.

Therefore, we have founders who determine the corporate culture, employees who carry forward the culture. And CEOs who…?

CEOs?

Where does this leave the CEOs and other individuals holding high managerial posts?

With the conclusion and comparison that have been drawn above, it would seem that a CEO would do well in a decision focused environment while a leader dealing with human relationships would do well in a people focused environment.

A study by Chad Hartnell and his team (Journal of Applied Psychology), tries to answer these very questions. Does a firm perform better when the values held by the CEO are in line with the corporate culture of the firm or does it do well when they are contrary to the corporate culture?

An article by The British Psychological Society Research Digest sums up the findings of Journal of Applied Psychology in the following way:

“Chad Hartnell and his colleagues surveyed the management of firms within a technology consortium, asking members of 120 management teams to rate their CEOs on task leadership (e.g. “encourages the use of uniform policies”) and relational leadership (“is friendly and approachable”), and to rate their organisation’s culture on these same task and relation dimensions. The researchers wanted to find out which combinations of leadership and culture would, nine months later, show the greatest benefit in a tangible outcome: firm finances.

The data drew a gloomy picture for alignment. For relationship focus, mismatches were always better. Firms with a strong relational culture performed better when led by a leader with a low relational focus, and highly relational leaders were associated with stronger results when they operated in a culture with lower concern with relations. A similar picture emerged for task focus, where a combination of a high-focus culture and leader was the worst one possible. These associations held true even after controlling for past performance, CEO tenure and size of the firm.”

(Source: The British Psychological Study Research Digest)

Why and how does this occur? Why is the productivity of the CEO lower when his goals are in alignment with the corporate culture?

This is simply because he brings nothing new to the table. The work culture is already attuned to what he believes in; therefore, the overall impact on the team is nullified.

Meanwhile, a CEO who innovates would find that his goals with respect to the company are disjoint. But the overall effect is an increase in firm finances.

According to Business research outsourcing firm Market Quotient, this should not suggest that unreasonable or perverse individuals would make a perfect fit for the organization. No they wouldn’t. But to solidify the fact that leaders cannot stick to one culture.

Leaders could and should be flexible to change and should bring something new to the table at any given point.


Sources:

1. Wikipedia

2. Investopedia

3. The British Psychological Society Research Digest

4. Journal of Applied Psychology

 

 

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