Management guru Peter Drucker is most well-known for his maxim ‘culture eats strategy for breakfast’. The gist being that strategy without a compatible culture is doomed. This is not management consultancy snake oil: the evidence backs him up. Research by psychologists and management scholars increasingly finds a positive relationship between organizational culture and organizational effectiveness.
Culture acts as a brake on firm-level choices that can’t be regulated in advance, and as the world becomes increasingly characterised by volatility, complexity and uncertainty, culture will become more important.
Consider the implications and ethics of AI-led decision-making, and the challenges faced by regulators who cannot write rules for every foreseeable situation where AI is used. Instead, we rely on culture to provide the social control for guiding staff on how to respond to change, threats, or the absence of detailed rules for every situation. Equally, high level regulatory principles, like ‘Treating Customers Fairly’ only work if there is a healthy culture.
So culture matters. Firms and regulators get this. But this is not enough. Firms, and potentially regulators too, also need to be able to understand, diagnose and change cultures. As Peter Drucker says in his other famous maxim: ‘What gets measured, gets managed’.
If culture is so crucial, then it needs to be managed. If it needs to be managed, then it needs to be measured.
And there’s the rub.