What's Culture Got to Do with It?

As it turns out, culture has a lot to do with how we operate. But how difficult is it to measure? In this episode of The Active Share, Hugo sits down with Dr. Tom Reader, an associate professor of organizational psychology at the London School of Economics, to discuss the broad role culture plays in all kinds of organizations; why great cultures are the defining feature of good companies; and how engaging with diverse perspectives can help foster meaningful cultural growth and innovation.

Comments are edited excerpts from our podcast, which you can listen to in full below.

Why did you decide to specialize in culture?

Reader: I’m interested in why institutions fail. And I’ve been interested in this for a long time. I grew up in Aberdeen, Scotland, which is the hub of the oil and gas industry in the United Kingdom.

There was a terrible disaster in the late 1980s involving an oil rig called Piper Alpha, which blew up and killed nearly 200 people.

The main issues were around culture, risk-taking, and lack of compliance, revealing much deeper patterns of thought and mindsets within the organization.

What you find when you study institutional failures and successes is that it’s key for organizations to navigate certain limits. Culture is a kind of explanatory factor in that.

I’ve always put culture under “It’s important, but it’s hard to measure, and it gets neglected out of difficulty.”

Reader: You can measure aspects of culture for sure. I think the issue boils down to: Are you interested in the culture on average?

For example, do people think they can raise a concern in the organization? That’s an example of an “on average” type of culture and you could run a survey to measure that.

You can also measure the extremes. Where are the problems? Where are the best practices? This isn’t revealed by a survey, but rather behavioral, finite data.

One of the complicated things around measuring culture is we talk about culture as if it’s a homogenous property of an organization. If you go into any bank, for instance, you’ll have financial traders and the compliance department. While they all have shared culture, they also have different outlooks.

A great culture can make a winning company, but a company with a bad culture isn’t going to survive. Is that a fair assessment from your research?

Reader: Good companies do need great cultures. I think the issue is with organizational culture. It’s like all things you build—it takes a long time to build a great organizational culture.

You might think of that as being adaptive, innovative. But what you find is cultures fall away very quickly, and it doesn’t take very much to disrupt them.

There’s some excellent research showing that organizations, sometimes with the best cultures, can become complacent in what they do, and that’s part of the problem, too.

Can cultures survive bad leaders?

Reader: It’s a great question. Organizations can survive bad leaders, but it's not a given.

Leaders are a huge influence on culture. If you have a bad leader in place for a long time, it’s important to remember that there’s not one culture that leads to organizational success. The culture an organization requires is very much based on the outcome it wants.

It’s also important to think about how leadership aligns with where the organization culturally needs to be. And that’s not the same for all organizations. It varies across industries. The culture of a bank is going to be different than the culture of a nuclear power plant.

How would you begin an investigation into a company’s culture?

Reader: First, I’d be interested if the organization documents things that go wrong, if it tries to learn from its mistakes, and if it does this in a systematic, methodical way.

I probably wouldn’t conduct a survey or interviews, but I would try to get a handle on the issues inside of the organization.

The culture an organization requires is very much based on the outcome it wants.

I would then speak to those at the top to find out if they have any clue about what’s going on at the operational level. As a psychologist, I’m interested in a shared understanding between leadership and operations because this is where problems arise—when operations and leadership become slightly unhinged from one another.

I’m also interested in if problems are caught. I’ll give you a quick example. We do a lot of work in healthcare and look at hospitals that are experiencing problems.

What you tend to find is hospitals that experience problems are bad at documenting problems. So, a great place to find out about the culture of a hospital is to speak to the patients and families or gather complaints.

If you think about culture in that sense, there are many ways that you can approach it. In a great culture, you ask the people inside the culture, and they’ll probably tell you it’s great. But if you’re trying to pick up on problems, you go somewhere else.

How many companies have issues with culture? You mentioned an insularity issue. Is that linked to groupthink or a lack of diversity?

Reader: With insularity, you can have groupthink, where everybody agrees on a situation, and no one is willing to challenge it. You get that in an organization that’s experiencing problems.

But how do you know if your organization is good or bad at something? Well, you usually need feedback from somebody else. Diversity comes from an outside perspective, and that can be somebody who’s different to the organization.

The funny thing is that in a strong culture, organizations tend to recruit people who subscribe to the values and norms of the organization wherever they’re from.

But when you’re encountering a problem, you need somebody who will do something differently, somebody who doesn’t subscribe to the culture and can see the problems in it.

And this goes all the way down to recruitment and retention and how you promote people because you’re trying to prevent groupthink.

This is what I find when I investigate institutional failures. It’s often what we call drift.

Is a core underpinning of culture just excellence? If a company does things well with good people, that excellence can drive culture.

Reader: There’s certainly a glow that comes from excellence, and it can lead to a great culture.

This is also fundamental in psychology—when things go well, we attribute it to a quality associated with us. But when things don’t go well, we attribute it to an external quality. That’s true of individuals, teams, and institutions.

I think one of the misnomers with organizational culture is that it’s sometimes seen as people being fair or nice to each other.

This is where problems arise—when operations and leadership become slightly unhinged from one another.

But sometimes the best organizational cultures are when people can communicate unvarnished pieces of information that reveal the truth, whether that’s about how something should or shouldn’t be done.

I think whenever you find an excellent culture, whether it’s before or after a successful event, it’s a sort of truth-telling aspect of the organization, where problems can be revealed.

I hear people talk about psychological safety or speaking up to capture that aspect of culture. Even in a team where people dislike each other, if you have an understanding that people will speak up and report problems, you still have a good culture.

How much should corporate culture reflect changes in societal culture? Or do corporations influence the culture of the broader society?

Reader: That question is a big debate within the culture literature. My own view is that an organization needs its culture to ensure that it’s good at doing what it’s supposed to do.

I think organizations need to engage with the issues of society. Take something like climate, and the degree to which organizations prioritize sustainability even when it counters other goals.

But some organizations become waylaid and take their eye off the ball.

Look at the oil and gas industry right now. A lot of oil and gas companies are trying to focus on sustainability. But there’s also this reality that they are oil and gas companies, and that’s what they do. They produce hydrocarbons, and so, they have this balancing act to achieve.

I think organizations must focus on what their core is and try and do it well. And if you can achieve broader social goals, that’s great.

Do corporate cultures drive society? I’m not sure. But where organizations can shape culture is through their innovations. A company like Apple has shaped the culture of our society, not through their mission statement on their websites, but through the products they create.

I think that’s where organizations and their innovative cultures can shape society.

What is an innovative culture?

Reader: One of the research observations we had at the London School of Economics is that companies that have problems with innovation often talk about how innovative they are. Because when you’re innovative, you’re not thinking about innovation.

The key observation of innovation is it’s going to fail. Most innovations fail. And the moment you start making innovation a high stakes thing—"You have to innovate in order to achieve”—you make it difficult because it involves a loosening of the mind and an exploration of possibilities and irrelevancies.

It’s a brainstorming exercise, with lots of blind alleys that you go down. An organization must understand that things could fail.

The best organizational cultures are when people can communicate unvarnished pieces of information that reveal the truth.

Another observation of innovation, perhaps a little bit detached from culture, is about the process of applying innovation. Usually, in the application part, an innovation comes undone.

Some organizations try and mesh these things together too much. It can constrain thinking. You then start working within the practical constraints of the problem you were trying to address, stymieing innovation by asking people to think about how their innovation is going to be applied too soon.

Many of the great innovations of society were accidents. They were coincidental moments that somebody saw the value of.

Innovation is also very social; we think of it as an individual or a team coming up with ideas.

But it’s bigger than that. It’s coming up with ideas, and then others seeing the value of how to use them. But because corporations can become very focused on a spreadsheet approach to innovation, they won’t see the outcomes they want to.

That won’t lead to great innovations. That will lead to great spreadsheets.

Are many people coming to you saying, “Help us understand our culture?”

Reader: There’s a genuine recognition within organizations in many fields of how important culture is. One of the challenges that organizations have is understanding their culture, but many also recognize that an annual employee engagement survey is not a good measure of culture.

That’s just a measure of how satisfied people are in their job. Twenty to thirty years ago, organizations didn’t have much data around their culture. It was somebody walking around and trying to get a feel of the place.

In a great culture, you ask the people inside the culture, and they’ll probably tell you it’s great. But if you’re trying to pick up on problems, you go somewhere else.

Now, organizations are inundated with possible cultural data. It could be feedback from customers, employee discussions on social media channels, the qualitative parts of surveys, whistleblowing or incident reporting, and what people say on Google.

Culture, especially when there are problems, spills out in lots of different places. What we find is organizations want to know what their culture is like so that they can address problems, but also because the culture itself is becoming transparent. And this has many ramifications around recruiting people or engaging with regulators.

Measuring culture becomes a driver for culture itself; you see where you need to improve. And one of the aspects that I find interesting is that a lot of this data is textual data—people writing about organizations, customers, and employees.

Some of this unstructured textual and behavioral data is interesting because you see there are important aspects of culture that you never really thought about, and they haven’t resonated with management.

Take, for example, problems around change. That often isn’t in a survey, but it’s what people are talking about in an organization. I think an unearthing of problems and strengths is what a lot of organizations want in their culture analysis.