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  • Malcolm De Leo

The Case for the Cultural Side of Business





The best way to make this point is with a real story. I once worked for someone who drove the business from a spreadsheet. He took immense pride in dissecting the numbers a hundred ways of Sunday, studying the factors that drove those financial changes and taking action based on what the math said. And when I talked to him about the importance of relationships and how influence was often linked to loyalty, he would chuckle at me and condescendingly say, "Malcolm, the numbers don't lie...". And I would add to his statement by responding, "you are right, the numbers don't lie but they don't always tell the whole story." This is the simplest way to highlight the difference between the operational side of business and the cultural side of business.


Most of you will say that culture isn't as important to the bottom line as operational excellence but I don't agree. I would say they are both equally important because in a way they are the true yin and yang of business. So how do we define these two key business drivers?


The operational side of business is what 80% of folks focus on when trying to drive things forward. It is the firm belief that actions must have an ROI. It is making cold hard trade offs between resources that are used to achieve the strategic goals of the business. And really it can be summed by that moment when someone looks at you as they coldly do what's best for them and shrug their shoulders telling you, "It's just business!". I know this is a pretty rudimentary way to describe it, but the operational side of business is just business and profits that ensue from sound decision making.


The cultural side of business is the fuzzy front end that stands for the importance of people. It's about believing that companies don't innovate people do. It's about believing that it is your duty to have goodwill towards your customers if you want them to stick by you in troubled times. It is about believing that the goals of the individual when aligned with the enterprise create an exponential output because those individuals create greater output through their synergistic effort. And most importantly, its the harmony a team that appreciates is individual differences that can produce something special because of who came together to imagine the possibilities..


Why highlight the difference? Because when people talk about culture they often think of it a soft and silly. And yes, I use the word silly on purpose because the typical lip service to culture always makes way to the bottom line as soon as it's financially necessary. And what I am not saying is that people don't care about culture or the cultural side of the business, but I am saying it usually the ugly step cousin to operational excellence. The two are decoupled way too often. And worse yet, if the cultural side is merely the politics people play to achieve their operational goals then everyone is really screwed; which sadly is often the case.


Quantifying the cultural side with a simple example


as a rule of thumb, I like to think that everyone has 100 energy units to give to whatever they are doing. For example, if we are an anxious person we may live our lives spending 20 or even 30 energy units worrying about things that most people would say are a waste of time. A person who sadly suffers from this problem would be going out everyday working with only 70 energy units to get done what everyone else is achieving with a full 100 energy units. This means that person who is anxious all the time is only operating at 70% efficiency. It would be easy to be outperformed at almost anything if we only could operate at 70% vs. 100%.


And while this example is a slightly extreme one, we could also use the example of a person who broke up with a significant other and is very sad for 3 months. This person might use 50 percent of their energy being sad, angry and upset over the breakup. Eventually when they get over it, they get back to 100 percent effective, but for a period of time they are usually difficult to be around because they perseverate constantly about their issue. They become someone until they are back to 100 percent many people grow weary of dealing with.


So how does this play out in business. Ok...let's assume everyone at work has 100 energy units to give their job (of course with my previous two example we know this is probably not true because life happens). Now imagine if we define a perfect culture as all people in the organization are driving the business at 100 percent. The would be perfect execution (like ants) and the operational side of things should explode!


If I have.a team of 10 people working at 100 percent focus on the task at hand then this group would have 1000 total energy units to drive the bottom line. So what happens when person 1 and person 5 on this team don't like each other. Let's say they don't tell anyone for the sake of harmony and both of them waste 10 energy units loathing their team member. Now this team is working with 980 energy units or 98% effectiveness from the optimum state. We know when people don't get along so this isn't the case. Now lets say the person 1 and person 5 who are both close with person 3 start complaining to person 3 about the other. Now they each spend 30 minutes a day on this topic. That would equal an hour.a day that 2 people aren't working but complaining. That equals 8 hours a week equals 2% that 2 people are not working towards cultural harmony which reduces our efficiency down another 40 energy units so we are down to 940 or 94%.


We can keep going, but I will stop here because I think I am making my point. People are complex, distracted and difficult. If we don't as leaders recognize the importance of striving for greater synergy and cultural harmony between people, execution suffers and the operational side will fail. And to be clear, cultural harmony is impossible because it is those differences that often are the spark of great cultures, but to simplify the point we use the energy unit model to start to simply explain how the cultural side of business can't be ignored. A company that really understands the cultural side of business works hard to do the following things.


Admit that there is a cultural side of business


I think I have to just make this a point again, because it needs to be reiterated. The cultural side of driving the bottom line is real and if you can say that out loud you are on your way. Not much else to say but hey this is a real thing that doesn't get enough attention.


Drive the concept of diversity of thought


I once had the opportunity to be in charge of diversity in one of my roles. And cultural diversity is an absolute must for any organization. People must first and foremost respect each other's culture, gender, sexual orientation, backgrounds, ethnicities and all the terms that you can fit in here. To me it is a non-starter. That being said, the concept of diversity of thought is equally important. Diversity of thought is the premise that we all create, produce, interact and learn differently. And any good cultures will work to teach individuals about themselves and their peers and drive a culture that encourages people to embrace their strengths and respect/leverage their differences to create better execution and innovation. Full stop.


Make people responsible for being culturally accretive .


As a leader if you can say there is a cultural side of business, then you can make sure your people can say it to. But that isn't enough. People in your organization need to work to bring who they are to your culture. But they need to be culturally accretive by being self aware, open to differences and most importantly support others to make sure they can operate as close to 100 percent as they can. That means being supportive and understanding when your peers are struggling personally, it means being honest when they aren't performing, it means handling conflict early and often to drive better harmony and lastly it means make friends at work because I have found when people are friends first at work they trust each other more and fix their problems faster.


Embrace alignment between THE ME, THE WE and THE ENTERPRISE


I have written about this. When individual understand what the enterprise expects but also what is in it for them, they form a better we. Creating a clear alignment that the me's work better as we's for an enterprise that drives clarity for all then your cultural side of business can get going.


The cultural side of business is a bit abstract, but it really isn't. It is striving for aligning your human capital in a harmonious manner where they produce at incredibly high levels so they CAN drive the operational side/bottom line. The effort to make this idea more tangible is important because too many capitalists don't pay enough attention to this like my old boss who could't get out from behind his spread sheets. And frankly, people didn't like working for him because he was so mechanical, successful but at what price?



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