The Impact of Culture on Creating Value

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Why is culture important?
Management gurus will tell you culture is important, because culture brings employees and partners in a company together through shared beliefs, traditions, and expectations and goals. The two basic types of culture are material culture, physical things produced by a society; and non-material culture, intangible objects produced by a society.

Culture can be one of Empowering, Innovation, Sales Culture, Customer-Centric Culture, and Culture of Leadership Excellence and of Safety. There are other types like a blame culture, blameless culture, a just culture and so on.

Value Creation and culture.
I want to talk about a Value Creation culture that avoids value destruction (like blaming each other or creating silos and not working together, not taking care of partners and customers etc.).

More importantly, the Business Roundtable announced in 2019 that the purpose of a company is to create value. Davos echoed this in 2020. Now many companies around the world want to create value for stakeholders. A great goal, but how are they going to do this? The word value has been used loosely in their vocabulary, and value creation (except in the form of profits) has not been a serious goal.

So, I repeat, how are they going to do this? One is to incorporate a culture of value creation:
1. Understand what value and Creating value means
2. Realise what stakeholders want as value
3. Learn to measure value for each of the stakeholders
4. Find ways of creating and delivering value and extracting a meaningful share. 

What we want is a culture to create stakeholder value, and specifically for employees, customers, partners, shareholders, nature and society, and measure these. Do we create more value for the stakeholders, or do they create more value for the companies? This is important. Generally, companies survive when stakeholders create more value for the company than the company does for them.

The culture of creating value has to start with the leader who builds a creating value eco-system. The amount of value the company creates for stakeholders (minus the value they destroy) is a measure of leadership.

Leaders and their companies must create more value than they extract. Creation must always go ahead of extraction. Creating Social and Environmental value and a reserve of social/environmental value is like banking cash for the future.

In this article I do not want to focus on how to create culture, but to get all of you to understand and establish a culture of value creation for which companies must have:

A Stakeholder culture that is a desire to create value for them
This requires a customer and a stakeholder strategy that then moulds and generates your corporate strategy.

Thus, if your shareholders prefer growing the existing business through various sub businesses, your corporate strategy should reflect that. If your customer strategy suggests affordability and risk averseness of customers, your corporate strategy must take that into account.

The stakeholder value creation thrust must come from the CEO.

Teaching employees and CXOs that the role of an executive is to create value and not just to perform a job. That is, your people must go beyond their jobs to create value. That value must be created consciously and not unconsciously. Focus also on reducing value destruction. Teach them how to create value. The chart below shows the relationship between value and culture and make the best value and culture happen.

This chart shows how value creation and culture must go hand in hand, and the culture must lead to value creation, otherwise the culture has not so great an impact. 

As always, I await your comments.

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