The Journal The Authority on Global Business in Japan

Renowned management consultant Peter Drucker coined the phrase “culture eats strategy,” and Grant Thornton International recently explored why this now famous statement has become accepted business wisdom.

There are many examples of corporate cultures that have failed the test of time, often as the result of a relentless quest for growth. US energy company Enron Corporation set the benchmark in the early 2000s with its large-scale corporate fraud and corruption. More recent examples are ridesharing service Uber Technologies Inc., with its core value ‘always be hustlin,’ and Whole Foods Market Inc., the US supermarket chain that specializes in organic products. The latter reportedly lost 14 million customers over 18 months before being bought by Amazon.com, Inc. in August 2017.

The common theme is the failure of corporate culture and governance practices to keep the organization on the straight and narrow. In each case, there’s no doubt that culture was instru­mental in the company’s growth strategy, but also its misfortunes.

Insights from our International Business Report tell us that boards are taking steps to get a firmer grip on their corporate culture. For example, 50 percent of the boards globally have culture as a standing item on their agenda and 71 percent are establishing internal controls that address culture and employee behavior. As Kim Schmidt, global leader of people and culture at Grant Thornton International, noted: “Culture has to be a key focus for the CEO, their senior executive team, and the board, because it has a direct impact on organizational performance and its ability to execute the organization’s strategy.” Whether for breakfast or lunch, it’s clear that culture eats strategy.

LEARNING FROM MISTAKES
A common misconception that emerges as companies grow larger is that anything to do with culture is “soft and fluffy” and can only get in the way of driving action and results. In fact, the opposite is true. Creating a great place to work isn’t simple, but it’s worth the effort. When achieved, such a workplace boosts motivation levels and talent retention, and makes the organization stand out in the recruitment market.

Another mistake that often comes with growth is that responsibility for culture tends to rest with the human resources (HR) director. Well-known British entre­pr­­eneur Sir John Timpson believes employment laws and HR depart­ments haven’t done much to help employees enjoy their work. “A people policy founded on a caring culture is much more likely to look after individual colleagues than processes driven by a company rule book. And, if you treat people well, it is blindingly obvious that they will do a good job.”

STUCK IN THE MIDDLE?
As with many organizations, the biggest barrier Timpson faced in transforming the culture of his own organization was middle management. “They were reluctant to delegate and were worried about their jobs,” he said. “So it took time for them to realize they had a different but more interesting role in planning the future, picking the team, and giving them support.”

According to Sir Win Bischoff, chairman of the Financial Reporting Council Limited, an independent regulator in the United Kingdom that sets the UK’s corporate governance and stewardship codes: “Culture change is more easily achievable at the top and bottom, through a hiring and induction process, but there is a vast and important middle level you have to convince. To change culture, you almost need to have a disaster for that big middle group to want to change.” The junior team always looks up to the immediate middle management and then to the next level. So, it’s important for the middle management to be aligned.


 

Toru Shirai is audit partner at the Tokyo office of Grant Thornton Japan, where he provides assurance services to multinational companies. He began his career as a certified public accountant in 2001. When Shirai was seconded to Grant Thornton’s Chicago office for three years (2012–2015), he also supported cross-border business expansion. He has 17 years of experience in public accounting and specializes in ICT and manufacturing.

For more information, please contact your Grant Thornton representative at +81 (0)3 5770 8829 or email me at toru.shirai@jp.gt.com.

www.grantthornton.jp/en

Toru Shirai is audit partner at the Tokyo office of Grant Thornton Japan
The common theme is the failure of corporate culture and governance practices to keep the organization on the straight and narrow.