Gameplan: culture versus strategy
by Michael Della Fortuna and Tom McCaffery
Two industry professionals take a critical look at the levers of culture and strategy. They were instructed to examine the topic in debate style
Organizations work on change strategies in hopes of pushing their metrics and KPIs in the right direction, angling for year-over-year, quarter-over-quarter or even month-over-month growth. These strategies, regardless of how well they’re conceived, planned and rolled out, face one main obstacle: company culture. As Mark Fields, former CEO of Ford Motor Company, said, “Culture eats strategy for breakfast,” and it has a vicious appetite.
Tom McCaffery: The case for strategy
“Culture eats strategy” has become a powerful mantra for some leaders. While I cannot disagree that company culture is an incredibly important factor in manufacturing success, I can’t help but wonder if the focus on “culture” has become a distraction when manufacturing leaders attempt to understand why their strategy failed.
Manufacturing plants require complex processes, procedures and goals to create efficient operations that earn profit. This reads as a simple statement, but the strategy involved in getting process, procedures and goals to seamlessly deliver value for the customer is challenging, and it is only step one. Once managers have achieved basic value creation in plant operations, the C-suite then asks managers to deliver strategies that increase efficiency, reduce waste and enable employees to do more with less. Thus, the advent of continuous improvement and change management on the shop floor.
Continuous improvement and change management are supposed to be tools that create or capture new value, but are they culture crushers? The Association for Manufacturing Excellence (AME) states that more than 90 per cent of lean implementations fail, and 46 per cent of change initiatives fail, according to a Robert Half Management Resources survey. Is that because of culture or are we just really bad at developing process improvement strategy?
In my opinion the answer lies in weak strategy development that does not account for culture and behaviour change. AME states: “Successful lean implementations require significant and pervasive change…with constant reinforcement of the behavioural adjustments.” If manufacturing strategy simply focuses on implementation, KPIs or outputs without focusing on the people driving those results, then it is a strategy development failure. It is not the culture’s responsibility to account for itself. It seems to me that the “culture eats strategy” mantra allows managers to offload the results of poorly developed strategy onto the employees who were never taken into account when the strategy was developed.
Michael Della Fortuna: The case for culture
It’s not that we are poor at developing strategies, it’s that we typically do not develop them. We deploy them. Somehow it seems easier to apply what’s worked somewhere else than do the work needed to understand our own organizations and develop something specific for ourselves. We take “canned” theories and apply them to our organizations expecting to achieve the “advertised” results. We take best-in-class and industry-leading strategies and we apply them, sometimes blindly. Even if we take into consideration the environment and employees, the statistics are against us. As Tom noted, 46 per cent of change initiatives fail on execution, according to Robert Half Management Resources.
If the continuous improvement tools are best in class or industry leading, and are consistent from one application to another, what’s different? The application, the culture.
We take a strategy and layer it onto a culture. It’s not one size fits all. The culture needs to be considered, it should be reviewed and a strategy should be developed, which incorporates continuous improvement fundamentals. We need to learn how to “read” continuous improvement successes and determine what elements we need to take, and modify, and apply it to our specific organization’s cultures. But it’s not that simple; cultures are not static, they are constantly evolving in minute ways that can have a colossal impact.
The issue lies in the fact that an organization’s culture is the culmination of a variety of sub-cultures. Organizations have different departments and functions, with specific mandates and targets, they have staff from different educational, experience and cultural backgrounds and they may be located in different geographical regions. Is there any wonder why we have a 50/50 chance for success? If we get it right with one group, there’s just more on the table for another group to feast on.
If we are to implement continuous improvement and change initiatives, we have to implement our version at our unique cultural level. If we manage to have success within the smaller groups and can build to have wins across groups, all with an aligned theme, then we can build momentum and implement strategies across all cultures.
Success does not come from layering a winning strategy onto an organization’s culture but from how the fundamentals of that strategy are applicable to the various cultures within an organization.
In the end it’s not about strategy at all. It’s about the behaviour of a culture. The strategy is simply a mechanism to guide the culture and impact change.
Tom’s strategy response
Michael makes an excellent argument for culture. I agree that when firms take the canned approach to strategy, they fail. Perhaps the reason we rarely see Canadian manufacturing firms scale is because they do not develop and deploy unique strategies.
Without a strategic roadmap and, in the absence of information, people will create their own direction. Canadian companies may be comfortable with a lack of strategy, but the rest of the world employs a range of strategic C-suite and executive expertise with the intention of becoming sector leaders. So says a recent McKinsey report on strategy, which polled 350 senior strategists representing 25 industries from all parts of the globe. Are we behind the curve on strategy or has culture in Canadian manufacturing finally eaten the last bites of it?
If the manufacturing sector is to achieve a goal such as the one set by the Canadian Manufacturers & Exporters, of doubling manufacturing output by 2030, which requires a skilled workforce, increasing sales locally and internationally, advanced technology adoption, and new product development, I don’t see how a sole focus on culture will achieve this. To me, the culture change in manufacturing that needs to take place is embracing strategy and executing it the way our international competition does.
Michael’s culture comeback
I definitely agree with Tom that Canadian manufacturers need a strategy roadmap. There are many ways to get to where we want to go and a roadmap enables us to communicate the organization’s direction and anticipate other routes to get around bumps in the road. If we think of the roadmap as the manufacturing environment, then how we navigate the terrain and the transportation mode we select would be our strategy. In this scenario the culture is comprised of operators: material handlers, route planners, schedulers and delivery personnel.
If we are getting product to market, one could select a number of different strategies – rail, trucks, aircraft, drones… It may be easy enough to select a different strategy (transportation mode), move from ground to air but it only works if we have the right operators (culture). But train engineers don’t drive trucks and transport operators don’t fly planes. We might be able to use the same material handlers, route planners, schedulers (with some modification) but the delta for the delivery personnel is just too great. Each sub-culture needs to be considered for strategies to work.
Having worked in the manufacturing arena in both North America and Europe, one key factor that I noticed between the two manufacturing environments was the level of specialization. In North America we tend to have operators with larger scopes of work, a “do more with less mindset.” In Europe operators have a more defined work envelope. This means that when a change in strategy occurs in Europe, the group the change focuses on may be smaller and therefore easier to implement, enabling them to achieve faster change and faster scaling. The same changes in North America, with operators with larger scopes of work, require the change to impact more sub-cultures, therefore making the challenge more difficult and the scaling cycle longer.
As much as it is about the marketplace and strategy, I believe it’s more about focusing change on the right subset of the organization’s culture and building momentum to change the overall direction to meet the market needs, using a strategy that drives the metrics.
Michael Della Fortuna, CEO, Nexeya Canada, Woodbridge, Ont.
Tom McCaffery, Director, Manufacturing, Government of Alberta.
Gameplan is a series produced by CanadianManufacturing.com. Presented in point/counterpoint style, each feature examines issues and trends that affect the manufacturing industry, policy and processes.
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Rehana Begg, Editor, CanadianManufacturing.com