The Business Case for Leadership Diversity – and Corporate Culture

Two recent studies show that culture tends to be underestimated as a success factor in large companies and that the leadership style (of at least the CEO) should be different from the existing organisational culture. The combination of the findings reconfirms the business case for a need to tackle Diversity, Culture and Leadership in a comprehensive way.

Based on data collected from 119 CEOs and 337 top management team members in 119 organisations in the U.S. software and hardware industries, researchers found that CEOs who adopt a leadership style similar to that of the organisation’s culture have a negative impact on the firms’ performances. Instead, firms are most effective when the CEO‘s leadership style differs from the organisational culture. This is one more insight that contradicts wide-spread assumptions. The original research was published in The Journal of Applied Psychology, 2016, Vol. 101 (June), pp. 846-861.

Not all leadership differences add value

As most times, things are not as simple as the headline suggest. In the case of leadership, the researchers found that a leadership style that is oppositional or confrontational – in relation to the corporate culture – may well create resistance. Instead, the leadership style, even if it is different, should build upon the positive aspects of the existing culture and it should go well beyond it. Leaders, and above all, CEOs, should be able to understand what isn’t addressed in a culture due to existing values or invisible norms.

Corporate culture a proclaimed priority – but lagging in action

According to Deloitte’s Global Human Capital Trends, nearly 80 percent of Executives rate ‘employee experience’ very important (42 percent) or important (38 percent) – however, the numbers for most European countries are much lower. As an umbrella term and a holistic approach, ‘employee experience’ brings together workplace culture, HR and management practices as they all relate to what employees experience at work. Only 22 percent of the Executives reported that their companies were excellent at building a differentiated employee experience. At the same time, fifty-nine percent replied that they were not ready or only somewhat ready to address the employee experience challenge.

Where and how Corporate Culture is a success factor

Already in 2008, a German study showed that as much as one third of a company’s financial success depends on the corporate culture (IBCR 2016, p. 81). Other studies discussed the relevance of culture in strategic projects such as mergers, acquisitions or organisational change. Meanwhile, many internal analysis, mostly through employee surveys, show that not many companies have found ways to translate their proclaimed corporate cultural values – usually laid down in their corporate identity brochures or statements – into an everyday workplace experience. New approaches such as design thinking or thinking environments serve as an impetus to reconsider a focus on corporate culture – although it can sometimes be limited.

D&I as the missing link for Corporate Culture and Leadership Quality and Effectiveness

Work/Life balance was one of the first topics where the nexus of D&I and corporate culture had become obvious – and strong. It was argued that the corporate culture was the key success factor – or bottle neck – to allow work/life balance programmes or D&I tools to create value-add (cf. <German source> http://en.diversitymine.eu/worklife-ist-ein-kulturthema/)

In other contexts, D&I was found to be the perfect model to put established (or proclaimed) corporate values into practice: Considering D&I as a value-chain, we see the following elements

  • Workforce diversity serves as a basic resource and starting point
  • Open-mindedness, curiosity, tolerance or respect (values in the corporate culture) are necessary moderators to access the power or potential of differences
  • Inclusive behaviours and processes provide the practicalities (including time and space) required to execute the value-creation
  • Synergies show up as the desired outcome of well-managed differences.

In various publications (Barcelona, 2009; Paris, 2011; Cologne, 2013), this value-creation process was described as the Propelling Potential Principle or Propelling Performance Principle.

Leadership, on the other hand, is the mantra that comes back in almost every single study or publication about the value of differences. Also Deloitte’s current dossier requests one more time to enlist leadership support when addressing employee engagement in a holistic way. But leadership is needed in more places and in different ways beyond the mere support. A recent article claims that D&I cannot be delegated – leaders must understand

  • that and how they have to assume ownership
  • that and how they have to role-model Diversity, Openness and Inclusion.

Where does your D&I sit in relation to Employee Experience, Culture or Leadership?

While the employee experience paradigm (feedback, culture, workplace / employee support tools / work-life-navigation) is about to populate the HR arena, little awareness seems to exist how the new umbrella term could and should be related to performance management, development and hence D&I. In many companies, D&I continues to be tied much closer to

  • employer branding (‘D&I is part of what GenY expects from us’) or
  • personnel development (‘D&I is about meeting targets or at least move the needle’) or
  • CSR (‘D&I provides a framework to support disadvantaged groups’).

Needless to say that in these places, D&I finds it extremely difficult to contribute to the (wider, new) employee experience agenda or to be connected to leadership & culture (where it ‘all happens’).

Employee feedback as a way to measure D&I

A promising connection is likely to materialise in the area of employee feedback. For companies are increasingly interested in finding ways to measure the success of D&I in a more comprehensive way. This would encompass metrics that capture the open-mindedness of a culture and others that measure inclusiveness of processes or behaviours. The latter as well as the cultural component are already covered by some ‘old-school’ employee surveys which have a notorious shortage of room for D&I questions and a certain bulkiness that doesn’t help either. Both can be fixed by new pulse survey tools which could be seen as techy replacements. They allow more targeted, more frequents and more context-sensitive measurements.

More comprehensive success measurement of D&I will greatly contribute to overcoming deep-rooted resistance against (perceived) quota. More importantly, they will ensure – through more differentiated metrics – that the new KPIs drive more of the right behaviour (which was not always the case for single/isolated KPIs).

Sources:

Hartnell, Chad et. al (2016): Do similarities or differences between CEO leadership and organizational culture have a more positive effect on firm performance? A test of competing predictions.

http://psycnet.apa.org/?&fa=main.doiLanding&doi=10.1037/apl0000083

Deloitte 2017 Global Human Capital Trends: Rewriting the rules for the digital age