January 31, 2018

How culture eats strategy in the social sector

Richard Spencer explores the importance of healthy culture in creating an effective for-purpose organisation and what it takes to create and maintain that culture.

Management consultant Peter Drucker coined the phrase ‘Culture eats strategy for breakfast’. Here we explore how this plays out in the social sector. Why is workplace culture so important and how can you deliberately build a healthy workplace culture?

Richard Spencer who recently stepped down from SVA’s board shares what he has learned in his years working in both the for-profit world and the social sector.

Richard began his career as a lawyer with Clayton Utz in Sydney, and then joined Rio Tinto as general counsel in its head office in London. At the end of the 80s, he switched to the non-profit sector, working with UNICEF in Australia then in Brazil, then as President and CEO with AFS Intercultural Programs in New York. Since 1998, he has worked as CEO for Cerebral Palsy Alliance and the Benevolent Society. In 2016, he was appointed a Commissioner with the Productivity Commission, where he has worked on the inquiry into Human Services and NDIS.

Why is culture important?

Susan Metcalf: As we think about culture in this sector, why is it important? What should we be thinking about around culture and how it links to strategy and success in the sector?

Richard Spencer
Richard Spencer: As a leader you’ve got to have a good sense of who you are and what your values are.

Richard Spencer: I first experienced a great culture with Rio Tinto in the UK because it took a lot of those issues seriously. That informed much of the work that I’ve done in the non-profit sector.

Overwhelmingly, I start from an assumption that most people are in a role to make a difference, and that matters at a profound level. It’s not often talked about; we don’t get explicit about what matters to us.

In Norman Drummond’s book, The Spirit of Success, he asks three great questions: Who are you, why are you living and working in the way that you are, and what you may yet become?

Use that anywhere with a group of people, and there’s a profoundly different conversation taking place. Ultimately, that does connect with the organisation’s capability to do what it is there to do, and do it as well as it can

How do you align the individual values – the why that each person is there – with what you want to achieve as an organisation, and the organisational culture?

One of the key responsibilities of leadership is to be thoughtful about who this organisation is, what this organisation is there to do, and what are the values that underpin that. It’s also to engage with the stakeholders: your staff, governance boards, and other stakeholders about what that means. Those conversations, in my experience, are important – to work out what matters to us. Then as a leader be thoughtful and explicit about how to bring those values to life in the organisation.

The first thing most people look for is whether the leader actually leads with those values?

As a leader you’ve got to have a good sense of who you are and what your values are. Then you need to engage with people and be clear both about the values you bring to the table, but also what they bring. It’s not a matter of imposing, but of discussing, exploring, and agreeing on what matters, and then asking, ‘how are we going to build that into the culture of the organisation over time?’

The first thing most people look for is whether the leader actually leads with those values? People are very good at working out when you are playing a role. So one of the initial challenges of leadership is identifying what are you comfortable with? Your values and the style you bring need to be explicit, and people need to experience consistency. People sniff inconsistency immediately. And that unravels trust and confidence about who we are, what we are part of, and what we’re trying to do.

Can you give us some examples of where you’ve seen that leadership play out strongly at a cultural level, and how it’s helped support that organisation achieve what it wants to achieve?

One example is the time I spent in New York with the 60-nation network, AFS Intercultural Programs which was volunteer-driven. There were about 300 staff in 60 offices around the world, but upwards of about 80,000 volunteers. It was the early days of student exchange, when it wasn’t the business model it has become.

… why should we expect that of others when we seem to be struggling with it ourselves?

We were grappling with working together across all of those cultures and languages. You select a young person in country A, you prepare them, they go to country B where they have the experience with a host family and the school. Then they are reintroduced back into their own culture. All of this demands consistent and integrated thinking and practise across all of those organisations.

When I started, a lot of people were pointing at each other saying ‘It’s your fault. This has gone wrong.’ So we had to blow the whistle and say ‘Hang on, we’re an organisation that says there will be a more peaceful and harmonious world if we all walk together, talk together. We’re not doing that. And why should we expect that of others when we seem to be struggling with it ourselves?’

The two major initiatives were to bring the 100 key volunteer and staff leaders together once a year. A big expense which had many people saying ‘You can’t justify that.’ My view was that we cannot afford not to do it, because the personal interaction and discussing of ideas and differences was important to get cohesion. Secondly, you had to get smart about what’s myth and what’s misunderstandings? What is really going on here?

We worked very closely with an outstanding Swiss consultant to put together a survey, where we could critique and explore each others’ performance. Why are we seeing the world differently? And if things have gone wrong, why and what do we do about that?

In a 60-country network, there was no shortage of cultural differences. So we had to find where’s the common humanity? Where do we work together across those differences and find the common ground? That’s always work in progress, and it plays out in every organisation, but it’s one of the fundamental responsibilities of leadership.

You need that reflective space. Talkers love that space, but the doers can get irritated and frustrated with it.

It sounds like you’re saying that it’s important to get very clear about culture, and to be very explicit about your expectations around culture?

Yes and to invite people to that discussion around the table. One of the dynamics in organisations is the tension between the talkers and the doers. You need both. You need a variety of different personalities and perspectives.

You need that reflective space. Talkers love that space, but the doers can get irritated and frustrated with it. But you’ve got to hold people in a space of ‘we all need to understand what’s behind those words’.

When you list values in an organisation, people will use words like respect and integrity. If you probe and get considered thoughts about what that means, that indicates an organisation that has explored this space, and has a shared commitment to what it means.

Sometimes, the conversation is almost more important than the words you end up with – to have that agreement.

‘You cannot do anything in a prison unless the inmates agree to it.’

And having become clear about what you’re expecting culturally, how do you link that to strategy and performance?

A friend of mine was the Deputy Director of one of the state prison systems. You’d think prison would be somewhere that you can tell people what to do and they have to do it, but he said ‘You cannot do anything in a prison unless the inmates agree to it’. That had a big impact on me.

This is back to Drucker’s quote that great culture will eat strategy every time. Of course strategy matters, but if you have a culture where there’s high levels of agreement, that brings trust and generosity when things don’t work as expected. And importantly, it sets up the scene for change.

In human services, if we look at how our strategy relates to our values, the values often take you to the individual: we are here because of people in difficult or vulnerable situations, and that should be at the heart of everything we do. Are we doing it in the most effective way? What does the evidence tell us? What should we try? And how do we marry that with one of the great ethical imperatives: to do no harm? You explore deep and significant conversations.

You can set a direction. But you can’t actually tell people to do that. It’s got to come from them.

In the absence of a strong culture people can default to ‘We’re running a great program here. We mustn’t touch it’.

Part of the culture is to say ‘Look, if it’s the person, the individual, the family, at the centre of what we do, we need to be intensely curious about what produces better results and why, and to be able to explore all those possibilities.’

You want people to feel supported to think and act that way, because you can’t tell people. You can set a direction. But you can’t actually tell people to do that. It’s got to come from them.

How do you change a toxic culture?

What about the flip side, where you’ve seen a bad or toxic culture. How do you go about changing that?

There are several answers to that. I experienced it once in the corporate world where I had to ask if I could be part of a change or not? And the decision was no – I don’t have the positional power or influence, so I left.

Sometimes in leadership roles you’ve got to be prepared to make the hard call. If you’ve got a very toxic culture, is that because you’ve got good people but the leadership and dysfunctionality has been part of the problem? If so, you begin to work on how to change that. Otherwise, are there people who need to go? Are there teams that need to go?

Then you begin the journey. I’ve got up in groups and had people’s body language saying ‘Yeah, yeah, we hear the words, but we don’t believe you.’ Perhaps they’ve been disappointed and let down in the past.

But, you’re very explicit and open; you have those conversations. You’ll have early adopters who get it and go with it, and you move through the bell curve of change.

No matter where you enter, whether it’s a difficult environment or whether it’s doing well, working out how to either maintain or to build towards that is the most interesting and rewarding aspect of leadership.

Everybody knows this is a moment of truth. Do our values count or don’t they?

Can you tell us about a time where you’ve had to actively manage culture? Perhaps you’ve had to make a hard call about something related to culture?

You do need to be able to draw a line around certain behaviours, which can be difficult because there can be fallout. The person may have a lot of influence, it may become quite public, the media may be interested.

I always take the view in those situations, the world is watching. The staff are watching. Everybody knows this is a moment of truth. Do our values count or don’t they? You may not be the person who is still standing at the end of it, but you make the call. When I’ve made that call, afterwards I’ve never regretted it. I believe it’s been good for the organisations because they’ve seen that, when it matters, it’s not just words: the tough decisions get taken, consistent with the values.

Have you seen that staff also have an important role in developing and maintaining culture?

I hear back anecdotally that when people aren’t aligned or they exhibit behaviour that’s not appropriate, their work colleagues call them out on it.

That becomes a terrific way for an organisation to be effective without people being told what to do – individuals taking responsibility with their own colleagues to let them know what we expect of each other. It’s powerful.

It sounds like being explicit about culture and then allowing both you, as a leader, and staff as a group, to not only understand it, but to help maintain and build it

Absolutely, and I’m always thinking about when do you refresh? When do you renew? Because it’s one of the things that can creep up on you with staff turnover and with new services starting.

You neglect this issue at your peril. So one of the things that I’ve learned, sometimes the hard way, is that you’re always on the front foot about culture and values. You don’t wait for there to be a problem. You refresh, you re-nurture people’s understanding of it, and the importance of it. My experience is staff welcome that.

Culture, effectiveness and change

How much of culture is about the organisation being effective, and how much of it just about the way we do things round here?

That is a tension in many organisations: between the ethical dimensions of what we do in the perfect world and the reality of limited resources and time pressures, and what that means in terms of efficiency and effectiveness?

I’ve always wanted a workforce that feels pretty aligned on that. And when it is difficult and challenging, we talk about it … we don’t duck it.

My view is you’ve got to find alignment, because it’s not sustainable to have the ethical framework parting ways with effectiveness.

In some organisations, there is a danger that we become so focused on our purpose to help people that it’s more a purely ethical view.

For example, you’re providing an outstanding service for 200 people and there are 1,000 people in that situation. How do we re-examine what we do to provide a modified service, that can be available to 400 or 500 people? How do we do that but not lose sight of what’s effective? Where’s the ethical dimension in that? Are we doing it in the right way, and not letting our professional standards go?

These are difficult and challenging discussions, but they’re good discussions because it’s ultimately about where is the greatest good in all of this, and how to wrestle with those issues? As a leader, I’ve always wanted a workforce that feels pretty aligned on that. And when it is difficult and challenging, we talk about it and get to a good place on it; we don’t duck it.

The sector broadly is going through so much change, particularly with the National Disability Insurance Scheme. Looking forward, we can only see that change is going to continue. How do we think about culture as we look to the future?

With all that change happening, it’s very confronting for a lot of organisations and individuals. If you go back to the ’90s when I was first involved in this sector, it was pretty moribund.

The rate of change and what’s happened now is completely different. You have the NDIS and consumer directed care coming in, which I think are fantastic because it is about the individual having choice and control.

The responsibility that organisations have, both to the individual and to society, is to do things efficiently.

This is changing the model quite dramatically. The organisations that I’m impressed with have actually stepped up the focus on culture and the values of the organisation and said ‘This will be at the heart’.

The responsibility that organisations have, both to the individual and to society, is to do things efficiently. Humanely and efficiently done, and evidence-based, who wouldn’t want to be part of that? It’s a big change process. So the leadership through that change is once again fundamentally important.

I see some organisations are very defensive; they want to try and hang on to the past. Those that are embracing it are realistic about the issues and the challenges. If you talk to stakeholders and staff in those organisations, they would say ‘This is a good thing because we’ll have better services, and we’ll be making better use of the resources for those services, and I feel proud about how we do it, and the way in which we challenge ourselves to do even better.’

An endorsement of the sector and the work that everybody in it does. Do you have any last words?

I think the spirit of optimism and hope should always be there. If we’re talking about leading from the point of view of culture and values, that small little word, hope – for the future, is so important. Because if people are consumed by those challenges, it can become overwhelming.

I love it – and I think we all do – when you’re in an organisation, where there’s a real spirit of optimism, smart thinking, and hope (not a forced, cheer squad type thing) about how we will change this. That kind of leadership is inspiring, and people want to be part of it. This is one of the reasons why we are attract great talent into this sector now.

So with that in mind, I think over the next five or 10 years, we’re in for a very exciting, challenging period, but a great period to demonstrably change society in Australia for the better.