What Culture Is, and Why Leaders Have to Manage It
Culture is the inside of a group. Think of it as the collective's interior: the values people share, the meanings they agree on, their sense of purpose, their ethics and morals, the mutual understanding that lets them work together, plus the habits, the history, and the worldviews they carry in common. That inner fabric holds a group together, the same way that its outer systems and structural networks hold it together from the outside.
Every person belongs to many groups at once. Family, friends, the people you work with, sometimes a church or a political party, and then wider circles: tribes, states, nations, humanity as a whole. A business is simply one more of these groups, a particular set of people, and like any group it carries its own culture. That means a specific interior of values, meanings, rules, and roles that binds it from within.
When management researchers try to isolate what matters most in running a business, they tend to arrive at culture before long. James Heskett of Harvard Business School has said a strong culture can either help performance or damage it. By some measures, culture accounts for as much as half the gap in operating profit between two companies competing in the same industry.
Because of that, shaping culture turns out to be one of a leader's heaviest responsibilities. One expert framed it this way: guiding culture is the single most significant thing any leader does. There is culture, and then there is everything else. Peter Drucker said it more sharply still, with his line that culture eats strategy for breakfast. Read that as a claim about priority: tending culture counts for more than the strategy and the planning. Managing culture, put plainly, means managing the interiors of the collective.
The fourth and last of the big theories here is systems theory, which shows up almost everywhere. Culture management, as described above, looks at the interiors of a group and sees them woven into networks of shared meaning, understanding, and value. Systems theory does the opposite. It looks at the group from the outside, in a detached and objective way, and sees it woven into networks of interrelated systems, structures, and physical mesh works.
The claim systems theory makes is that any individual sits inside networks of mutually dependent, interlocking processes, and that those networks are what is ultimately real. You cannot understand a situation by taking it apart and inspecting the pieces; you have to study the whole system. Business leadership shaped by this view treats the company as one unified web, itself a strand in a larger market web, which sits inside still larger international, environmental, and planetary webs. The company is not a pile of separate, atomistic individuals and divisions and parts. Systems theory, then, is concerned with the exteriors of the collective.