Adaptive and Unadaptive Cultures

There was an interesting article in a French newspaper last week about the performance of a French company’s stock compared to similar companies that are listed outside France. Notwithstanding the specifics of the company’s performance (which was ultimately a discussion regarding actual performance against communicated budget), there were a number of points proposed by the newspaper which would explain why this French stock was performing worse than international equivalents. Firstly, there was the exposure to the Euro both in terms of currency risk and the debt crisis. Second, there was the “French” risk – strong unions and restrictive employment rules. Thirdly, there was the “French management” risk… According to the article, the stock was essentially underperforming because it was run by French management!

The lament appeared to be self-doubt: the same article written in Germany about a German company might have pointed to “German management” as a problem. The article was blaming “French management” for a lack of speed, a lack of direction and ultimately a lack of innovation. My first reaction to this was that the underperformance was actually related to having an “unadaptive” rather than “adaptive” culture in place and could apply to any country, not just France. In particular I was reminded of “Corporate Culture and Performance” by Kotter and Heskett, 1992, The Free Press, wherein the authors state that “there is a segment of the financial community that […] believe in a negative correlation between culture strength and long term economic performance.”

Here are the differences between adaptive and unadaptive cultures along with further implications (“et alors?”).

Adaptive and Unadaptive Cultures

The difference between adaptive and unadaptive cultures can be explained with reference to two key dimensions:

Core Values

·        Adaptive cultures have managers who care deeply about customers, shareholders and employees. They also strongly value people and processes that can create change, e.g. leadership up and down the management hierarchy.

·        Unadaptive cultures have managers who care mainly about themselves, their immediate work group or their product. They value orderly risk-reducing management processes more highly than leadership initiative.

Common Behaviour

·        Adaptive cultures exhibit managers who pay close attention to all stakeholders and initiate change even if that involves taking some risks.

·        Unadaptive cultures exhibit managers who behave somewhat insularly, politically and bureaucratically. They do not adjust or take advantage of changes in their environment.

The cultural ideal of an adaptive culture is that managers throughout the hierarchy should provide leadership to initiate change whenever necessary to serve the legitimate interests of not just shareholders, or customers, or employees but all three.

Et alors?

At first glance, the French newspaper article referred to French management as the “problem”. At a “second” glance, it does look like the “problem” could be an unadaptive corporate culture which could be found anywhere. At “third” glance however, is there a link: is the French national culture more likely than other national cultures to exhibit “unadaptive” values and behaviours? Quite possibly when looking at certain dimensions of the French culture, viz:

Firstly, the French national culture is, according to Hofstede, one of the most uncertainty-avoiding national cultures to be found anywhere. This does not lend itself to building a risk-taking collective leadership structure within a hierarchy and is therefore more likely to result in an unadaptive organisational culture. Secondly, that hierarchy is likely to be very strong: the sense on power-distance is very high in France. Members of an organization are therefore more likely to follow instructions from their superiors rather than having a natural reflex to adapt to change “in the field”.

In addition, analysis is sometimes considered the cornerstone of French culture. If there is an issue to be resolved, it must be broken down to its component parts and then reconstructed using Cartesian reasoning. This is wonderful for producing bullet-proof theories, but it does not lend itself so well to advancing a business in a pragmatic, try-and-see fashion. So, whilst it looked like the original financial performance analysis was taking a shortcut fueled by self-doubt to criticize French management (rather than unadaptive corporate cultures for lacking speed, direction and innovation), in fact, they might have had a point!