Multiplying Structure by Culture

Large parts of the Ger­man econ­o­my are in a dif­fi­cult peri­od that is “first and fore­most a struc­tur­al cri­sis,” writes the Munich-based ifo Insti­tute for Eco­nom­ic Research in its “Eco­nom­ic Fore­cast Autumn 2024.” A wave of struc­tur­al adjust­ments is under­way, with head offices under enor­mous strain. Costs and ben­e­fits are being scru­ti­nized as close­ly as posi­tions and orga­ni­za­tion­al charts. As observed by the Porsche Con­sult­ing man­age­ment con­sul­tan­cy, top-level man­agers at large cor­po­ra­tions are hard at work on struc­tur­al changes. They have long since rec­og­nized that pre­vi­ous for­mu­las for suc­cess are no longer applic­a­ble. Rig­or­ous pro­grams are being launched every­where. Most involve new struc­tures that first need to be created.

New structures—what do they mean for the orga­ni­za­tion as a whole? For one thing, they dis­rupt the pre­vi­ous rou­tines fol­lowed by employ­ees in all parts of the com­pa­ny. Rou­tines that used to pro­vide sta­bil­i­ty and secu­ri­ty, but might not have been exam­ined inten­sive­ly for quite a while. And then comes the day of reck­on­ing. A tough cut. When a com­pa­ny restruc­tures, it may well end up with fewer hands on deck. That com­pels its employ­ees to reor­ga­nize, become more pro­duc­tive, and gen­er­al­ly also assume more respon­si­bil­i­ty. Each indi­vid­ual is now called upon more than ever before. On top of that, an entire­ly new mind­set is often expect­ed as well.

For many peo­ple, peri­ods such as these feel like sail­ing into unchart­ed waters. Con­cerns arise. Uncer­tain­ties spread. Who will pro­vide solid guid­ance? What can now inspire confidence?

Com­pa­nies in trans­for­ma­tion find them­selves at a crit­i­cal junc­ture for their cor­po­rate cul­tures. The struc­tur­al mea­sures they under­take have a sub­stan­tial impact on employ­ee behav­ior, on indi­vid­u­als, teams, and col­lab­o­ra­tion as a whole. Com­pa­ny lead­ers should now active­ly shape and build their cul­tures to sup­port their strate­gic cours­es and goals. It is cru­cial to pre­vent the cor­po­rate cul­ture from devel­op­ing in the wrong direc­tion in an uncon­trolled way—or in other words, to pre­vent a cul­tur­al acci­dent. The aim now is to make use of what is actu­al­ly a win­dow of opportunity.

A company’s cul­ture fig­ures promi­nent­ly in the suc­cess of its struc­tur­al changes. These cul­tures now need to be active­ly reshaped, care­ful­ly cul­ti­vat­ed, and embraced by lead­ers on all lev­els. Many man­agers are acute­ly aware of this. Accord­ing to an analy­sis by Porsche Con­sult­ing, 83 per­cent of board mem­bers at the top 40 com­pa­nies on the Ger­man stock index (DAX) are striv­ing for a high-per­for­mance cul­ture in order to safe­guard their com­pet­i­tive­ness in the future. Yet teams from Porsche Con­sult­ing have also noted that most of the activ­i­ties these com­pa­nies under­take tend to fiz­zle out in practice.

A sim­ple and illu­mi­nat­ing equa­tion can facil­i­tate a suc­cess­ful out­come: “struc­tur­al excel­lence times cul­tur­al excel­lence equals orga­ni­za­tion­al excel­lence.” Lean struc­tures and process­es cou­pled with indi­vid­ual respon­si­bil­i­ty for the results—these two fac­tors yield a strong for­mu­la. Of course, orga­ni­za­tion­al excel­lence or what is meant by “high per­for­mance” needs to be defined for spe­cif­ic cases. Dur­ing the course of work­ing with its clients, Porsche Con­sult­ing has devel­oped and repeat­ed­ly test­ed a gen­er­al for­mu­la. It lends itself to prac­tice, is well received at com­pa­nies, and works. At its heart are “the will and abil­i­ty of an orga­ni­za­tion and its employ­ees to con­sis­tent­ly achieve pre­cise­ly the right high performance—in a sus­tain­able manner.”

Any­one who focus­es on high per­for­mance real­izes that excel­lence is always accom­pa­nied by change. Most com­pa­nies have a great need for change. That is con­firmed by the Change Man­age­ment Com­pass, for which Porsche Con­sult­ing sur­veys lead­er­ship per­son­nel from Germany’s top 100 com­pa­nies every two years. And in fact, 66 per­cent of respon­dents in 2022 expressed a desire to change their com­pa­nies in fun­da­men­tal ways over the fol­low­ing two years. But the most recent sur­vey, in 2024, revealed that 69 per­cent of the trans­for­ma­tion projects had failed. That does not bode well for orga­ni­za­tion­al excel­lence, which is pre­ci­sion work—and a goal that can only be achieved if every­one on all lev­els works togeth­er with a high degree of commitment.

Excel­lence begins with each employ­ee, with each indi­vid­ual. For instance, with the ques­tion of what type of atti­tude employ­ees and their super­vi­sors bring to work at the start of their day. It also includes the atmos­phere await­ing them in their pro­fes­sion­al con­text. Peo­ple are moti­vat­ed when they can make con­tri­bu­tions, devel­op as indi­vid­u­als, be seen, and feel val­ued. Here too, the sur­vey of man­agers at the top 100 com­pa­nies yields a crit­i­cal result: only 53 per­cent of respon­dents stat­ed that every­one at their com­pa­ny appears will­ing to go the extra mile, day in and day out. Most of their employ­ees are moti­vat­ed and com­mit­ted in prin­ci­ple, the man­agers say. But their ener­gy is not put to the best pos­si­ble use in fos­ter­ing col­lab­o­ra­tion, pur­su­ing the company’s strate­gies, and achiev­ing its goals.

The next level up is that of teams. High-per­for­mance orga­ni­za­tions are guid­ed by a “we before I” prin­ci­ple. Every team mem­ber needs to know their role in the orga­ni­za­tion, and the shared aim. The con­sul­tants have observed that col­lab­o­ra­tion usu­al­ly works smooth­ly between clear­ly defined teams from the same depart­ment. Dur­ing peri­ods of trans­for­ma­tion, how­ev­er, there is an increased demand for inter­dis­ci­pli­nary project teams and cross-func­tion­al col­lab­o­ra­tion. The ques­tion of resource allo­ca­tion often leads to con­tention and con­tro­ver­sy. Only 44 per­cent of the man­agers sur­veyed stat­ed that strong inter­de­part­men­tal col­lab­o­ra­tion is evi­dent in their organizations.

The third level—that of the com­pa­ny itself—is formed by the sum of the teams. It thrives on entre­pre­neur­ial thought or “own­er­ship.” Each employ­ee should act as if the com­pa­ny were their own. But it is not uncom­mon for this prin­ci­ple to fall by the way­side, espe­cial­ly in what are often com­plex orga­ni­za­tions. Here only 18 per­cent of respon­dents from the top 100 com­pa­nies stat­ed that they are trans­fer­ring an increased level of deci­sion-mak­ing author­i­ty to teams and indi­vid­u­als in order to fos­ter entre­pre­neur­ship. And only 26 per­cent con­sid­er their orga­ni­za­tions suf­fi­cient­ly flex­i­ble and agile to allo­cate resources based on need.

In order to achieve and main­tain long-term orga­ni­za­tion­al excel­lence, a com­pa­ny needs to com­mu­ni­cate its strate­gies, aims, and val­ues trans­par­ent­ly and con­tin­u­al­ly to all its employ­ees. This can be done on a step­wise basis. Work­shops, town­hall meet­ings, and team dis­cus­sions can start the process for mid-level man­age­ment. The next step con­sists of bring­ing all the employ­ees on board. Lead­er­ship per­son­nel on all lev­els are then called upon to explain, answer ques­tions, and con­vince their peo­ple, also in small­er groups. Two points are cru­cial here. First, rep­e­ti­tion is noth­ing to be feared. For a cul­ture to be influ­enced, it needs to appear reg­u­lar­ly on the agen­da. And sec­ond, top-level man­agers need to speak with one voice, send con­sis­tent mes­sages, and demon­strate a high degree of unity to their workforce.

Com­mu­ni­ca­tion alone is not suf­fi­cient, how­ev­er. Suc­cess depends above all on lead­er­ship per­son­nel truly embrac­ing their company’s cul­tur­al val­ues. Lead­ers who demand a team spir­it from their staff mem­bers should pos­sess this qual­i­ty them­selves and show it in authen­tic ways. This, unfor­tu­nate­ly, has still been lack­ing too often in prac­tice. At com­pa­nies with­out a demon­strat­ed high-per­for­mance cul­ture, only 42 per­cent of their lead­er­ship per­son­nel show com­mit­ment and col­lab­o­ra­tion them­selves, com­pared to 61 per­cent at com­pa­nies that do have this culture.

More on this topic in the strat­e­gy paper „High Per­for­mance Cul­ture“.