The 3 Phases of Growth Your Company Culture Must Adapt To

Change is inevitable, so you need to be prepared to manage your business' evolutionary stages

Written by Lorella DePieri

How aligned is your culture with your strategy? Few leaders are unaware of Peter Drucker’s famous saying, “Culture eats strategy for breakfast.’ Yet few pay purposeful attention to culture—a potentialmistake. Ignoring culture leads to an organization’s demise.

It’s tough to put your finger on organization culture like you would many other things in business—it can feel nebulous and illusive. Leaders often feel that culture cannot be managed, but this view leads to complacency. Left unattended company cultures evolve into weedy gardens that choke out the execution of strategy.

Don’t be put off by anthropological or sociological conceptions of culture—it’s not all academic. For business, culture simply means “the way we do things around here.” It is your particular collection of behaviors, language, symbols, rituals, stories, values, and organizational norms. Without considering, engaging and aligning your organization’s culture with its purpose and strategy, execution becomes difficult, leading to a death spiral.

Humans have a need to make their environment sensible, orderly and meaningful. We work at developing a consistent and predictable view of how things are and how they should be. So culture becomes the collective patterning of these world-views and values.

George Land’s To Grow or Die suggests that anything that is organic will naturally experience change. Change is simply an outcome of growth. Anything organic—whether it’s a human being, a plant, or an organization—will go through three very predictable phases of growth. Culture is an ecosystem that needs to evolve and grow like any other lifeform.

Here’s how culture forms and morphs through three phases of growth.

Phase 1—The Formative Phase

In Phase 1, the leader has a particular world-view and compelling vision. A good example of this is Steve Jobs’ “We’re here to put a dent in the universe.” If this vision captivates and galvanizes a group of people and leads to success, the leader’s world-view and values become shared. They become the organization €˜correct’ way to think, feel and act.

If you have ever been in a start-up, you know how exciting this process can be. Everyone buys into the vision and does whatever is necessary to make it a reality. While most of the time you are flying by the seat of your pants, the vision is catalytic and energizing, creating a culture that is exciting, electric and chaotic. Nobody really knows what their role is or cares, because it’s all hands on deck. There is no such thing as “that’s not my job” because your financial performance is pretty flat and you do what’s necessary to make payroll.

But for this environment to have meaning, the founder’s vision needs to produce success—and in business that means financial performance. So you can’t afford to stay in Phase 1 for very long, or you flat line. At some point—hopefully before the start-up capital dries up—you find a pattern for success and you enter Phase 2.

Phase 2—The Normative Phase

Now it’s all about replicating the pattern of success €˜efficiently’. Processes are put in place to support efficiency and predictability—you want to €˜cookie cut’ initial success. Systems, procedures, rules, hierarchy, formal structure flourish and grow. You don’t want anybody to deviate from the pattern. Leadership style now needs to be more managerial or operational. Managers need to be process-oriented, and focused on profitability.

When someone joins a Phase 2 organization, they are taught how to think, feel and act through both formal training and informal group norms. Culture is learned through interaction and consistent repetition. If you violate these norms, it produces discomfort and often ostracism. The organization’s culture takes on a life of its own, held in place by the very systems, processes and hierarchy necessary for growth in Phase 2.

But it’s not possible to sustain this type of Phase 2 growth forever. In today’s environment change happens quickly; your competition is aware of your success and replicates it faster, cheaper, better. This challenge to your market by competitors can accelerate the leveling-off of your growth. The offering that used to be highly profitable is now feeling competitive pressure, and working harder or smarter is not likely to change that.

Phase 3—The Integrative Phase

This is a critical choice point. This is where failed Fortune 500 companies go wrong. None of those firms chose to go out of business—they just didn’t understand the dynamics of their own culture. Companies become set in their ways. But the need for change shows up as a neon sign in financial statements, increased customer dissatisfaction and attrition.

Transformation is necessary at this stage in the culture, but many leaders miss this nuance. This trial and error period has to coexist culturally with a business that has become intolerant of mistakes.

This trial and error mode is often called the Yes And Phase: Yes, you need to innovate and make sure that you’re still bringing in business because that’s what’s keeping the doors open and what will feed new growth.

Companies die because their leaders singularly focus on the economic activity of producing goods or services, and on adherence to their systems and processes from Phase 2. What is lost is the organizations’ true purpose.

Change needs to be purposeful, and culture must be aligned with strategy—if left unattended or unaligned the culture that has taken hold will trump the new direction.

To define culture, leaders must go below the behavioral level to the individual and shared values, and ensure alignment. Here are some tips to help align culture with strategic direction:

  1. Culture must be an element of strategic planning. Have a strategic pathway that aligns culture with the key values or behaviours and the strategic direction of the organization
  2. Conduct a culture audit. Do a values assessment—what is the gap between the organization’s current and desired state?
  3. Audit your systems. These are the legacy of past leaders and past strategies. They may prevent change and at the very least they create confusion if they are not re-aligned.
  4. Work on the vision, strategy and values with the collective team. Don’t just communicate it. A bottom-up approach drives real engagement.
  5. Relentless focus on values. Rather than plaques on a wall or words on a website, desired values need to be “alive” in as many ways as possible and used to make daily decisions

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The bottom line is that if leaders don’t consciously manage their cultures, those cultures will end up managing them.

Lorella DePieri is Program Director at the Centre of Excellence (CoE) in Sales Leadership at York University’s Schulich Executive Education Centre. She is also CEO of Results By Design Consultants Inc., designing and delivering learning solutions that lead to sales culture transformation since 1989. And she is Co-Founder of 1-degree shift Inc., an organization whose mission is to serve and support leaders who have an appetite to transform their cultures.


How have you adapted your company culture as your business has grown? Let us know by commenting below.

Originally appeared on PROFITguide.com