Culture rises up the leadership agenda yet major gap in attitudes

  • Culture becomes a higher priority with 67% globally and 71% of Australia’s senior leaders saying it is an important topic on the agenda
  • 68% of Australia’s business leaders whose organisations have successfully adapted in the pandemic say culture has been a source of competitive advantage
  • Average 20-point gap in attitudes towards diversity, equity and inclusion highlights divide between senior management and the rest of the workforce globally

Culture is advancing on the leadership agenda, however the gap in perceptions between senior management and the rest of the organisation has widened even further, according to a new PwC study.

PwC’s 2021 Global Culture Survey examined the views of 3,200 workers across more than 20 countries including Australia and revealed that culture is a source of competitive advantage and a strategic priority for senior leaders, but it has been deprioritised in the eyes of the rest of the workforce.

Culture’s time has come

Culture has risen sharply up the leadership agenda in recent years – globally, the importance level of culture has climbed from 53% in 2013, to 61% in 2018, and to 67% in 2021. Of the C-suite and board members who participated in the survey, 66% said that culture is more important to performance than the organisation’s strategy or operating model.

In Australia, the numbers were higher with 71% of respondents saying their organisation’s culture is an important topic on the agenda of their company’s senior leadership and 74% of senior management said culture is more important to performance than an organisation’s strategy or operating model. Overall, in order to succeed, grow, and retain the best people, 78% of Australian respondents said their organisation’s culture will need to evolve significantly in the next three to five years.

The survey also revealed a great divide – that talking about culture and thinking culture is important does not always translate to employees feeling a cultural impact.

Dr Michelle Kam, Partner at Strategy&, part of the PwC network, said, “The intersection of culture with strategy, the business and operating model, and of course purpose, is the key to enhancing each. The evidence of culture’s impact is more than anecdotal and our survey data reinforces the connection between strong cultural situations and business success. In the pandemic context, what we observed is that stronger cultures were more adaptable, and distinctive cultures enabled more effective ways of working, making it easier to maintain performance despite the external shock.”

Culture as a source of competitive advantage

A resounding 81% of respondents globally, who strongly believe their organisation was able to adapt during the 12 months before the survey was conducted, also said their culture has been a source of competitive advantage. These results were consistent across geographies including the US (80%) and UK (72%), and the percentage was even higher in some countries, with 94% in China and 92% in India.

Locally, 78% of Australian respondents who said their organisation has been able to adapt over the past year also said their culture is a source of competitive advantage. Of those Australian respondents that said their organisation has a distinctive culture, 81% agreed there would likely be an increase in customer satisfaction and 76% agreed there would likely be an increase in employee satisfaction. More than three-quarters of senior management (85%) agreed that their culture helps successful change initiatives to happen.

Globally, 73% of respondents who stated that culture is a source of competitive advantage said making decisions quickly has either become easier or stayed the same during the pandemic. The proportion of people agreeing with this rose in Australia (77%), UK (77%), the US (81%) and China (81%). On the flip side, only 57% of respondents globally who state that culture is not a source of competitive advantage found decision making easier or the same during the pandemic. In Australia, this percentage dropped to 41% and China dropped even lower to 38%, whilst in India it rose to 68%.

The Australian survey results demonstrated a clear disparity between those who say their culture is distinctive and those who do not, namely that the following have become easier or stayed the same (in relation to whether ways of working in the organisation have become easier or more difficult as a result of COVID-19 over the last 12 months):

  • Coaching and developing talent (63% agree vs. 55% disagree)
  • Developing or maintaining a sense of community (75% agree vs. 45% disagree)
  • Innovating new products and services (70% agree vs. 59% disagree)
  • Producing/delivering expected results (70% agree vs. 59% disagree)

Dr Kam said while leaders may understand the value of culture, to optimise its alignment with strategy and operating model within an organisation is a hard task.

“The findings from the survey revealed how culture can be a distinct competitive advantage, and I certainly see that on a day-to-day basis. Organisations that view culture as a potential differentiator, an asset rather than a drag, will stand to gain from it as a source of competitive advantage because they invest in aligning it with strategy. The majority of respondents know the importance of culture and this sentiment is increasing. We have also observed that many don’t know how to manage it robustly – the best organisations use science, evidence and rigour to align culture with strategy.

“With organisations adjusting to hybrid working models, some for the first time, the key question is what approach senior leaders take to maintain a coherent organisational culture. The most common error is to confuse ‘connection’ and ‘culture’, and thinking that working virtually will ‘kill culture’ when in fact it just undermines connections.”

The great divide – attitudes of senior management vs. the workforce

The global data shows that culture has been dismissed in the eyes of the rest of the workforce. In 2018, 66% of front-line workers believed that culture was more important than strategy or operating model, vs. 46% in 2021. Similarly, there is a divergence in the way that purpose is viewed by different staff levels, with 77% of senior management stating they feel a personal connection to the company’s purpose in contrast to just 54% for the rest of the workforce.

In Australia, respondents were asked to think about how organisations can help their people successfully adapt to change which unveiled a large number of gaping mismatches between senior management and the rest of the workforce. With the biggest by far by nearly 30 points, 85% of senior management within Australian organisations said their organisation encourages open discussions around sensitive and uncomfortable topics, while only 56% of middle management and below agreed.

The survey revealed another stark difference between employees and leaders regarding diversity, equity and inclusion (DE&I). Only 21% of respondents overall said that DE&I needs to be improved in their organisation, and there was a huge mismatch between the views of leaders and below management employees. This gap was seen across all geographies.

A majority of Australian senior managers (84%) said they can be their whole (‘authentic’) self in their organisation, compared to 66% of middle management and below, while just over half (59%) of middle management and below said their colleagues take the time to understand their background especially when it differs from their own, compared to 77% of senior management respondents.

Dr Kam said, “The gap between leaders’ and employees’ perceptions of culture persists. This creates a huge barrier to investing in culture, because leaders are not always genuinely listening to the fact that their cultural situation could do with some work.

“The disconnect in attitudes extends to issues of diversity, equity and inclusion. As firms adapt to rapidly changing societal and cultural expectations, it is more important than ever for leaders to recognise and address head on any misgivings around DE&I – and act early before it’s too late. We’ve seen more than once now that employee activism can entirely change the focus and agenda for Australian corporates and public sector organisations, and this activism is triggered by issues like exclusion, misconduct and inequity. Employees who are uncomfortable are unlikely to stay for long, and now more than ever, they can’t be assumed to remain silent on their experience,” concluded Dr Kam.

View the 2021 Global Culture Survey – Australian viewpoint and Global report.