How Company Culture Can Make or Break Performance

Steve Denning starts his Seattle ALM Forum presentation with the following disclaimer: “I want to make clear that I am not a developer or technology professional. I’ve spent my entire career in management – the people you love to hate.”

So, what is this guy, a former U.S. World Bank chairman, doing at the Seattle ALM Forum addressing a group of software development professionals? And how did he manage to get himself sponsored by the Scrum Alliance, a non-profit organization known only to the geekiest of geeks? To receive PTC’s exclusive and pre-release notifications in the Agile space, click here.

Well, years ago, Denning, a then young, fresh-faced economist, asked an innocent question in a meeting with top executives. This was his first lesson in the power of “culture” within an organization. His question was shot down immediately. All other avenues of inquiry closed, with an abrupt “…and anyone who thinks otherwise is a poor fit for this organization.”

So began Denning’s extraordinary, decades-long exploration into the elements of organizational culture and change, a journey which includes multiple best-selling books, a distinguished career at the helm of the World Bank, and an unlikely yet oddly perfect association with the scrappy Scrum Alliance (he is on their Board of Directors.)

Scrum Alliance is a non-profit membership organization that encourages and supports the widespread adoption and effective practice of scrum, a specific set of Agile practices. A scrum—fashioned from the British rugby term—is a group of people who work together to accomplish a goal. In the realm of software development, the scrum works to deliver products in short cycles, enabling fast feedback and continual improvement.

Agile teams are all about self-organization, pushing down decision-making, and making teams self-governing. A wealth of literature attests to the efficacy of these practices for improving software development velocity and quality. Simply put, agile teams get more and better stuff done.

But over many years of studying organizational change paradigms, Denning has noticed a tension between some agile teams and the corporate environment in which they operate.

“Development organizations must reflect the environment in which they operate,” he explains. “A shift is taking place between the culture of creativity and the culture of command and control.”

At the organizational level, Denning says, the only thing that really matters is the ability to “delight your customer.” Organizations that focus single-handedly on this metric naturally align their business processes to maximize customer value. These companies create a virtuous cycle of delighting customers, empowering employees, and engaging employees with a more collaborative, conversational communication style. Revenues and profits inevitably follow.

On the other side are companies that focus primarily on the metric of returning share-holder value. According to Denning, these enterprises—and there are many—have been hoodwinked into confusing cause and effect. Instead of investing in business processes that surprise and delight their customers, they are caught in a vicious cycle of bureaucracy, control-based hierarchy, and a rigid, command-based communication style.

I ask Denning whether the pillars of the Tech 100 are too beholden to Wall Street to focus on anything but quarterly earnings. Do they really have a choice? Absolutely, says Denning. He mentions one tech giant that publicly announced its intention to change its business model from delivering products to delivering cloud services. That company made clear that quarterly earnings would go down in the short-term, as a result. Wall Street responded by increasing the company’s stock price even in the face of revenue declines.

According to Denning, having corporate goalposts like delighting customers and empowering employees makes all the difference in how organizations evolve their culture. These goals inform all decisions and actions. In the words of organizational change luminary Peter Drucker, “culture eats strategy for breakfast.”