Why Business Culture Matters

Why business culture matters

June 6, 2025
By Andrew Davidson | Regional Vice President, North & East Europe

"Culture eats strategy for breakfast"

The quote above is from Peter Drucker, considered by many to be the father of modern business management. His highly influential management theory (published in the mid-1940s) centers on things like decentralization, workforce development, corporate responsibility, and what he believed to be the only real purpose of a business: the customer experience.

As the opening quote suggests, Drucker also stressed the primacy of workplace culture and believed that managers, for better or worse, play a key role in shaping it. Interestingly, in the private equity (PE) space, most deals are completed without a formal culture review. Moreover, in a survey of PE portfolio company leaders, half of the respondents said they felt their culture wasn’t aligned with the PE firm’s strategy (1).

With more than 10,000 PE deals completed each year, it begs some big questions.

How important is culture to a company's success?
What is the relationship of culture to strategy and execution?

If strategy is the "logic" of a company, culture encompasses more emotional aspects like values, beliefs, engagement, and motivation. Comparing it to the human body, we can think of strategy as the brain and culture as the heart - we cannot survive without both.

To continue the analogy, the first organ to develop is the heart. This should be the same for a business. A well-defined culture (or heart of the company) should be in place as the foundation. Next comes the strategy (or brain), which guides execution (the movements of the body).

Culture, strategy, and execution. All three are essential. And they should proceed in that order.

When Lebron became "Lebronze"

I really wanted to avoid sports analogies (no easy task in a business advice article), but I promise this one helps illustrate the point.

Do you remember the 2004 USA men’s Olympic basketball “Dream Team”? They had a Hall of Fame coach (presumably with a solid game plan) in Larry Brown. They had far and away the world’s best players, including Lebron James, Tim Duncan, and Allen Iverson. … And yet, somehow they managed to lose to Puerto Rico by 19 points en route to a humiliating bronze medal finish.

The takeaway? Talent isn't enough.

Even talent with strategy isn’t enough. You also have to have a culture of teamwork and trust, which in basketball includes a willingness to box out, set screens, make cuts and simple passes, and hustle back in transition defense (things superstar players aren’t always used to doing).

But even with all that in place – even when strategy and culture are synced like clockwork – you still have to go out and execute. You may have a talented team flowing down the court and sharing the ball. You may have the right game plan to break the defense. But in the end, you have to put the ball through the hoop. As they say in the NBA, it’s a make or miss league.

Building the culture, defining the strategy, and finding ways to optimize execution. Again, all three are vital, and they should flow in that sequence.

You are always going to get what you create and what you allow

Okay, we’ve established that culture is the wellspring and strategy is downstream. So, how do we build a strong culture – one that unlocks human potential and inspires behaviors that create happy customers? I believe the self-help author Dr. Henry Cloud offers useful guidance: “As a leader, you are always going to get what you create and what you allow.”

For example, let’s say you want to foster a culture of teamwork. First, we need to communicate that expectation. Explain why teamwork is important to the organization, paint a picture of what it looks like in real situations, and inspire people to buy in. We should also strive to model teamwork in our own actions and mentor managers to do the same for their teams.

Okay, now here’s the tough part. If certain managers or employees are quick to take credit and equally quick to pass blame – in other words, if they’re not exhibiting teamwork – you need to have a candid conversation with them about changing those behaviors. As a business leader, it’s not enough to set a direction. For the benefit of the team, you also have to be willing to step in and not allow behaviors that erode the culture.

Other situations may dictate letting go instead of stepping in. For example, if you want to foster a culture of decentralized decision-making, you actually have to allow people to … make decisions. It sounds obvious, but it’s not a natural mindset for many business leaders. In this example, to create the desired culture, you have to do things that can feel very uncomfortable – suppress your ego, accept some risk, and allow people throughout the organization to use their creativity.

Again, the culture will be shaped by the behaviors you create and allow to happen within your organization. Note the different shades of “allow.” In the first example above, it means permit or tolerate. In the second, it means enable or empower.

Keeping the "core" consistent

Having led business units in a dozen countries and several continents, I feel it’s important to differentiate what are core cultural values and what are not. Societal cultures will inevitably influence your business culture. For example, if you’re primarily operating in the United States and plan to expand into, say, Brazil, you should challenge yourself to be empathetic and understand that many cultural aspects will be different in your Brazilian business unit. However, the core values must stay consistent. You need to have the same principled approach of what you will create and what you will allow. Fortunately, it’s often not as tough as it sounds. I’ve found that if something is a core value, it’s usually a universal value – something that resonates across
borders and cultures.

A human-centered approach

Business is a relentlessly rational pursuit guided by data, performance metrics, and financial results. But a business is really just a group of humans – and culture matters. If you nurture an exceptionally strong and healthy culture, you can create a higher level of engagement, energy, and creativity than the competition. If you couple that with a strategy to create differentiated value for your customers, and if you execute the strategy well, then you have a fastmoving
train that will be hard to stop.

Sources:

AlixPartners Fifth Annual Private Equity Leadership Survey, 2020