Creating the right culture consciously

Guest blog post by FHRD Member, RSM Malta 

In Malta’s skills-scarce market, businesses need every means available to attract, engage and retain talent. Pay matters, but a competitor can match a salary. What it cannot match as easily is the experience of working for you: how decisions are made, how people are treated, whether good work gets noticed and whether poor behaviour is tolerated.

In other words, culture.

Culture can be an important driver of organisational performance. McKinsey’s long-running research on organisational health, of which culture is an important component, has found that organisations in the top quartile for health generate around three times the total shareholder returns of those in the bottom quartile. If you want capable people to stay, care about the work and perform close to their potential, culture should not be left to chance.

The challenge is that culture emerges incrementally and often unconsciously.

In a start-up or micro-enterprise, the initial culture tends to align closely with the owner’s values and habits, which are usually focused first on survival and then on growth. As the business scales, it must decide which elements of that early culture to retain as founders step back from day-to-day decisions. Each new hire influences the culture, while growth brings a more diverse workforce and greater complexity. A clear culture gives people a shared way of working, but without deliberate effort it can fragment into silos.

Cultural evolution is often haphazard, slow or both. What once served the organisation well may eventually become an impediment as circumstances change.

Culture itself is a common term but one that is not always well understood. At its core, it is the accumulated shared learning of a group as it solves problems, with approaches that work well enough eventually being passed on to new members. Over time, these lessons become norms around how people think, decide, communicate and act. They are also reflected in practices such as how performance is defined, measured and rewarded.

Some elements are easy to see but harder to interpret. Organisations may have clearly stated values expressed through strategy documents, company communications and what leaders say. Beneath those, however, sit assumptions that can become so embedded that they are rarely questioned.

For example, an assumption that revenue growth is paramount may translate into a stated value of continually seeking new opportunities. In practice, this could result in pursuing new leads without investing sufficiently in the resources needed to scale, potentially at the expense of existing clients. What was a critical priority in the organisation’s early years may eventually become a risk, yet the assumption behind it may remain largely unexamined.

“Culture eats strategy for breakfast” has become a cliché for a reason. Strategies ultimately depend on people’s ability and willingness to execute them. Culture shapes behaviour, and those behaviours can either support the strategy or work against it. Even the right strategy can therefore encounter difficulties when organisational culture is disregarded.

Making the unconscious conscious

Healthy cultures examine themselves, and the practices involved do not necessarily need to be complicated.

A short review after a major project can ask what went well and what the team would change. Stay interviews with valued employees can take place before they begin considering opportunities elsewhere. Leaders can ask their teams directly what they should do differently and, importantly, demonstrate that they act on the answers.

Customer feedback and regular culture pulse surveys can also provide useful insight.

Leadership teams can begin by asking:

• What are our values, and where do they show up day to day?

• What practices, rituals, stories and structural elements bring those values to life?

• What assumptions sit behind them, where did they come from and are they still relevant?

• What are we rewarding, incentivising, discouraging and tolerating?

• Do people see expectations, rewards, progression and accountability as fair?

• Are our behaviours contradicting our stated values, particularly around promotion, accountability and pay?

The last question is often where friction appears: in the gap between what an organisation says it values and what its decisions, including decisions not taken, suggest it actually values.

External facilitation often helps leaders look beyond these implicit assumptions and challenge established ways of thinking.

A leadership team should explore these questions in a structured way before inviting the wider organisation to do the same.

In our experience, leaders often view organisational culture more favourably than employees do. This can partly be explained by position. Those with greater authority may experience organisational rules as choices, while others experience the same rules as constraints.

Information also matters. If employees do not feel safe speaking openly, difficult messages may not reach senior leadership. The less comfortable people feel raising concerns, the easier it becomes for leaders to develop an incomplete picture of the organisation. This gap can help explain why leadership teams are sometimes surprised when strong performers disengage or leave.

Do not simply change culture, change behaviours

Once a business understands its current culture, it can begin identifying the gap between the culture it has and the culture it needs.

Structures and policies matter, but culture is recreated through daily actions and decisions. Changing culture therefore largely means changing behaviours and habits, beginning with those of leaders.

Every interaction communicates something about what is genuinely valued. Absences communicate too: delayed responses, missing recognition, avoided conversations and behaviour left unaddressed when it contradicts stated values.

Several organisational levers are particularly important.

Hiring can focus on both culture fit and culture add. Hiring only for fit can reinforce the organisation’s existing culture, including its blind spots. Both considerations have a place, and hiring patterns send strong signals about what is valued and what the organisation intends to become.

Onboarding is equally important. A new employee’s first interactions with the organisation are where cultural assimilation begins. Expectations should be clear, including what “good” looks like beyond the employee’s immediate outputs. New hires should also understand the principles, values and assumptions behind the practices they encounter each day.

Incentives and accountability are among the clearest expressions of organisational culture. What a business rewards, discourages and tolerates establishes the practical rules by which people operate and progress.

Communication and storytelling matter because how something is communicated can shape how employees interpret it just as much as the message itself. Stories also turn values and principles into tangible examples that people can remember and apply.

Rituals play a similar role. Just as habits reinforce individual behaviour, organisational rituals repeatedly signal what matters and can help close the gap between stated values and daily practice.

As organisations grow and teams develop their own ways of working, culture needs reinforcing mechanisms as well as aspirations. Leadership alignment, consistent processes and clear behavioural expectations help maintain common principles across departments, locations and management levels while still giving teams room to operate.

This requires a cohesive approach across the organisation. Boards should consider culture as an enabler or potential inhibitor of the strategic direction they set. Yet, in our experience, culture does not always receive dedicated board attention.

Senior leadership sets the tone through its decisions, communication and policies. Middle managers, however, operate where employees, strategy and day-to-day operations meet, meaning their decisions are visible continuously.

Gallup’s research finds that managers account for around 70% of the variance in team engagement. Yet people promoted primarily for technical competence are not always given the support required to become effective managers and stewards of organisational culture.

Leaders at every level therefore need to model consciously the behaviours they expect from others. People take their cues from what they consistently observe, not simply from what is formally communicated.

Self-awareness and psychological safety are central

Leaders who ask what each hire, promotion, restructure or response to a mistake will teach employees about “how things work here” are consciously shaping culture. Those who do not are still shaping it, but without necessarily understanding how. Regular reflection on leadership decisions and how those decisions are interpreted can help build the self-awareness leaders need.

According to research by TalentSmart, emotional intelligence tends to be lower at the top of the organisational hierarchy than in the middle. One possible reason is that senior leaders may receive less dissent and honest feedback as they progress.

Psychological safety, the shared belief that people can take interpersonal risks without fear of inappropriate consequences, therefore becomes especially important. Without it, leaders may receive an incomplete picture of what is happening within their organisation.

Malta’s relatively small professional and business circles can work both ways. In family businesses and close-knit teams, familiarity may help build trust. However, where the person who needs to be challenged is also the owner, a family member or someone with whom employees have a longstanding relationship, disagreement can sometimes feel like disloyalty.

Psychological safety is also only part of the picture. Strong organisational performance requires it to exist alongside clear expectations and accountability. Both are cultural.

Ultimately, that is what culture is intended to support. The specifics will vary from one organisation to another, but a healthy culture helps channel individual and collective performance towards the strategic direction the business has chosen.

Every business already has a culture.

The question is whether it developed consciously, and whether it still serves the organisation today.

RSM Malta works with organisations to understand the behaviours, assumptions and practices shaping their culture and assess whether these remain aligned with their people and strategic objectives.

To discuss how your organisation can build a clearer understanding of its culture and the behaviours needed to support its future direction, contact RSM Malta.

Article written by Yashar Dominic Klipp – Consultant, Governance, Risk & Compliance  and Romina Abdilla – Head of HR, Human Resources