Why organizational culture is not the same thing as employee engagement.

1. strategy+business
ONLINE JULY 31, 2017
Improving Company
Culture Is Not About
Providing Free Snacks
Why organizational culture is not the
same thing as employee engagement.
BY ALICE ZHOU

2. www.strategy-business.com
2
Alice Zhou
alice.zhou@pwc.com
is advises clients on culture and
organization for Strategy&, PwC’s
strategy consulting business. A
manager based in Philadelphia,
she is part of the Katzenbach
Center, PwC’s global institute
on organizational culture and
leadership.
What’s the difference between culture and employee engagement? It’s a good
question. Many people use the two terms interchangeably. In their minds, the
term company culture is synonymous with free food, foosball tables, and other
workplace perks deemed to improve the employee experience, increase satisfac-
tion, and drive greater commitment to the company. There is, of course, a lot
more to employee engagement than workplace goodies. Employee engagement
surveys typically ask about factors such as empowerment to make decisions,
freedom to innovate, and work–life balance. There is some evidence to suggest
that high scores on these issues make a difference to a company’s bottom line.
According to Gallup’s 2016 Q12 Meta-Analysis report, business units in the top
quartile in terms of employee engagement outperformed business units in the
bottom quartile by 21 percent in profitability.
However, simply changing a culture in an effort to improve employee engage-
ment won’t necessarily lead to improved business performance. In fact, treating
engagement as the goal of culture evolution can have a negative impact. That’s
because although there are widely recognized drivers of engagement that are in-
dependent of strategy or industry, the cultural drivers of success differ widely
from company to company. The same behavior can drive success at one compa-
ny while hampering success at another (see exhibit, next page).
We’ve learned through our work at the Katzenbach Center that the key to
unlocking performance via organizational culture is to align company culture to
business priorities. This requires the selection of a “critical few” behaviors that
enable the desired business outcomes. When these behaviors are coupled with

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structural and process changes that support them, the entirety of these changes
have an impact on the employee experience. Using culture to drive performance
thus requires emphasizing elements of the employee experience compatible with
desired business outcomes, and downplaying non-compatible elements. Wheth-
er the elements of the employee experience that drive performance also drive in-
creased engagement is of secondary importance. Employee engagement should
be regarded as a byproduct of culture evolution efforts rather than a tangible
goal of them.
A company in a fast-moving industry like social media that must contin-
uously come up with new and better products needs to encourage risk-taking
and fast failure. Disruptive technology companies like Facebook succeed via a
non-hierarchical culture in which individuals are empowered to speak up, try
new ideas, fail fast, and iterate. It is easy to see how a culture that encourages
these behaviors would be both engaging and productive. But for a company in
a regulated, compliance-focused industry, such as a utility that operates nuclear
power plants, culture must stress process adherence and behaviors that stress
prevention and safety. In that context, tolerance for failure is extremely low. Al-
though a focus on compliance is often seen as tedious and not conducive to
Exhibit: Culture vs. Employee Engagement
Source: Strategy&
Although the terms are often used interchangeably, culture and employee engagement differ in meaningful ways.
Patterns of behaving,
feeling, thinking, and
believing influence
employee satisfaction
and thus engagement
How people interpret
and act on their
experience gives
a company its
distinctive culture
Culture Employee Engagement
• Descriptive rather than
comparative. There is no
universal “ideal” culture,
and a company’s cultural
needs depend on its strategy
and operating model
• Difficult to change
• Comparative rather than
descriptive. There are widely
recognized drivers of
engagement, and it is possible
to assess and compare
companies against them
• Transitory and sensitive to
short-term external events
(such as negative news)
The self-sustaining
patterns of behaving,
feeling, thinking, and
believing that determine
how things are done within
a company
A measure of how
satisfied employees are
with their experience
within the company
Certain drivers of employee
engagement (e.g., compensation,
the design of physical work location)
are independent of culture
Certain cultural choices
(e.g., to become less
consultative) may be necessary
but not drive engagement

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employee engagement in general, at some companies it is very much necessary
for performance (and survival).
Let’s take some other examples. According to PwC’s 2017 Employee Engage-
ment Landscape Study, the number-one obstacle that creates a drain on peo-
ple’s engagement is “doing work for others that is not part of my job.” But in
fast-moving, creative environments (e.g., startups), an all-hands-on-deck culture
in which everyone does everything is often necessary for rapid growth.
Similarly, if a company is pursuing a low-cost strategy, its culture should em-
phasize behaviors around aggressive cost-control, including clamping down on
employee expenses. Asking employees to always choose the cheapest means of
travel — taking a five-hour bus from Washington to New York instead of the
one-hour shuttle — is unlikely to increase engagement. But it is consistent with
the company’s strategy and may be necessary for performance.
Clearly, the necessary critical behaviors that drive performance in a culture
evolution effort are distinct from behaviors that improve employee engagement.
Of course, driving performance through culture is not mutually exclusive with
driving engagement. Ideally, the critical few behaviors and related structural/
process changes that drive performance will harness sources of emotional ener-
gy within the company and thus also improve engagement. In addition, work-
ing at a successful company tends to be more engaging. Culture evolution can
thus lead to greater engagement as a side product. However, when improving
both isn’t possible, leaders should be willing to choose elements of the employ-
ee experience that drive performance at the expense of engagement. For exam-
ple, involvement in decision making that affects one’s job is a commonly recog-
nized driver of employee engagement. But in turnaround or M&A situations, in
which quick decision making is imperative, it is neither practical nor desirable to
involve everyone who will be affected by the changes.
Furthermore, employee engagement is often transitory and sensitive to
short-term external shocks, whereas culture is more enduring and self-sustain-
ing. When a company faces negative publicity, for example, engagement may
suffer. This does not mean that the culture is broken. Similarly, because change
is difficult and often disruptive, even the most well-managed change programs
can result in a short-term drop in engagement. This does not mean that the

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program has destroyed the culture and is doomed to fail.
In 2011 and 2012, Qantas Airways experienced a strike and an employee
lock-out due to an impasse in negotiations between the company and labor
unions. Friction culminated in a decision by Qantas to ground all flights in
October 2011. Although Qantas was widely deemed to have prevailed in the
months-long mediation that followed, employee engagement took a large hit, as
evidenced by lower overall employee engagement scores. And yet Qantas’s rep-
utation for customer service remained intact and its Net Promoter Score for the
FY2012 was actually higher than before the industrial dispute. From the airline’s
perspective, trading off employee engagement in the short term for an improve-
ment in its operating performance and cost structure was a necessary move, and
did not hurt its culture of customer service.
Of course, this is not to say we should ignore employee engagement entirely.
In theory, leaders can spread the critical few behaviors through force and fear,
effectively scaring employees into compliance. In reality, however, a demoralized
workforce is unlikely to perform at its best, and the highest-value employees are
likely to vote with their feet. Driving cultural change means being willing to
consider trade-offs, balancing efforts that are likely to drive greater engagement
with those that are not. At Qantas, as mediation wrapped up, concrete steps
were taken to improve employee engagement in order to rebuild labor relations.
There is thus a time and place to focus on employee engagement, and a time and
place to focus on culture evolution. Let’s not conflate the two, or we may end up
solving the wrong problem. +
In reality, a demoralized workforce
is unlikely to perform at its best,
and the highest-value employees are
likely to vote with their feet.

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