Culture is the essential complement of rules to help organizations function effectively — concluding our three-part series on rules.

visited London for the first time when I was a teenager. As one might expect from a school trip, it contained numerous memorable experiences. Quite a few of these, my parents only heard about many years later.

Aside from those escapades though, two things really struck me during that trip. One of them was that there were penalty notices everywhere on the train and in the station. If you smoked where you shouldn’t, dropped litter, or activated the emergency brake inappropriately, you knew exactly how much it would cost you. That looked like a pretty good deterrent, and I did indeed see nobody smoking, dropping rubbish or pulling the emergency brake handle.

A Flash of Insight from the Bus Queue

The second thing were the queues (or lines) of people waiting for the bus. In one of them, I spotted a fierce-looking punk dude standing courteously and patiently behind an old lady — a most remarkable sight, I thought at the time.

For until that moment, I had never really noticed any big differences in people’s behaviour on trips abroad. I simply assumed people everywhere acted pretty much in the same way because I didn’t know any better. I guess that was the first time I realized (without actually realizing until much later) what an important role culture plays in how people behave.

And that applies not just in bus queues. As this post was taking shape, a snippet from a recent article by John Kay struck a chord:

“If we ask why [mobile phone] tariffs were once simpler and zero-hours contracts rare, and why chief executives only recently began to pay each other millions of pounds a year, the answer is in earlier days reputable companies did not think it appropriate to do these things. So the best answer is not to attack a few topical symptoms of excess, but to restore a culture that recognises corporations are above all social organisations.”

Just read that again: ‘did not think it appropriate’. What a superb description of organizational culture: doing what is appropriate, and not doing what is not appropriate.

Do we need a rule that says we shouldn’t pull the emergency brake willy nilly? Perhaps — but the people waiting for the bus were not neatly queueing because a rule told them so.


Well over a hundred years ago, Taylorism treated workers like mechanic creatures that could (and should) be made to follow precise rules to maximize efficiency. We have come a long way since then. Most organizations don’t need people that are compliant automata following instructions, but people who use their judgement, and make intelligent choices and decisions.

But that is not so easily achieved. As we suggested in The No Rules Illusion, people need guidance to make the ‘right’ choices and decisions. That means they must understand the organization, how it ticks, and what is important.

Rules can provide some of that guidance, but as we argued in The Rules Illusion, they can only take you so far before they become a burden to the organization.

He isn’t just a mean keyboard player.

Just like for the good people of London, guidance on how to act as a member of an organization is largely encompassed in its culture — implicitly or explicitly. Culture facilitates herd behaviour: we see how others behave, and copy what they do, especially in situations where we are unsure. Others copy us again, and so on.

Culture works on the Process, not on the Outcome

Can culture help people make the right decision? Not if we define the ‘right’ decision as the one with the best outcome. But if that is what we did, we would be succumbing to hindsight bias. Lottery winners get a good outcome, but that is not because they are better at picking their numbers than those who lose week after week.

Culture cannot help you win the jackpot, but it can give you guidance on how to engage in the right kind of decision-making. It should help you figure out how to make trade-offs in the organization.

Few people would contest that good decision-making ought to be based on evidence, rather than dogma or gut feel — it almost goes without saying. But to what extent is this actually reflected in an organization’s culture?

If a stranger were to walk around in your organization and observe the people at work, could she actually see them systematically gathering facts, requiring evidence when evaluating proposals etc? Making this behaviour part of the culture is not just a matter of laminated cards or fancy desk ornaments. It is much more a matter of ensuring people set the example and act out the idea at every occasion — not just business-critical decisions, but everywhere, from policies on remote working, to how conference rooms should be booked.

The Value of Values

But collecting evidence, and then weighing up and trading off the lot to calculate the best outcome is only one facet of good decision-making. There is another crucial element of guidance that forms part of the culture: the values of the organization.

Well-chosen values embody what is important for the organization. But values, too, need to be acted out to become part of the culture. Chris Argyris spoke about the difference between Espoused Theory (what we say we do), and Theory-in-Use (what we actually do). (Here is a slightly naff video illustrating the two theories.)

It is not the prominence of the values on the corporate website or on the inspirational posters in the corridors that bring the values to life. Whether it’s ‘the customer always comes first’, ‘respect for each other’ or ‘always be curious’, it is how people adopt and act out these values that will establish the culture. Only then (through the magic of the herding effect) can it help sustain a cohesive social organization.

In London, the advertised penalties I saw during my school trip may have deterred most people from dropping litter, but nevertheless I did see bits of rubbish lying on the ground. What I never saw, though, was the chaotic scramble for the door of the bus I was used to at home — not even at the rushest moments of the rush hour. In London, the punk and the old lady, and everyone else behaved very differently. And that had nothing to do with the existence (or even the absence) of rules.

There is a lesson here: culture is a crucial determinant of behaviour— in society, and in organizations.

This article was co-written with Paul Thoresen. You can find part 1 of this trilogy here, and part 2 here.
Originally published on New Organisational Insights.

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Koen Smets

Koen Smets

Koen Smets is an accidental behavioural economist, who works as an organization development specialist. He uses elements from both orthodox microeconomics and behavioural economics to bring about behavioural change. He is on Twitter as @koenfucius.

Culture as Organizational Glue: Beyond Rules.
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