Culture as a P&L Decision

Executive Summary Culture shapes how organisations respond to adversity and sustain performance through leadership transitions.

Externalising responsibility entrenches underperformance ; clear priorities and accountability help restore growth .

Ambitious targets must be supported by focus and resources concentrated on the highest-value opportunities.

Commercial transformation must be accompanied by ethical conduct, merit-based leadership, transparency and diversity .

A commercially grounded culture can endure beyond the leader who initiated it.

. Culture is often treated as a people issue, separate from business strategy or operations. Anand Kripalu , Operating Partner at Kedaara Capital, argues that culture carries a far greater weight. Drawing on leadership assignments at Unilever East Africa, Cadbury India and United Spirits/Diageo, he explains that culture determines how an organisation sets its ambition, responds to adversity and sustains performance after a leader moves on. Business decisions may initiate change, but culture is what enables the results to endure. It begins with important leadership choices like confronting the ‘victim mindset’, increasing ambition, concentrating resources behind key priorities, insisting on ethical conduct regardless of revenue and building a diverse and meritocratic leadership team. Once those choices begin producing results, conviction and new behaviour follows. For CEOs, culture is therefore a P&L decision that affects growth, cost, innovation, resilience and the organisation's future capacity.

. Culture Follows Decisions The following examples illustrate that culture followed after leaders undertook hard commercial decisions, whether on pricing, brands, cost, capacity, portfolio, ethics or organisation design. These decisions clarified what mattered and how success would be measured.

A CEO's role is especially important because their decisions create the largest cultural signals. Employees observe organisational decisions and convert these signals into norms. Cultural change that isn't tied to performance and operating choices tends to stay dependent on the personality of the leader who launched it.

. Three experiences in building performance cultures Unilever East Africa: replacing victimhood with agency

Unilever’ s business in Kenya, Tanzania and Uganda had not grown for a decade, facing the prospect of closure. The decline was attributed to external factors like a slowing economy, non-compliant competitors and a regional office that did not understand local conditions. This created a prevailing culture of avoiding accountability and accepting underperformance as inevitable.

The turnaround began with replacing assumptions and engaging directly with the markets and local stakeholders, including consumer home-visits to understand how low-income households made purchasing trade-offs and examining how local culture influenced consumer choices. This field immersion helped establish leadership credibility and grounded the turnaround strategy in local realities.

2. Cadbury India: using ambition and focus to reset expectations

Cadbury India was recovering from the 2003-04 product infestation crisis. Business growth had historically remained below double-digits and the organisation considered it highly ambitious to attempt to cross that threshold. The gap between the strength of the brand in consumers' minds and the revenue it generated, pointed to unrealised potential, therefore an ambitious 5-year target of 20% annual growth was set.

Initially dismissed as unrealistic, the executive team gradually came on board with the target after evidence of initial success. The company eliminated roughly one-third of its brands, halved the number of SKUs and innovations, stopped price discounting and concentrated resources behind fewer ideas with meaningful scale. The success of Cadbury Dairy Milk Silk and Oreo proved that pursuing fewer innovations but fully funded and supported by the organisation could achieve outstanding results. Over eight years, the business grew at a CAGR of ~25%, while Cadbury Dairy Milk in particular grew at ~30%.

3. United Spirits and Diageo: making values operational

Integrating United Spirits and Diageo required a deep reset of the latter’s operations and culture. The company was plagued by legacy issues, a large portfolio of brands, numerous factories and a promoter-centric leadership culture. The real challenge lay in changing decision-making and day-to-day business conduct.

Restoration began by concentrating resources behind fewer brands, shifting sales from push to pull, halving the factory network,streamlining the white-collar structure, treating ethical standards as non-negotiable and withdrawing from markets instead of making improper payments.

The shift also involved changing the composition of leadership, with women moving from zero representation on the management committee to four of the eight most senior positions, including the top executive role. Women ultimately represented approximately one-third of the top 50 leaders.

Lastly, close collaboration between the CEO and CHRO was essential in defining the intended culture and reinforcing it through leadership and organisational decisions. While structures and roles can be changed quickly, changing the underlying assumptions and behaviours requires hard work.

. Five leadership lessons Set the ambition before the strategy. Leaders must combine evidence with a clear vision of possibility. Low targets risk causing unrealised potential while high targets without conviction can create fear and risk aversion.

Choose a few battles that matter. Leaders must distinguish 'active action' from fruitless time-consuming activities. A small number of well-chosen priorities creates more value than a long list of scattered initiatives.

Focus on the circle of control. For Cadbury, most performance drivers were internal rather than external. Build a culture of agency that questions what can change inside the company instead of rationalising bad performance.

Treat culture as the driver of performance. Culture is most visible in adversity. It shapes whether employees stay, take responsibility and serve customers when ordinary incentives are insufficient. Organisations can build collective capacity by establishing clear priorities, devolving accountability and consistently reinforcing the behaviours expected through simple performance measures.

Build for tomorrow while delivering today. In fast-changing markets, leaders need one eye on current results and the other on future competitiveness. Technology and consumers may move faster than organisations. Structure, talent and culture must be developed anticipating future needs instead of waiting for failure.

. Implications for CEOs and boards Culture becomes durable when leadership decisions consistently reinforce the behaviours needed to execute the strategy. CEOs and boards can test whether this is happening by asking: