Changing Organizational Culture: Frequently Asked Questions
What is organizational culture?
Organizational culture is often defined simply as “How we get things done around here.” The definition of corporate culture is also frequently cited as the underlying beliefs, assumptions, values and ways of interacting that contribute to the unique social and psychological environment of an organization – or if you prefer: the sum of the beliefs, values, customers, and behaviors that collectively create the organizational climate and results.
Our favorite working definition that relates to changing organizational culture: How we get things done that either accelerates (or hinders) our vision, strategy and competitive advantage. (if you are not achieving competitive advantage or executing your strategy well, chances are it’s an issue related to your organizational culture.)
Simply put, if old intelligence centered around WHAT you did (strategy, technology, products); new intelligence is HOW you do it (culture.)
Why changing organizational culture is important
Changing organizational culture is a potent strategy to align people in a disruptive era characterized by rapid change and digital transformation.
(in other words, evolve or die, as Darwin might say.)
When done right, organizational culture is difficult for competitors to copy.
Society is navigating massive disruption in workplace expectations and environmental conditions (compared to the business landscape 50 years ago, towards the end of the Industrial Era.) Experts suggest we are approximately 50 years into a societal revolution known as the Digital Era. Everything about our society is undergoing transformation to adapt – including economic, social, political, business and family norms and values.
Changing organizational culture means becoming high-speed, agile, virtual, balancing business and family/personal needs – and perhaps most importantly to the younger generations – a freedom culture dominated by individual empowerment and choice.
Transforming how, when, where and with whom we work is the realm of culture change in today’s world.
The inability of leaders to change organizational culture so it can adapt naturally to the changing conditions – will predict the extinction of ANY company. In the next decade, experts predict up to 40% of today’s companies will be out of business. Modern culture change is less about fixing a broken culture, and more about HOW you define and execute your adaptation strategy.
Changing organizational culture also means aligning your internal brand to your external brand. Your employees and your target market, are comprised of Millennials – and they care about this, big-time. You cannot consistently deliver an experience to your customers, that is different from the culture you create. Examples:
Brand promise: “We are easy to do business with”? Ask: Do we create an employee experience that is easy?
Brand promise: “Provides innovative solutions” ? Ask: Are risk-taking and experimentation encouraged and rewarded here?
Brand promise: “Friendliest /best-trained staff.” Ask: Do we invest enough in constant training?
Changing organizational culture through measurement
A truth about business is “What gets measured, changes.” Organizational culture is a key health barometer of your business. Not only CAN it be measured – it definitely SHOULD be a top priority of executives to choose an appropriate measurement tool before embarking on any meaningful organizational culture change effort. There are multiple assessment philosophies and approaches on the market today. Denison and OCAI are the longest standing and most prominent. Denison measures behaviors and management practices that link to performance. OCAI measures the perception of the culture today, in comparison to what leaders want it to become.
Any system can change – the question is “Will leaders do the real work?” Measuring organizational culture is an essential element of a sound culture change strategy – and, given that culture change is a long-term process it is best done in measurable and digestible stages.
Otherwise, the process will lose momentum as leaders cannot see the tangible impact of their efforts.
How changing organizational culture impacts employees
Your culture determines who you can hire, who stays and who goes, how leaders lead, which in turn affects how customers and employees feel every day.
Changing organizational culture can often feel like a threat to employees – who often view it as a top-down leadership driven activity that has little transparency (and is more about optimizing the bottom line than caring for people.) Employees care MOST about the organizational culture (versus leaders) because they live in it. They are typically faced with the most problems and issues from cultural tensions and mismatches between the stated values and goals versus the reality.
Any change to organizational culture should address the very real issues and pressures that are felt on your front lines every day. Increasingly, employees choose companies that are actively investing in and working on this element of changing organizational culture.
- Millennial generation is the majority of the workforce and expected to be 75-80% of the workforce by 2025. They will choose freelance status and opt-out of toxic workplaces.
- Customers increasingly choose companies with a sound culture.
- Transparency (#MeToo) is here to stay; in a Glassdoor world it is difficult to hide or overcome a toxic corporate culture to attract good talent.
- The ability or an organization to attract and retain good people, foster teamwork and creativity, develop leaders, lead continuous change, is more important than ever – organizational culture is the best predictor of your capacity to accomplish this.
Can a culture change, really?
Organizational culture change is an emerging business discipline (beyond employee engagement tactics and high profile reinventions (Jack Welch at GE, Lou Gerstner at IBM) from decades past.
Changing organizational culture is no longer just for big turnarounds, led by academics or assessment companies. (John Kotter, Edgar Schein, Dan Denison, OCAI). Culture change today is about preparing to radically evolve in the face of digital transformation, as well as a new generation of workers who have vastly different expectations and attitudes about careers and commitment to work.
Leading 4 generations through the transition to a knowledge-based, disrupted economy is the crucial role of culture change.
Changing culture (from the standpoint of deeply embedded norms, beliefs and assumptions, as cited in most definitions of organizational culture) is the the ONLY way to sustainably address the current massive employee disengagement: Gallup’s research has shown employee engagement statistics have not changed much in 15 years, and that 2/3 of employees are not fully engaged at work – a cost of billions in global productivity.
Who drives organizational culture change?
Changing organizational culture must be championed by the CEO or top leader – that is fairly well accepted. This is because any real change is shaped by leadership behavior, and that is not something most leaders can see (like the fish swimming in toxic water) until the culture is sick or weak. This also must be accompanied by changes to people systems (which takes a strong will and partnership between the CEO and top HR person): Hiring, promotions, separations, performance management, reward and recognition, celebrations.
If the top leader (President, CEO) is not the #1 champion of changing culture, the process rarely works. The top executives must also be willing to model new organizational culture systems, values and behaviors.
Unfortunately, many leaders naively view changing organizational culture as a “bolt-on” activity to the strategy or relegate it to HR or a consultant.
Further, most culture change programs lack a clear link to performance; since the process can take years it is difficult to prioritize for leaders who are responsible for ROI. The linkage between culture and performance must be made strongly, in order to sustain the journey.
How organizational culture changes
As mentioned above, changing organizational culture happens one way: The top leader demands it. Culture is a systemic set of systems, norms, and beliefs that have become unconscious and habitual. It requires a courageous and committed leader to initiate this process.
There are 6 success factors that must be accomplished in all efforts to lead changes in organizational culture – regardless of company size, industry, or success:
- Clear strategic vision. The top leader must have a compelling and clear vision: Why change? Why now? What happens if we don’t? Without a strong intention and direction for the desired culture change, the process rarely sustains long enough before leaders lose patience.
- Top-management commitment. The CEO and top executives must own changing organizational culture, if it is to take hold across the organization. The larger and more geographically diverse the company’s culture, the more this is true. (Note: Sub-cultures are a different situation, not part of the culture change sequence described here.)
- Leaders must model the culture change behaviors. Leaders must clearly demonstrate the values and behaviors IN ACTION, that they want to see across the entire company. This is almost always accompanied with difficult decisions to separate from leaders (and employees) who do not model new behaviors. Training change agents who occupy front-line positions is crucial to cultural change as well.
- People systems must support desired behavioral change. Changing culture must identify and evolve new systems and processes – in particular systems related to time and money: Meeting and decision practices, compensation and promotion systems, procedures and rules on employee behavior. Without this, lasting culture change will not occur. This must include training for employees on new processes, expectations, and systems.
- Ensure diversity, inclusion, and human-centered communications. Fostering an employee experience that builds tribal unity across the business ensures people will embrace and own the culture change (versus resist it). This is why leadership modeling is so important – as is hiring and promotion systems. When employees feel they are with “like-minded” colleagues, this increases loyalty to the company: A priceless premium in today’s rapid-change world.
- Celebrate progress and manage outliers. “Change the people or change the people.” Not everyone can or should make the journey in a cultural change – by definition. The goal is to ensure a transparent and fair process in managing this element of cultural change.
- Plan for ongoing, continuous change. It is no longer sufficient to manage change; to survive, companies today must embed the capacity and skill sets for rapid adaptability, and train the capacity for ongoing, continuous change.
Why senior executives have the least accurate view of organizational culture
Most senior leaders are insulated from day to day operations and customer interactions in their organization. Company culture is lived and enacted through how daily decisions are made and problems are solved on the front lines. As leaders ascend to the top of the organization, they are responsible for a bigger landscape and broader view: More strategic, longer term focus.
When an airplane is flying at 36,000′, pilots see a different view from those on the ground. Neither view is inherently wrong. Pilots depend on frequent communication with translators to help them know what is happening below them. (ATC – known as mid-managers in a company.)
By necessity, senior executives are often preoccupied with issues and conversations that have little connection to what is happening in the business right now.
The senior executive team is usually able to pinpoint the broadest issues the organization is struggling with, but often are not in touch with the true “culture pulse” – issues that keep people from performing their best work every day. This is why it is so important in organizational culture change, to connect-the-dots between senior leaders and the front lines of the business, through progressive communication programs and tactics.
Why culture change is essential for digital transformation
Culture change is increasingly popular, because most organizations are realizing they have outgrown structures and systems that worked 30 years ago.
Efficiency in operations, innovation, profitable growth – do not emerge from digital or technology savvy or solutions. They are the result of HOW people work together across the business to align themselves, serve customers, and being rewarded to work with greater speed and efficiency.
As the world moves from the “industrial age” to the “digital age” (in which every organization, regardless of their business model, is facing digital transformation) the intangible elements in organizations are the final frontier — ideas, people, teams.
How you engage, empower, and inspire people directly translates to how you compete and whether customers will buy from you – and continue to.
In the complex arena of business today, culture change is a requirement. Leaving your organizational culture to chance is a dangerously naïve and outdated viewpoint. Consider examples of winners vs. losers in the same industry, in which one company goes beyond luck and strategy to leverage the intangibles:
- Walmart didn’t beat Kmart only on low-cost strategy.
- Starbucks may be synonymous with coffee – but their CEO claims digital transformation (mobile ordering) along with the hiring of smart, interesting, friendly baristas who are well-trained in how to serve, has truly set them apart.
- Southwest Airlines and Virgin Air provide powerful examples of the power of culture: United and Delta are in the same business, but offer a completely different customer experience. Southwest is the only airline that has been consistently profitable since the 1970’s.
- The power of corporate culture can be shown in the negative as well: Uber’s mass stumble in 2017 almost put the company out of business. Their new CEO emphasizes listening to employees and transparency,
Examples of the best organizational cultures
From November 2017 to November 2018, careers site Comparably surveyed nearly 10 million employee ratings across 50,000 U.S. companies, asking workers more than 50 questions about how their company fared on factors important to employees: Compensation, leadership, opportunities for professional development, work-life balance, perks and benefits.
How is organizational culture a driver of performance/profit?
Your company culture is either helping or hindering your business outcomes.
(It’s not neutral – as in NO impact – that we guarantee.)
- Clarity: What defines your culture’s capacity to drive high performance and profitable growth? Knowing the top 1-2 success factors for your business. For example, Amazon’s corporate culture will look much different than Exxon; one culture’s “business” is efficiency, the other safety.
- Behavioral alignment: Creating crystal-clear behaviors (the foundation of culture) is not easy – every leader we have ever worked with struggles in this territory. But it is essential to high performance – when all employees know what behaviors foster success, you create strong alignment, which is the foundation of all performance.
- Measurement: Do you measure the link between culture and performance? There are many tools that help you do this – including Gallup, Denison. Ensure you benchmark your company culture as a driver of high performance.
According to a global study by Mercer-Delta Consulting top concern of 223 leaders surveyed in 2005 are “increased competitive pressures” (83%) “responding to rapidly changing market conditions (67%), “failure to innovate” (60%), and “satisfying customer expectations” (52%). They further go on to report that today’s organizations are not investing in developing multi-skilled leaders who can effectively adapt to these changes in globalization and increased competitive pressure.
CEO quotes about organizational culture
Dick Clark, CEO, Merck:
“Culture eats strategy for lunch.”
Jack Welch, after he masterminded GE’s corporate transformation:
“No company can sustain high productivity without culture change.”
[resulting in stock price growth of 30% for 20+ years]
Dave Roberts, Barclays:
Culture and capability is the only source of sustainable corporate advantage.”
Sam Palmisano, IBM:
“In the end, whether or not you have a values-driven culture is what makes you a winner or a loser.”
Aligning culture versus culture change
Aligning corporate culture to strategy and linking it to business performance is easier to explain to your stakeholders, more straightforward, and higher payoff than trying to sell a culture change process to an executive team who have never done it.
Further, culture change has been viewed as changing the organization’s DNA – a painful and often impossible process leading to failure rates well over 50%. Culture change may be the goal, but aligning culture with strategy makes it feel more actionable and measurable. This is the key to balancing seemingly impossible paradoxes in your business:
- Short-term performance v. long-term sustainability;
- Centralized command v. employee engagement;
- Being adaptive and flexible vs. being consistent;
- Quality, speed, value, and price.
How do we work on “culture change” along with existing priorities?
Culture change is not a “bolt-on” project, it’s about ensuring HOW you work is in alignment with the behaviors that are most conducive to change and growth.
Most of our clients find significant gains in productivity, freeing up time, energy and resources in their company culture alignment process.
Ultimately, most companies need to NARROW to fewer areas of focus that have a bigger impact – that’s the outcome of aligning corporate culture with the vision and strategy.
Culture change (or culture alignment) work is like health: You are never done! And, the best results come from making small, meaningful changes in areas that are motivating to you – and that you can sustain.
Organizational culture and performance – a crucial linkage
In all organizations undergoing culture change – whether the result of a digital transformation, a merger/acquisition, or a shift in strategy – leaders must begin with defining the crucial linkage between organizational culture and company performance. Otherwise, the initiative will diminish in importance as the organization prioritizes achieving its metrics.
Denison has made this linkage very clear through their assessment process. Based on decades of research, they benchmark a company’s culture to crucial business performance metrics such as profitability, market share, and sales growth, innovation, quality, and employee satisfaction.
If you are not using a tool such as Denison: Determine which KPI’s the business values most and tie metrics related to those, that are people-centered. Examples: Turnover, NPS, productivity, on-time performance of crucial projects, customer satisfaction surveys, Vitality Profit Index (a measure of innovation).
What is the “right formula” for improving our organizational culture?
In addition to what was covered above (n any true culture change, you will develop a cadre of leaders, change agents, and supporters who become culture champions for the new ways of working.
People are “modelers” by nature. (How does a baby learn to walk and talk? By modeling the adults around them.) Leaders and culture champions serve as a daily reminder and role model to help the organization see what’s possible, change outdated habits, and build excitement toward a common vision and strategy.
employees lack clarity about strategy, the pathway to achieving it, and the priorities leadership is committed to in getting there. Applying our methodology will make it easier for you to know what to focus on and create a more balanced skill base in your company culture to get you there. The answer lies not in complicated theories or a one-size-fits-all prescription that works for everyone. The answer lives in a simple but profound truth we have discovered in 20 years of experience:
People don’t resist change. They resist being changed.
The most important rule in culture change is simple (not easy): Engage the people living the culture, to change the culture.
Force-feeding change is sometimes a necessity ( eg, relocation of a company headquarters, regulatory changes or technology innovations, merger/acquisition) – but companies that sustain profitable growth are consistently this way because they champion, cultivate and reward creativity in the company culture. In this way, their employees (who are close to the customer) are the true leaders of culture change.
(and of course you must accept, not everyone can or will make it in a culture change journey.)
In many years of supporting clients in culture change initiatives, there is no more important success factor than learning to tap and use the wisdom of your people in leading change – and providing a proven process for doing so.
How To Lead Culture Change That Links to Performance
There are four important steps for stimulating high performance and profitable growth through corporate culture:
- Measure it – there are sophisticated assessment tools available today that allow you to measure your culture in direct relationship to how it is driving the key performance measures in your business:
- Return on Equity, ROA, ROI
- Sales Growth and Market Value
- Customer Satisfaction
- Product and service innovation
- Employee satisfaction
- Identify What to Change – Pinpoint behaviors that are supporting or hindering your strategy – this is how you preserve the cultural DNA that is part of who you are (which should not change), versus the behaviors and systems for how people work that need to be discouraged, or which no longer serve your needs and goals. Example: Respect is a core value. Listen more than you talk, Ask questions more than telling, are examples of behaviors. One client asked people to make a list of behaviors they wanted to STOP doing – “Eye-rolling” became a fan favorite.
- Make Culture a Strategy – like any strategic focus, culture must be elevated to a “business process” or mission-critical change, to be an accelerator for profitable growth. If you make it a visible part of your management team’s conversation (by measuring it and talking about it at the monthly meeting) it receives the proper attention and weight.
- Be Patient. What is the single most critical success factor in company culture change? We have spent our entire careers successfully teaching organizations and leaders how to implement culture change. What makes or breaks company culture change – every single time – is the presence of a committed leader at the top who understands the importance of corporate culture, is willing to learn their role as a steward of it, and spends time reinforcing the culture they want to see. Too many CEO’s expect culture change to happen through a few Town Hall meetings or worse, a hand-off to HR.
How does culture actually impact business performance?
See “Culture Link to Performance”
Summary of Organizational Culture Change
Especially during periods of change, your organizational culture may be the single most important leverage point in your business.
Company culture is the foundation on which everything takes hold and sticks” – or doesn’t. Whether you are winning through product innovation, operational efficiency, customer/relationship management, implementation of technology, or global expansion … people are the heart of your success.
If you don’t believe culture matters, wait to see if your competition figures it out first.