Tag Archives: Organizational Culture

Leaders and Culture

Leaders, through their words and actions, send messages as to the right and expected way to interact and do things.

Culture is created by shared experience, but it is the leader who initiates this process by acting out his or her beliefs, values, and assumptions in the behaviors he or she demonstrates and the practices he or she uses.

Anyone who has worked with a very good leader or a really bad one can clearly recall the effect that this individual had on the culture of their work group, division, function, or organization. Remember the ‘micro-manager’ that was constantly looking over your shoulder and telling you in agonizing detail how to do things or the leader that never ever made a decision? How did it impact the way people worked? Almost definitely, there wasn’t a lot of empowerment, the energy level in the group was low and people felt undervalued and disrespected.

On the other hand, many of us have been fortunate enough to work with leaders who have given people the freedom to make decisions within their area of responsibility and according to their capability level. How different is that? People are energized, feel empowered and take personal responsibility for their decisions. It seems obvious but most of us would much prefer the opportunity to work with leaders (anyone in a position of influence over others) who empower people rather than those that micro-manage. It affects our morale, productivity and performance. This is why it is extremely important that leaders are aware of the ways that their behaviors and the practices that they use, influence others, their work group and organization’s culture.

Leader Behaviors

Leaders, through their words and actions, send messages as to the right and expected way to interact and do things.

The good news is that leader behaviors and practices can be used in an intentional manner to accelerate culture change and strengthen alignment to strategy. This is not to suggest that changing behavior and practices is easy, but it is one of the most powerful tools that leaders have available to them. This is possible because people notice absolutely everything that a leader says and does. If a leader always arrives early for a meeting, his or her direct reports will do the same or risk the stigma of being unpunctual and disrespectful of others time. If the leader always wears the appropriate safety gear on a work site, people know this is important and they can likely expect censure if they don’t do the same.

Of course, the opposite is also true. A leader that blames someone else for his or her mistake is telling people that avoidance of responsibility for one’s actions is okay. We also see examples of both positive and negative messaging in what leaders say. Keep in mind that every word and action of a leader is carefully examined for subtle nuances and hidden meaning. However, not all leaders are created equal. The level of influence of a leader, or a leadership team, is directly related to the extent others perceive them to be authentic, credible, trustworthy and having integrity.

Authenticity: Genuineness or truth.

Credibility: The ability to inspire belief or trust.

Integrity: Possessing and steadfastly adhering to high moral principles or professional standards.

Trustworthiness: The belief that a person will not take advantage of another who puts him or herself in a vulnerable position.

At the core is the message that the leader genuinely believes in what he or she is doing and saying; that he or she is 100% committed in both words and actions to doing what he or he believes is needed; and that, at the same time, there is an overarching sense that he or she adheres to high moral principles and standards of behavior. In other words, this is someone that others can trust – period.

Leader Practices

Practices are the building blocks that define “the way that things are done around here”.

Leaders also impact culture by the practices that they use in performing their jobs and interacting with people. Practices are the repetitive patterns of activity essential to the smooth functioning of an organization. They cover a wide range of routines including the way leaders make decisions, run meetings and recognize people, just to name a few. They are the building blocks that help to shape “the way that things are done around here”. Practices are different from organizational processes which define how things are done. For example, a process might be the activities and tasks to complete in order to safely add new to a highway whereas a practice is the way this is done such as the use of concrete barriers to protect workers.

Shaping and Changing Culture

While culture change is not easy, it is possible to make it happen and achieve concrete results in a matter of months and not years as popularly believed. We’ve seen numerous examples in all sizes of companies across a wide range of industries and sectors that support this statement. In some cases, the change is dramatic and others less so but, in all cases, leaders were the catalyst for the change that occurred. How did they do it?

The leaders used a combination of their own behaviors and a set of practices carefully selected to fit their purpose. In one case, the leader was frustrated by a lack of discipline that he believed was negatively affecting productivity and his department’s ability to meet its objectives. He decided that he was going to do something about it. Within his work group, he introduced practices designed to bring more discipline into the way people worked. The leader reinforced these practices with his own behaviors. For example, he made it clear that people were expected to be on time for meetings and scheduled appointments, no exceptions and no excuses. To this end, he introduced the following practices and behaviors:

  • Practice 1: Meetings started and ended exactly at the scheduled time. If the meeting was to start at 9:00 a.m., he locked the room door and started the meeting. People were not allowed to enter the meeting after it started. This included his boss and other senior people. It caused quite a stir at the beginning!
  • Practice 2: Appointment times were strictly adhered to. If someone was late for an appointment, the appointment was automatically cancelled. This was a big deal as it was extremely difficult getting time booked with the leader who spent a lot of time at work sites. It could be weeks before people had another chance to meet with him.
  • Behavior: The leader always arrived at least 5 minutes early for every meeting. If it was someone else’s meeting, he would wait 10 minutes and if the meeting hadn’t started, he would leave. Initially, this was a problem with his boss and his boss’ peers in other groups however he was able to manage the issue by agreeing to return to meetings if required. He made his point swiftly and effectively.
  • Result: Within days, people began to show up on time for their appointments. Within a few weeks, people consistently arrived on time for meetings and not just his meetings but also meetings hosted by his boss and others in the organization. Meetings became more efficient and effective and people appreciated that they could depend on the fact that the meetings would always end on time.

He also introduced a number of other practices which he supported through his own behavior. Many of these were small like the ones in this example but the results were huge. Although the change started small with only one department, the change in performance of that department drew attention to what the leader was doing. Soon other departments began to follow suit and within a matter of a few months a significant shift in culture had taken root across the organization.

In Summary

The Good News:

You may not have the power to change the culture of the whole organization, but you can change the culture in your work area and, perhaps, influence the culture of the department, division, region and even the organization.

  • Leaders can use their words and actions in an intentional and purposeful way to influence the norms of behavior in use in their organizations and thereby shape culture.
  • When a critical mass of leaders purposefully and authentically demonstrates the same core set of behaviors, the potential for positive change increases dramatically.
  • Every leader can change practices that are part of the way that work is done on a day-to-day basis.

The Challenge:

Using leader behaviors and practices in a purposeful and mindful way to shape culture requires…

  • A high level of self-awareness that only comes from deep personal reflection which is a skill that few of us have and needs to be developed and honed.
  • A high level of constant vigilance to notice how one’s words and actions are influencing the behaviors of others and to pick up on the subtle clues and messages that people provide.
  • The courage to stand by one’s convictions and the tenacity to stick with it for the long term.
  • The organizational acumen to make sure that your plans don’t get derailed by people at higher levels.

Dr. Nancie Evans
Dr. Nancie Evans is co-founder and VP Client Solutions at Culture-Strategy Fit Inc. specializing in the alignment of organizational culture and strategy. She has developed a unique set of leading-edge diagnostic tools and approaches that provide leaders with deep insights into the culture of their organizations, how it is supporting or getting in the way of strategy execution, as well as the levers that they can use to drive rapid culture change.

CULTURESTRATEGYFIT®
Culture-Strategy Fit Inc. is a leading culture and executive leadership consulting firm conducting groundbreaking work in leveraging culture to drive strategy and performance. Its suite of culture surveys and culture alignment tools are used by market-leading organizations around the world.

Contact Us
www.culturestrategyfit.com
1.800.976.1660
nancie@culturestrategyfit.com

© CULTURESTRATEGYFIT® All rights reserved

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  "articleBody": "Culture is created by shared experience, but it is the leader who initiates this process by acting out his or her beliefs, 
values, and assumptions in the behaviors he or she demonstrates and the practices he or she uses.
Anyone who has worked with a very good leader or a really bad one can clearly recall the effect that this individual had on the culture of their 
work group, division, function, or organization. Remember the ‘micro-manager’ that was constantly looking over your shoulder and telling you in 
agonizing detail how to do things or the leader that never ever made a decision? How did it impact the way people worked? Almost definitely, there 
wasn’t a lot of empowerment, the energy level in the group was low and people felt undervalued and disrespected.
On the other hand, many of us have been fortunate enough to work with leaders who have given people the freedom to make decisions within their 
area of responsibility and according to their capability level. How different is that? People are energized, feel empowered and take personal 
responsibility for their decisions. It seems obvious but most of us would much prefer the opportunity to work with leaders (anyone in a position 
of influence over others) who empower people rather than those that micro-manage. It affects our morale, productivity and performance. This is why 
it is extremely important that leaders are aware of the ways that their behaviors and the practices that they use influence others, their work 
group and organization’s culture. 
Leader Behaviors
Leaders, through their words and actions, send messages as to the right and expected way to interact and do things.
The good news is that leader behaviors and practices can be used in an intentional manner to accelerate culture change and strengthen alignment to 
strategy. This is not to suggest that changing behavior and practices is easy, but it is one of the most powerful tools that leaders have 
available to them. This is possible because people notice absolutely everything that a leader says and does. If a leader always arrives early for 
a meeting, his or her direct reports will do the same or risk the stigma of being unpunctual and disrespectful of others time. If the leader 
always wears the appropriate safety gear on a work site, people know this is important and they can likely expect censure if they don’t do the 
same. 
Of course, the opposite is also true. A leader that blames someone else for his or her mistake is telling people that avoidance of responsibility 
for one’s actions is okay. We also see examples of both positive and negative messaging in what leaders say. Keep in mind that every word and 
action of a leader is carefully examined for subtle nuances and hidden meaning. However, not all leaders are created equal. The level of influence 
of a leader, or a leadership team, is directly related to the extent others perceive them to be authentic, credible, trustworthy and having 
integrity. 
Authenticity: Genuineness or truth.
Credibility: The ability to inspire belief or trust.
Integrity: Possessing and steadfastly adhering to high moral principles or professional standards.
Trustworthiness: The belief that a person will not take advantage of another who puts him or herself in a vulnerable position.
At the core is the message that the leader genuinely believes in what he or she is doing and saying; that he or she is 100% committed in both 
words and actions to doing what he or he believes is needed; and that, at the same time, there is an overarching sense that he or she adheres to 
high moral principles and standards of behavior. In other words, this is someone that others can trust – period.
Leader Practices
Practices are the building blocks that define “the way that things are done around here”.
Leaders also impact culture by the practices that they use in performing their jobs and interacting with people. Practices are the repetitive 
patterns of activity essential to the smooth functioning of an organization. They cover a wide range of routines including the way leaders make 
decisions, run meetings and recognize people, just to name a few. They are the building blocks that help to shape “the way that things are done 
around here”. Practices are different from organizational processes which define how things are done. For example, a process might be the 
activities and tasks to complete in order to safely add new to a highway whereas a practice is the way this is done such as the use of concrete 
barriers to protect workers.
Shaping and Changing Culture
While culture change is not easy, it is possible to make it happen and achieve concrete results in a matter of months and not years as popularly 
believed. We’ve seen numerous examples in all sizes of companies across a wide range of industries and sectors that support this statement. In 
some cases, the change is dramatic and others less so but, in all cases, leaders were the catalyst for the change that occurred. How did they do 
it?
The leaders used a combination of their own behaviors and a set of practices carefully selected to fit their purpose. In one case, the leader was 
frustrated by a lack of discipline that he believed was negatively affecting productivity and his department’s ability to meet its objectives. He 
decided that he was going to do something about it. Within his work group, he introduced practices designed to bring more discipline into the way 
people worked. The leader reinforced these practices with his own behaviors. For example, he made it clear that people were expected to be on time 
for meetings and scheduled appointments, no exceptions and no excuses. To this end, he introduced the following practices and behaviors:
Practice 1: Meetings started and ended exactly at the scheduled time. If the meeting was to start at 9:00 a.m., he locked the room door and 
started the meeting. People were not allowed to enter the meeting after it started. This included his boss and other senior people. It caused 
quite a stir at the beginning!
Practice 2: Appointment times were strictly adhered to. If someone was late for an appointment, the appointment was automatically cancelled. This 
was a big deal as it was extremely difficult getting time booked with the leader who spent a lot of time at work sites. It could be weeks before 
people had another chance to meet with him.
Behavior: The leader always arrived at least 5 minutes early for every meeting. If it was someone else’s meeting, he would wait 10 minutes and if 
the meeting hadn’t started, he would leave. Initially, this was a problem with his boss and his boss’ peers in other groups however he was able to 
manage the issue by agreeing to return to meetings if required. He made his point swiftly and effectively.
Result: Within days, people began to show up on time for their appointments. Within a few weeks, people consistently arrived on time for meetings 
and not just his meetings but also meetings hosted by his boss and others in the organization. Meetings became more efficient and effective and 
people appreciated that they could depend on the fact that the meetings would always end on time.
He also introduced a number of other practices which he supported through his own behavior. Many of these were small like the ones in this example 
but the results were huge. Although the change started small with only one department, the change in performance of that department drew attention 
to what the leader was doing. Soon other departments began to follow suit and within a matter of a few months a significant shift in culture had 
taken root across the organization.
In Summary
The Good News:
You may not have the power to change the culture of the whole organization, but you can change the culture in your work area and, perhaps, 
influence the culture of the department, division, region and even the organization.
Leaders can use their words and actions in an intentional and purposeful way to influence the norms of behavior in use in their organizations and 
thereby shape culture.
When a critical mass of leaders purposefully and authentically demonstrates the same core set of behaviors, the potential for positive change 
increases dramatically.
Every leader can change practices that are part of the way that work is done on a day-to-day basis. 
The Challenge:
Using leader behaviors and practices in a purposeful and mindful way to shape culture requires…
A high level of self-awareness that only comes from deep personal reflection which is a skill that few of us have and needs to be developed and 
honed.
A high level of constant vigilance to notice how one’s words and actions are influencing the behaviors of others and to pick up on the subtle 
clues and messages that people provide.
The courage to stand by one’s convictions and the tenacity to stick with it for the long term.
The organizational acumen to make sure that your plans don’t get derailed by people at higher levels.
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The Culture-Performance Dilemma

Corporate Culture Performance Dilemma

If you are a manager at any level in an organization, you need to care about culture. Specifically, you need to understand how your words and actions are affecting the values, beliefs and assumptions of the people within your sphere of influence, and particularly those who report to you. This goes well beyond behaving in a manner that is consistent with your organization’s values, although this is certainly important. The fact is that you make choices every day about the way you manage, do your work and interact with people that directly influence culture. This includes the way you go about planning and scheduling work, conducting meetings, making decisions, sharing information and so forth. This is true in every organization regardless of sector, industry, size or nationality.

Why is this important? The bottom-line is that managers affect culture and culture affects performance and not just financials either. Culture is a significant factor in determining the level of innovation, customer experience, safety, quality, reliability, employee retention, and so on. This plays out on a small scale at the group or department level, as well as large scale within business units and even entire organizations. When a significant number of managers are operating in a manner that demonstrates similar beliefs and a shared sense of purpose you have traction. This does not mean that they are doing things the same way, but it does mean that they are operating with a shared set of assumptions and beliefs about the right way to go about fulfilling their roles and responsibilities. This is evident in their behavior, the practices that they use, the heroes they celebrate, the stories they tell, and the structures, systems, and processes they design amongst other things. These various manifestations of culture in turn affect the way that work is done in terms of both efficiency and effectiveness. It determines to a large extent the ability of the organization to execute its strategy such as delivering an exceptional customer experience, high levels of patient safety, consistent execution and continuous innovation. It also directly impacts the employee experience thereby affecting engagement, satisfaction and retention. While this sounds good, what proof is there that it is in fact true?

Culture and Performance

Triggered by the global success of Japanese firms in the 1970’s, questions began to be asked about what it was that the Japanese were doing that was giving them this unexpected competitive advantage. The answer was, at least in part, that it was their culture that was making the difference in performance. Specifically, one study by Ouchi compared the culture and performance of American and Japanese firms and found that the higher level of success of the latter was the result of worker’s commitment and a unitary vision for a company’s performance. Furthermore, he suggested that the superior financial success of the Japanese firms was attributable to their culture and specifically to their attention to humanistic values such as concern for employee well-being and emphasis on consensual decision-making[i]. Similarly, Pascale and Athos attributed higher productivity in Japanese versus American firms to the formers focus on human relations[ii]. This was evident in their attention to employee well-being and skill development, as well as their team-based way of working that was anchored by a unified focus on organizational goals and performance. These observations were a catalyst for the surge of interest in the culture-performance link that led to the 1982 release of Peters and Waterman’s best-selling book, In Search of Excellence, and, in the same year, Deal and Kennedy’s Corporate Culture.

While the former describes organizations that achieved stellar results in large part because of the culture that their leaders created; the latter takes a prescriptive approach detailing the things that leaders need to pay attention to in order to create a healthy and high performing culture. The assertion that culture plays an important role in determining organizational performance continued with Denison’s 1990 book, Corporate Culture and Organization Effectiveness followed in 1992 by Kotter and Heskett’s book titled Corporate Culture and Performance. Both publications present factual evidence that the authors’ assert conclusively link organizational culture with the achievement of superior financial results.  Books such as Bossidy, Charan and Burck’s (2002) Execution and Collins’ (2001) Good to Great continued this trend with their description of cultures that set certain organizations apart from the rest.

The Bad News

Unfortunately, many of the organizations cited as stellar examples of the cultures that other organization leaders should aspire to create ended up struggling or outright failing. For example, only two years after the release of In Search of Excellence, Business Week published a story reporting that a third of the supposedly “excellent companies” were in difficulty including Wang, Eastman Kodak, and Westinghouse[iii]. Within five years, the number no longer viewed as leaders in their industries had increased to two-thirds[iv]. Similar findings have plagued subsequent work. The three case studies of effective culture change described by Kotter and Heskett in their bestselling book Corporate Culture and Performance all have experienced significant challenges[v]. For example, the Nissan plant in Zama, Japan was closed in 1995, a mere three years after their book was released. Similarly, many of the organizations in Collins and Porras’ book Built to Last have gone through substantial performance challenges despite the assertion that they had developed “a blueprint for building organizations which will prosper into the twenty-first century and beyond”[vi]. Hewlett-Packard, IBM and Motorola are only a few examples. Furthermore, ten of the original eleven companies[vii] noted as stellar performers in Collins’ book Good to Great performed slightly worse than the Standard & Poor’s 500 during the 2009 recession[viii]. In fact, two of them, Circuit City and Fannie Mae had disastrous results with Circuit City filed for bankruptcy in 2008 closing the last of its stores in March 2009[ix]. Meanwhile, the U.S. government stepped in to shore up Fannie Mae hand-picking executives to run the company and pledging unlimited financial support currently projected to be somewhere in the vicinity of $154 Billion USD[x].

To make matters worse, the turn of the century introduced a new trend in the popular and academic literature being the tendency to blame culture for a wide range of well publicized negative outcomes. In an extreme example, Richard Mason in an analysis of the 2003 Columbia Space Shuttle disaster noted that “With respect to Columbia, and Challenger and Apollo before it, NASA’s culture proved to be lethal”[xi]. Culture was also cited as a primary contributing factor to the recall of nearly nine million cars by Toyota in late 2009. For example, Time.com quotes Jeffrey Kingston, director of Asian studies at Temple University in Japan, as saying, “Toyota is famous for having an arrogant culture. They’re so used to dealing with successes that when they have a problem, they’re not sure how to respond”[xii]. Among the long list of others is Enron, once the seventh largest firm in the United States, described as an organization whose culture put short-term financial results ahead of ethics and doing the right thing[xiii], a description also applied to Nortel Networks whose culture was once described as being one of deceit and manipulation[xiv].

Toyota

In late 2009, Toyota Corporation recalled more than eleven million vehicles worldwide and, in Toyota RecallJanuary 2010, stopped production of several of its most popular vehicles. This unprecedented action was taken in response to 19 fatalities attributed to accelerator pedal flaws. Later investigations revealed that the problems were caused by the accelerator pedals getting caught in floor mats which resulted in the vehicle continuing to accelerate after the driver removed pressure (NHSTA investigation) as well as ‘sticky pedals’ in some Toyota models (internal investigation)[xv]. For a company that’s reputation for reliability and quality was a significant contributor to it being ranked as one of the world’s top ten leading brands and the world’s most valuable automotive brand in 2008[xvi], this was a stunning fall from grace. How could this happen? Specifically, how could an organization that had been a model of best practices in automotive manufacturing end up responsible for the deaths of nineteen people?

The answer may be found at least in part in the way it dealt with past allegations. Although the stuff literally hit the fan in late 2009, reports of ‘unwanted acceleration’ have been traced back to 2003 when an incident occurred during production testing of its Sienna minivan. An internal investigation determined that the problem was caused by a missing clip that allowed the trim panel to trap the accelerator pedal. The company decided that it was an isolated incident. It wasn’t until five years later that Toyota informed the NHSTA of the incident in response to a blanket request for information[xvii]. Recent news reports suggest that Toyota failed or refused to disclose vehicle problems to federal regulators over a period of years[xviii].

From 2003 through 2007, the NHSTA continued to receive reports of related problems with Toyota vehicles. One of the most high-profile incidents occurred in July 2007 with the death of Troy Edwin Johnson who was killed when a Camry accelerating out of control hit his car at approximately 120 m.p.h. The driver had been unable to slow the car for 23 miles leading up to the crash. Toyota eventually settled out of court with Johnson’s family for an undisclosed amount. Then, in August 2009, an off-duty highway patrolman and his family were killed when the Lexus ES350 they rented ended up in a runaway crash. The NHTSA and the California Highway Patrol investigation of the incident reported that the floor mat snagged the pedal causing the uncontrollable acceleration. In October of the same year, Toyota issued the first of a series of recalls affecting 3.8 million vehicles on the grounds that floor mats can trap the pedals[xix]. The recall exposed a larger problem: Toyota’s inability to resolve a brewing crisis that reportedly first surfaced in 2002 when complaints of sticky accelerators spiked.

What does this have to do with culture? At least three cultural factors appear to have contributed to Toyota’s problems. First is the reluctance to admit that there is a problem and face the shame and embarrassment that would accompany it. In a high-status company like Toyota this would be especially difficult. Second, there is the emphasis placed on respect and deference that prevents those lower in the organization from challenging and questioning the decisions of their superiors[xx]. Third, there is the hubris or arrogance of leaders which is largely a product of past success and public aggrandizement that cause them to believe in their own, and the organization’s, infallibility[xxi].

General Motors and British Petroleum

General Motors, once the largest automobile manufacturer in the world, filed for Chapter 11 bankruptcy on June 1, 2009[xxii]. By the end of 2009, the company had received $50 Billion USD in government bailouts with the U.S. government owning a 60% stake and the Canadian government a 12.5% stake[xxiii]. While conditions in the global economy undoubtedly were a major factor in GM’s problems, its “inward-looking century-old corporate culture” also played a central role in its demise[xxiv]. This included the following observations by Rob Kleinbaum, a GM executive:

“GM’s culture shows little tolerance for dissent, little appetite for making hard decisions and an insularity that has made it seem sometimes “tone deaf” to broader societal concerns like the environment.[xxv]

“GM has promised profound and fundamental changes to the taxpayers, but there is little evidence that they are addressing the fundamental cultural issues that have driven so much poor decision making”[xxvi].

Then there is British Petroleum which is infamous for its role in the Gulf Oil spill of 2010. This is an organization that reportedly compromised its values of safety and environmental stewardship in pursuit of profits with catastrophic results[xxvii]. The impact on the environment and the people and communities of the Gulf coast is almost unfathomable. The effect on the company was also huge as illustrated by the announcement made on July 27, 2010 that it had a “net loss of $16.97 billion during the second quarter of 2010, with the oil spill costing $32.2 billion up to that point”[xxviii].

The Good News

At the same time, there are also organizations that have leaped to the forefront of their industries reportedly in large part as a result of their unique, positive cultures. Amongst these, the best known is probably Google, who at the time had a reported market capitalization of $196.33 Billion USD. This made it the ninth most valuable firm in the world and by far the most valuable internet information provider at almost seven times that of its closest competitor[xxix]. Google was also consistently ranked in the top five of Fortune’s ranking of the “Best Companies to Work For”[xxx] which is duly noted by the fact that the company received over 3,000 job applications per day[xxxi]. This is further highlighted by the fact that “nearly one in five (American university) undergraduate students, 17 percent, chose the web’s leading search engine (Google) as their ideal employer”[xxxii]. Based on these facts alone, there is absolutely no question that Google is a huge success but what made it this way? What is it about Google that separated it from its internet search engine competitors such as Yahoo, Microsoft (Bing) and AOL? While some people such as Microsoft’s CEO Steve Ballmer may argue that it is the result of being the first to “get it right”[xxxiii], there is a strong case in support of its culture as an important differentiating factor.

Google

“The Google culture is probably one of the most positive, influential, all-encompassing, productivity-inducing environments the world has ever seen” said Kevin Ryan, a vice president at SearchEngineWatch.com, an industry newsletter”[xxxiv].

Google is renowned for the outstanding benefits that it provides to its employees, also known as Googlers. These include amongst other things, free snacks and meals, health care coverage from the first day with the company, generous tuition reimbursement, an assortment of entertainment and physical fitness options such as foozball, ping pong and yoga classes, not to mention dogs, lava lamps and massage chairs[xxxv]. While this is certainly unique and attractive, it is only one small piece of the picture. Google’s culture was crafted by engineers for engineers reflecting the influence of its founders, Larry Page and Sergey Brin, who were graduate students at Stanford when they started the company in 1998. As such, it has a strong laboratory feel in that it combines a relaxed, playful work environment with a deeply methodical, task-based engineer design system (think extreme attention to details) and big expectations in terms of employee behavior[xxxvi]. This is reflected in its loosely formed team-based structure comprised of Googlers with equal authority and a certain level of autonomy. There are few middle managers and senior managers are “so hands on, it’s hard to qualify them in a separate category”[xxxvii].

Autonomy plays out in a number of different ways. For one thing, Googlers are encouraged to take 20 percent of their time to work on things that interest them. This is where collaboration comes in. If an engineer has an idea for a new product, he or she seeks out other Googlers who have a similar interest and away they go. GMail and Google News are two products that were a result of this process. A Googler may also have an idea for an internal organization improvement such as expanding agile programming practices or fixing bugs that are irritants to customers[xxxviii]. In this case, he or she invites other Googlers to form a ‘grouplet’ which is a self-organizing team of individuals with a common interest. Grouplets “have practically no budget and they have no decision-making authority. What they have is a bunch of people who are committed to an idea and willing to work to convince the rest of the company to adopt it”[xxxix]. To make sure that the grouplets are aligned with the company’s interest and are not working at cross purposes, oversight is provided by grouplet organizers who meet once a week[xl].

Collaboration is also evident in the company’s famous hiring practices which invite existing employees to provide references and/or comment on applicants. This is facilitated by its applicant tracking system which matches applicants with existing employees based on the school that they graduated from and past work experience. Using this approach, recruiters can access the perspectives of Googlers who have a deep knowledge of the requirements of the job and culture when assessing the fit of potential hires. It also provides Googlers with an active role in building the community even if they aren’t part of the formal interview process[xli].

The point is not that organizations should try to emulate Google whose culture is deeply rooted in its own unique context (more on that later), but to provide evidence of a strong, positive culture that plays a huge role in the organization’s past and current success. Given Google’s emphasis on searching out new ideas and learning throughout the organization, this is also likely to continue long into the future. It is however only one of many organizations that provide anecdotal evidence of the link between culture and performance.

ING Direct

ING Direct, a Dutch owned company, shook up the financial sector with its direct to consumer and no fees business model. ING Direct is known for its ‘nonbanking culture’ referring amongst other things to its flat organization structure with few management layers. There are no titles and no offices. Everyone has the same metrics and is in the bonus program, which by the way are very meaningful. In this way, the company provides tangible evidence of one of its thirteen values “We will be for everyone”. It also tries to hire people who do not have prior banking experience, except in specialized areas such as risk. Instead, it emphasizes the fit between the person and the company’s values which are the same ones that are used to connect with its customers.

At ING Direct, it is about doing things differently which encompasses the way they conduct their business (on-line and through social media), their offer (it’s all about saving therefore no credit cards), as well as the way they work (their culture). To make this happen, the emphasis is on alignment with a shared sense of purpose, goals and values. Managers make sure employees know what to do but allow them a level of autonomy in how they do it[xlii]. By doing things differently, ING Direct transitioned from a 1997 experiment in North American on-line banking[xliii] to becoming the 18th largest bank in the United States in 2009 with $90 Billion in assets and $77.4 Billion in deposits[xliv].

Sisters of St. Mary Health Care

“In 2008, SSM Health Care began an ambitious effort to instill across the organization a culture of patient safety. The effort, called Always Safe . . . Every Day. Every Way focuses on clinical care; communications; and the commitment of all employees, physicians and administrators to the goal: Do no harm, which means zero preventable deaths and zero medical errors.”[xlv]

In the not-for-profit sector you don’t have to look any further than Sisters of St. Mary (SSM) Health Care. SSM Health Care is a Catholic health care system with approximately 22,000 employees, 5,800 physicians and nearly 3,900 volunteers operating in four states and serving more than two million people annually[xlvi]. It “owns 15 hospitals, has a minority interest in five hospitals, manages one hospital, has affiliations with 16 rural hospitals, owns two nursing homes, and has a variety of partnerships with physicians, including Dean Health Plan in Wisconsin”[xlvii]. Like ING Direct, it also does things differently and extremely well.

The first health care organization to receive the Malcolm Baldridge Award, SSM Health Care has an international reputation as a “pioneer in the use of quality measures to improve patient care”[xlviii] and has received numerous awards for quality, safety and employer of choice. To achieve its goal of exceptional patient safety and care, it has created a high reliability culture[xlix] that is characterized by “open communication, highly reliable processes, teamwork, the sharing of best practices, and accountability”[l]. This is evident in a wide range of practices and behaviors that aim to keep “patient safety top of mind with every clinician, employee and administrator in the system – all the time”[li].  For example, ‘incident intervention teams’ or ‘no harm teams’ examine near misses (incidents that could have happened but didn’t) to identify causes and develop solutions to prevent them from happening in the future. These prevention strategies are then rolled out across the entire health care system. Another example is its Clinical Collaboratives which are the cornerstone of the organization’s system-wide quality improvement efforts. The collaboratives consist of people from a wide range of professions such as medicine, nursing, pharmacy, infection control, pastoral care and case management working together to improve patient care in targeted clinical areas such as surgical care and congestive heart failure. Since 1999, more than 110 health care teams have participated in the collaboratives[lii].

The results of this continuing effort were impressive. In 2009, St. Mary’s Health Center was ranked 10th in the United States out of 4,400 hospitals for patient care in the areas of heart attack, heart failure, surgical care and pneumonia by the New York based Commonwealth Fund[liii]. In another example, one of its hospital reports that since 2001 it has reduced in hospital acquired infections that were often fatal and cost $30,000 to $90,000 each by 85%; lowered staph infections from 26 to 8 per thousand patients; decreased intensive care mortality from 5.5% to 3.3%; and, reduced acute diabetic complications from 13.5% to 5%[liv].

Southwest Airlines

As for unionized (and non-unionized) environments, there is Southwest Airlines that managed to generate a level of loyalty among its employees that is rarely found in organizations of any kind[lv]. As an example, the New York Times noted that “Pilots often help clean up a cabin to speed up operations. Flight attendants have been known to lend a hand on their day off”[lvi]. This is forty years after it first burst onto the scene with its zany culture and low-cost offer that put fear in the hearts of its competitors. In this company, culture is viewed as the key differentiator that allows it to do things that other organizations only wish they could do. Here, employees understand that their success depends on the success of the organization. As a result, they go above and beyond what might be typically expected to help the company deliver on its promise of no frills, low cost service. The impact is readily apparent. During the 2009 recession when its competitors were losing billions of dollars, Southwest remained profitable despite soaring fuel prices flying “86 million passengers, more than any other airline within the United States”[lvii].

What Does This Tell Us?

So far, we have touched on organizations that have leveraged their cultures to drive innovation (Google), patient care and safety (SSM Health Care), and a low-cost operating model in a unionized (Southwest Airlines) and non-unionized (ING Direct) environment. Similar stories can also be found linking culture to delivery of an exceptional customer experience at the Four Seasons Hotels. The Four Seasons was ranked number two in Business Week’s 2007 ranking of top customer service organizations and number four in 2010[lviii]. Among the long list of things that the hotel does to embed customer service into every employee’s heart and mind is its ‘familiarization stay’. At the end of a seven-day new employee orientation, every employee from housekeepers to front-desk clerks stay one night at their hotel including free dining. After six months they can stay up to three nights for free and by ten years they get up to twenty free nights. In this way, each and every employee personally experiences what the customer does when they stay at the hotel[lix].

We could go on and on describing organizations that are leveraging their culture to execute their strategies and achieve outstanding performance but what does this prove? On the one hand, we have the good news provided by anecdotal evidence linking culture to performance. On the other hand, we have the bad news evident in the number of organizations that have demonstrated this link and later struggled or failed. With these mixed messages, it is no wonder that leaders are skeptical when it comes to the link between culture and performance and the prescriptions for achieving effective, high performing cultures that are provided in the popular literature[lx]. It therefore seems that the link between culture and performance warrants a closer look. Stay tuned for more to come.

 

Author’s Note: This article was written in 2010 but never published. While there are more recent case studies, the message remains the same…case studies and anecdotal evidence is inconclusive in determining the relationship between culture and performance.

[i] Ouchi & Jaeger, 1978; Ouchi & Johnson, 1978

[ii] Pascale and Athos (1981)

[iii] Business Week (1984)

[iv] Kim & Mauborgne (2005)

[v] Kotter & Heskett (1992)

[vi] Collins & Porras (1994)

[vii] Gillette was excluded from the analysis as it was acquired by Procter & Gamble in 2005 for $57 billion. P&G shareholders have seen a 23 percent decline in value during 2009.

[viii] Hawkins, J. (2009). Good to Great to Bust? Retrieved from ArkansasBusiness.com (http://www.arkansasbusiness.com/article.aspx?aID=112581.54928.124704)

[ix] Wikipedia (2011). Circuit City Stores. Retrieved from Wikipedia.org (http://en.wikipedia.org/wiki/Circuit_City_Stores.)

[x] Goldfarb, Z.A. (2010). Fannie Mae, Freddie Mac bailout cost likely to rise to $154 billion, agency projects. Retrieved from WashingtonPost.com (http://www.washingtonpost.com/wp-dyn/content/article/2010/10/21/AR2010102101941.html)

[xi] Mason (2004)

[xii] Saporito, Schuman, & Szczesny (2010)

[xiii] Sims & Brinkman (2003)

[xiv] Kalawsky (2005)

[xv] LaPonsie, M. (2010). 2010 Global Toyota Recall: Two Recalls Impact Nearly 8 million Toyota Vehicles Worldwide. Retrieved from Suite101.com  (http://www.suite101.com/content/2010-global-toyota-recall-a197355#ixzz18wvYUeyk)

[xvi] ALG (2010). Toyota Recall Impacts Resale. Residual Value Report, 11 (2).

[xvii] Steinmetz, K. (2010). Toyota’s Safety Problems: A Checkered History. Retrieved  from  Time.com (http://www.time.com/time/business/article/0,8599,1962218,00.html#ixzz18xD348W)

[xviii] Rhee, J. (2010). Congress Blasts Toyota for Withholding Key Evidence, Secret ‘Books of Knowledge’. Retrieved from ABCNews.com (http://abcnews.go.com/Blotter/RunawayToyotas/congress-blasts-toyota-withholding-key-evidence-secret-books/story?id=9957579&page=1)

[xix] Steinmetz (2010)

[xx] Kingston (2010)

[xxi] Sheth, J. (2007). The Self-Destructive Habits of Good Companies…And How to Break Them. Upper Saddle River, NJ: Wharton School Publishing.

[xxii] BBC News (2009). GM enters bankruptcy protection. Retrieved from news.bbc.co.uk (http://news.bbc.co.uk/2/hi/business/8077255.stm)

[xxiii] Kim, S. & Lawder, D. (2010). GM repays U.S. loan, government loss on bailout falls. Retrieved from Reuters.com (http://www.reuters.com/article/idUSTRE63K56920100421)

[xxiv] Krolicki, K. (2009). GM culture: A problem that cash can’t fix? Retrieved from Reuters.com (http://www.reuters.com/article/idUSTRE52104N20090302).

[xxv] ibid

[xxvi] ibid

[xxvii] Edersheim, E.H. (2010). The BP Culture’s Role in the Gulf Oil Crisis. Retrieved from blogs.hbr.org (http://blogs.hbr.org/cs/2010/06/the_bp_cultures_role_in_the_gu.html)

[xxviii] Reuters (2010). BP Launches Image Overhaul, Ditches CEO. Retieved from CNBC.com (http://www.cnbc.com/id/38423142)

[xxix] “Market Capitalization (Market Cap) is a measurement of business value based on share price and number of shares outstanding. It generally represents the market’s view of a company’s stock value and is a determining factor in stock valuation” (YCharts, 2011).

[xxx] Johansson, G. (2010). Google: The World’s Most Successful Corporate Culture. Retrieved from Suite101.com (http://www.suite101.com/content/google-the-worlds-most-successful-corporate-culture-a242303)

[xxxi] Petrecca, L. (2010). With 3,000 job applications a day, Google can be picky. Retrieved from USAToday.com (http://www.usatoday.com/money/workplace/2010-05-19-jobs19_VA_N.htm)

[xxxii] Wright (2008: 56)

[xxxiii] Johnson, B. (2010). Ballmer: Google’s culture isn’t responsible for its success. Retrieved from guardian.co.uk (http://www.guardian.co.uk/technology/2010/mar/03/microsoft-bing)

[xxxiv] Yung, K. (2007) Google’s engine for change. Knight Ridder Tribune News Service, 5 September: 1.

[xxxv] Johansson (2010); Yung (2007)

[xxxvi] Johansson (2010)

[xxxvii] Johansson (2010)

[xxxviii] “Agile programming is a product development approach that incorporates

feedback early and often, and was being done in a few scattered parts of the organization” (Mediratta & Bick, 2007)

[xxxix] Mediratta & Bick (2007)

[xl] Mediratta & Bick (2007)

[xli] Wright, A.D. (2008). At Google, It Takes A Village To Hire an Employee. HR Magazine: SHRM’s 2009 HR Trend Book, 53 (12), 56-57.

[xlii]  Hitt, M.A., Ireland, R.D. & Hoskisson, R.E. (2009) Strategic management: competitiveness and globalization: concepts & cases. Mason, OH: South-Western Cengage Learning.

[xliii] Mueller, C. (2007). ING Direct’s Man on a Mission. Retreived fromTime.com (http://www.time.com/time/magazine/article/0,9171,1633064-1,00.html)

[xliv] RJ & Mackay (2010). SNL Financial’s top 50 biggest banks and thrifts in the U.S. Retrieved from RJandMackay.com (http://www.rjandmakay.com/rj-and-makay/snl-financials-top-50-biggest-banks-and-thrifts-in-the-us.html)

[xlv] SSM Health Care (2011). Who We Are. Retrieved from SSMHC.com (http://www.ssmhc.com/internet/home/ssmcorp.nsf/documents/who+we+are)

[xlvi] ibid

[xlvii] Wikipedia (2010). SSM Health Care. Retrieved from Wikipedia.org (http://en.wikipedia.org/wiki/SSM_Health_Care)

[xlviii] Wikipedia (2010). SSM Health Care. Retrieved from Wikipedia.org (http://en.wikipedia.org/wiki/SSM_Health_Care)

[xlix] By definition, highly reliable organizations are ones that operate under very trying conditions all the time and yet manage to have fewer than their fair share of accidents. Consistent with this perspective, SSM Health Care defines high reliability as zero errors over a long period of time. High reliability organizations are the focus of Managing the Unexpected: Assuring High Performance in an Age of Complexity by Karl E. Weick and Kathleen M. Sutcliffe (2001).

[l] SSM Health Care (2011). Patient Safety. Retrieved from SSMHC.com (http://www.ssmhc.com/internet/home/ssmcorp.nsf/documents/Patient%20Safety?opendocument)

[li] SSM Health Care (2011). Patient Safety. Retrieved from SSMHC.com (http://www.ssmhc.com/internet/home/ssmcorp.nsf/documents/Patient%20Safety?opendocument)

[lii] SSM Health Care (2011). Patient Safety. Retrieved from SSMHC.com (http://www.ssmhc.com/internet/home/ssmcorp.nsf/documents/Patient%20Safety?opendocument)

[liii] SSM Health Care (2010). Experience Exceptional: SSM Healthcare Report to our Communities: Top 10 in 2010: Ten Reasons Why Your Community is Better Because SSM is There.

[liv] Need reference from Sherrill

[lv] Mouawad, J. (2010). Pushing 40, Southwest Is Still Playing the Rebel. Retrieved from NYTimes.com (http://www.nytimes.com/2010/11/21/business/21south.html?_r=3&pagewanted=all)

[lvi] Mouawad, J. (2010)

[lvii] Mouawad, J. (2010)

[lviii] Business Week (2007). 25 companies where customers come first. Retrieved from articles.moneycentral.msn.com (http://articles.moneycentral.msn.com/News/25CompaniesWhereCustomersComeFirst.aspx?page=1); McGregor, J. (2010). Customer service champs 2010. Retrieved from Businessweek.com (http://images.businessweek.com/ss/10/02/0218_customer_service_champs/1.htm)

[lix] Business Week (2007). 25 companies where customers come first. Retrieved from moneycentral.msn.com (http://articles.moneycentral.msn.com/News/25CompaniesWhereCustomersComeFirst.aspx?page=1)

[lx] According to industry studies, The 2005 Canadian Corporate Culture Study reported that 82% of the executives that participated in their study believe that there is a direct correlation between culture and financial performance (Waterstone Human Capital, 2005).

 

Conducting Culture Due Diligence

Conducting Culture Due Diligence

Every acquisition an organization makes, no matter how large or small, has a culture that defines the way things are done around here. This is deeply embedded in its DNA and affects all aspects of organizational life. It is anchored in a set of unconscious and taken-for-granted beliefs and assumptions about the expected and best way to behave, interact and work. It is what makes every organization unique and is one of the reasons integrating acquisitions can be a significant challenge.

Even if an acquisition appears to be similar, employees may have different values, beliefs and norms that have implications for integration. For example, the Fire and Security industry typically places a high priority on safety, quality and reliability in order to protect against loss of property and loss of life. The way organizations address this obligation can, however, be very different. One organization may emphasize strict adherence to rules, policies and procedures while others focus on empowering people to use their judgment. Both believe their approach is the right and best way to accomplish their goal. The thing is they are also polar opposites creating the potential for a costly culture clash. If the acquirer were to force the acquisition to adopt its approach, it would immediately be met with resistance. This would be accompanied by a significant risk of employee turnover and a deterioration in performance which could, in a worst-case scenario, lead to loss of property or life and/or erode the value of the acquisition.

Comment on cultural due diligence for mergers and acquisitions.Culture due diligence is designed to uncover high risk cultural differences so that integration plans can be tailored to prevent these types of problems from occurring and help the transition to go as smoothly as possible. It is also used to identify areas of synergy that can be leveraged to ease employee anxiety and facilitate integration. Culture due diligence is:

  • A process used by due diligence and integration teams to develop plans that effectively address high risk areas of cultural tension.
  • A competency in conducting observation to gain understanding of an acquired organization’s culture.
  • A strategic capability to overcome cultural barriers and accelerate integration efforts.

Why Is Culture an Important Part of Due Diligence?

Over the past two decades, extensive research has shown that organizations that understand the culture of their acquisitions and use this knowledge to make deal decisions and develop culturally appropriate and effective integration strategies and plans are more likely to be successful than those that don’t. By assessing culture during due diligence and integration planning, organizations can:

  • Identify red flags or non-negotiables: In some cases, cultural differences can present major risks that the acquiring organization is not prepared to take. For example, a regulated company with a need for strict adherence to policies would have to carefully consider the benefits of acquiring an organization that is flexible when it comes to following rules.
  • Determine the best way to phase integration: One of the biggest risks of integration is to unknowingly damage the source of the acquisition’s value. For example, an acquisition that has built a tightly integrated customer-focused operation would suffer if an acquirer forced a change in CRMs or moved customer facing work to another office.
  • Increase retention and engagement of critical people: With few exceptions, one of the keys to a successful acquisition is the ability to retain and engage leaders, experts and others who have knowledge, customer relationships and capabilities that are the foundation of its value. While retention packages certainly help, this is not enough to ensure they will continue to dedicate the same level of energy and attention as they have in the past.
  • Lower the cost of integration: The proactive identification and removal of obstacles caused by cultural differences allows integration activities to proceed more quickly and effectively thereby reducing associated costs.
  • Identify synergies and best practices: In acquiring an organization, there is always the potential to uncover cultural practices that are sources of value to one or both organizations. For example, identifying the specific practices that allow for the rapid development and release of new products would be of huge value to an acquirer who has been struggling in this area. What Is Involved?

When to Conduct Culture Due Diligence

Including culture as part of due diligence and integration planning is recommended for most acquisitions especially when success depends on the retention and engagement of people. The exception is when the reason for acquiring the organization is to gain access to specific assets and does not involve acquiring people. For example, a company acquires existing customer contracts from a small owner who has a $5M per year contract to perform a service. The owner is ready to retire, and the acquirer has no intention of retaining the acquired company’s employees or equipment. Of course, there may be differences in the scope of the culture due diligence depending on the size of the acquisition. However, if the acquisition involves onboarding one or more people, it is still important to understand their interests, motivations and behavior but this will be a relatively short and simple undertaking.

With this in mind, culture due diligence can be conducted at different points in the acquisition process depending on the objective. Obviously, if culture is a consideration in making a deal decision, it needs to be included in due diligence activities. In most cases, culture isn’t a deciding factor which means its primary purpose is to inform integration plans. The bottom-line is the earlier culture due diligence is completed, the more time there is to develop effective plans. It can however occur after a deal closes, preferably as soon as possible before changes are implemented in the acquired organization. There is also an advantage to post-close due diligence activities as this provides the opportunity to involve people from both organizations in the process. This circumvents the need for observation which is replaced by focused discussions in a workshop format. This is very effective in identifying synergies and cultural tensions while engaging acquired employees in planning activities that can increase buy-in and support for the changes to be implemented.

What Does Culture Due Diligence Involve?

Culture due diligence is conducted by members of the acquiring organization’s due diligence or integration team who directly interact with and have access to the acquisition’s leaders, people and facilities. Observations occur as team members participate in negotiations and/or pre or post-close activities. Why observations versus surveys or other methods? For one, it is rarely possible to survey or engage people in a potential acquisition until after a deal closes. This leaves us with members of the acquiring organization as our source. Before we can ask them to complete a survey about the acquired organization, they need to gain some insights about the way they operate, their beliefs and values. This is where guided observations play a valuable role.

Observation is a method employed to learn about the physical, social, cultural, and economic contexts in which the members of an organization live; the relationships among and between people, contexts, ideas, norms, and events; and people’s behaviors and activities – what they do, how frequently, and with whom. It is unique because the observers interact with people in the organization rather than simply watching from a distance. This provides the opportunity to learn what life is like for an “insider” while remaining, an “outsider.” With these insights, due diligence team members are equipped to compare the cultures of the combining organizations.

The value of a guided approach is it focuses people on the culture attributes with the greatest potential to cause culture clash. It also saves time in gathering and making sense of the data. This is important given the demands placed on due diligence and integration teams. It is also the reason we use a short culture survey to help make sense of the observations. The survey uses the same culture framework as the observation guide. This allows us to easily and quickly identify similarities and differences in the culture and focus discussions on those with the greatest potential to affect integration.

Success Factors

In addition to competing demands and heavy workload, due diligence team members rarely have much in the way of knowledge or experience with culture or observations. This combination of factors is the main reason it is so difficult to get culture included in due diligence activities despite the strong evidence of its value. There are however ways to address this including:

#1 Make It Part of Existing Due Diligence Activities – For culture due diligence to have any chance, it must be built into existing due diligence and integration planning activities; it cannot be a separate process although some additional time is required. The basic concept is we ask people who are already interfacing with the acquisition to make observations about their culture.

#2 Minimize Workload – To address the objection of lack of time and too few resources, we focus observations on the culture attributes that have the highest risk of culture clash. We then divide these among the members of the due diligence team. As a result, an individual typically is asked to observe at most two or three different culture attributes. In addition, the two workshops used at the beginning and end of the observation phase are very structured and focused minimizing the time required of due diligence team members. The survey also helps by providing data to guide discussions of the observations and their implications for integration.

#3 Make It Easy – To address the objection that culture due diligence is outside people’s expertise and comfort zone, we provide a short training session that explains how to conduct effective observations, what to look for and how to make sense of what they see. This is an investment of time but well worth it. We’ve found that attempts to conduct culture due diligence without this fail abysmally. It also helps to provide them with practical examples or clues that focus them on what is important. We’ve tried unguided observation with mixed results. Remember, due diligence team members are doing other work, and this is competing for their time and attention. We must make it easy or it simply won’t happen.

The Discipline of Culture Due Diligence

Culture due diligence requires discipline to be effective. Simply bringing people together to talk about culture doesn’t work, unless they are from both organizations and someone knows enough about culture to focus the discussion. Nor does completing a culture survey; that is, unless you can survey employees in the acquisition. By preparing due diligence teams and providing them with knowledge, support and tools, we can acquire the data and insights needed to make informed decisions. This allows us to create plans that leverage cultural synergies to ease the transition and addresses cultural tensions that could derail integration efforts.

But, how do we connect all the dots to arrive at this outcome? This is where a disciplined approach is important. To this end, we follow the five-step process shown in the following diagram. The process is straightforward. The key is in its implementation.

5-Phases-of-Cultural-Due-Diligence

Phase 1. Prepare
Preparing due diligence team members to include culture in their activities is the focus of this first phase. We provide an overview of the culture due diligence process, explain their role and train them on observation techniques. This includes providing them with an observation guide that includes clues that can be helpful in focusing their efforts.
This takes place in a face-to-face meeting or webinar facilitated by the Human Resources lead for integration activity. It takes no more than an hour. By the end of the meeting, people are assigned specific culture attributes to observe. They also understand what is expected and the timeline for completing the data gathering activities.

Phase 2. Gather Data
The culture due diligence team conducts on-site observations as part of their other due diligence activities. We ask them to take notes after their site visit and interactions, so they have these for later reference. They don’t have to be overly detailed; just reminders they can use when it comes time to analyze the results.
When the observations are complete, the next step is to complete a 25-item culture assessment. The assessment, called the M&A Culture Scan, asks the observers to rate the acquisition’s culture using the same framework as the observations. In some cases, they also rate the acquirer’s culture although this is usually established ahead of time. The purpose of the Culture Scan is to focus discussions on the culture attributes with the greatest potential for synergy and culture clash. It is not intended to be conclusive but rather directional. The main benefit is it saves time and provides data that identifies similarities and differences in the perspectives of the observers.

Phase 3. Analyze
Once we have the data, the next step is to make sense of it. This is where we bring the due diligence team together to discuss their observations using the Culture Scan results to prioritize topics. The discussion focuses on potential synergies and tensions and the implications for integration. We augment the discussion with a tool that identifies potential risks and implications plus suggestions for actions to include in integration plans. This is intended as directional rather than prescriptive.
The discussions take place in a workshop format which can be done face-to-face or by webinar. We’ve found the face-to-face format more effective as people are more likely to actively engage in discussions. Unfortunately, this isn’t always possible due to costs and geography. The workshop typically takes about four hours but can be longer depending on the extent of the differences identified. The outcome is a prioritized list of cultural synergies and tensions with recommended actions to be used to inform integration plans. In most organizations, this concludes the engagement of the due diligence team members who hand-off to the integration team.

Phase 4. Planning
This phase takes the outcomes from the analyze phase and uses them to develop or refine integration plans. In most cases, this is led by Human Resources sometimes with the participation of integration team members. This includes developing culturally appropriate communication and change plans leveraging proven change management practices.
It is important to note that this is often where things go wrong. Successful cultural integration sometimes means being willing to delay or not make changes that have been targeted to achieve cost synergies until a transition plan can be put in place. Unfortunately, the pressure to realize the financial benefits of an acquisition often take precedent over doing things right. All we can say is that to avoid the pain of culture clash, you must be willing to make the tough decisions even when they require paying the price in the short-term to realize benefits in the long-term.

Phase 5. Implementation
Culture work is not an exact science. While we can anticipate how the changes made during integration may affect culture, we cannot predict everything. We must constantly monitor the acquisition to identify, as early as possible, unintended negative consequences so they can be addressed.

We recommend a quarterly pulse check focused on the areas identified as a high risk for culture clash, employee engagement and a general scan to identify unexpected developments. If possible, the best approach is to conduct a short pulse survey followed by focus groups or round tables with acquisition employees, if necessary. While an investment, it is far cheaper than dealing with the consequences of a significant culture clash left unaddressed.

In Closing

Culture due diligence is an investment. It takes people, time and money to do it well. This is the main reason it doesn’t happen. People are too busy or there isn’t money in the budget to take on culture as part of due diligence activities. If there is, it only covers up to the analyze phase and there is an unwillingness to make the investment to achieve a successful integration.

Let’s put this in perspective. The investment required to include culture in due diligence and integration activities is a drop in the bucket when compared with the cost of acquiring an organization. It is next to nothing! At the same time, the potential benefits are huge. Consider the evidence citing the number of acquisitions that fail to realize the expected financial and other benefits as a result of, first and foremost, incompatible cultures.

Hopefully, this article has helped to demystify culture due diligence. Yes, it requires knowledge and an investment, but it isn’t rocket science. By applying a simple, disciplined approach backed up by knowledge transfer, any organization can take on culture due diligence and be successful.

© CULTURESTRATEGYFIT® All rights reserved

Dr. Nancie Evans
Dr. Nancie Evans is co-founder and VP Client Solutions at Culture-Strategy Fit Inc. specializing in the alignment of organizational culture and strategy. She has developed a unique set of leading-edge diagnostic tools and approaches that provide leaders with deep insights into the culture of their organizations, how it is supporting or getting in the way of strategy execution, as well as the levers that they can use to drive rapid culture change.

CULTURESTRATEGYFIT®
Culture-Strategy Fit Inc. is a leading culture and executive leadership consulting firm conducting groundbreaking work in leveraging culture to drive strategy and performance. Its suite of culture surveys and culture alignment tools are used by market-leading organizations around the world.

Lesson #2: Engaging Leaders, Changing Culture

Vector Image of a leader

This article is a draft chapter in Dr. Nancie Evans’ upcoming book, Changing Culture: 30 Years of Lessons Learned. Comments, questions and suggestions are gratefully appreciated. Happy reading!

In an ideal world, senior leaders fully embrace the challenge of changing culture. As explained previously, this means role modeling the expected behaviors, reinforcing them in day-to-day practices, and creating the conditions for success. Unfortunately, I’ve found this rarely happens. It isn’t that leaders don’t understand what it takes to be successful. When asked for examples from their experience, leaders can almost always come up with great stories of both successful and failed efforts. They totally get that they need to lead the way.

Barriers to Leader Engagement

So, what stops leaders from personally owning and fully engaging in culture change? Why do leaders overwhelmingly delegate the heavy-lifting to Human Resources? In years of asking this question to leaders and Human Resource professionals, a few things stand out.

Competing Priorities and Demands

Leaders at all levels and especially those in senior roles are stretched thin. Competing demands mean having to make choices as to where they invest their time, energy and attention. There simply aren’t enough hours in the day and days in the week to do everything. As a result, while culture is viewed by many as important, it often takes a back seat to more urgent demands, such as delivering short-term financial results and day-to-day management of the business. This is not to say they don’t support culture work. In fact, a lot of CEOs and other C-Suite executives sponsor culture change initiatives and personally invest a significant amount of time in defining values, communication and employee engagement. The problem is their involvement falls short of that required to achieve meaningful and sustained change.

Culture Is Vague and Ambiguous

Consider for a moment, the language of business. Products, services, processes, operations, market share, revenues, cost structures and so on are clear and widely understood. Talk about a business process and people know exactly what you mean. It’s tangible with elements that can be measured, analysed and improved. Contrast this with culture which is defined by words like values, beliefs and assumptions or ‘the way things are done around here’. No wonder many leaders’ eyes start to glaze over. Start talking about culture change as requiring a shift in underlying beliefs and we’ve lost them entirely. It is simply too vague and ambiguous to grab their attention.

The Comfort Zone  

Faced with a choice of solving an immediate business problem or getting involved in culture change, the former always wins. Even when there are good intentions, there are always more problems to be solved, plans made, and actions taken causing less urgent matters like culture change to take a back seat. This is simply human nature. When under pressure, we tend to deal first with things that fall into our comfort zone and second with those that are urgent and important. If there is time and energy left, and we are sufficiently motivated and confident in our abilities, we might then take on things that are less urgent but important or urgent but complex such as culture change.

Culture Change Is Personal

Culture change almost always requires a shift in leaders’ behavior. Keeping in mind that employees follow the actions of leaders, not so much their words, this means letting go of behaviors that worked in the past but are detrimental in the new world. It means learning or demonstrating new behaviors that include ones outside their comfort zone or inconsistent with their personal beliefs regarding the most effective way to manage and lead. It can also mean the qualities and capabilities that made a leader successful are no longer valued and might even cause them to fail. This can lead to avoidance in the form of passive resistance or an ‘I’m good but the rest of you need to change’ attitude which undermines the change effort.

Experts Advocate a Behavioral or Values-Based Approach

Most Change Management and Human Resource consultants advocate a behavioral or values-based approach to culture change. In this approach, leaders define the organization’s vision, mission, purpose and values; the latter sometimes in consultation with employees. A lot of effort is directed at sharing the values and engaging employees in building the connection with their personal values. Once finalized, Human Resources translate the values into expected behaviors, often in the form of competency models. The expected behaviors are communicated to employees and embedded in orientation and training programs, as well as talent management processes and performance management systems. This approach is appealing to leaders looking for a solution that doesn’t require a lot of their personal time and attention. The fact that it is advocated by experts also lends it credibility, which gives leaders confidence it is the right way to proceed.

It’s a People Thing

Finally, culture change is generally perceived to be a ‘people thing’. After all, it involves defining values and changing behaviors, right? As this is not an area of expertise for most leaders, it should not be surprising that they happily delegate responsibility to Human Resources. In fact, it makes sense for Human Resources to take the lead on most culture initiatives. Human Resource professionals bring much needed skills and expertise to help leaders through the culture change process. The challenge is to convince leaders to retain ownership of culture change with Human Resources as a strategic partner versus doers.

Strategies for Leader Engagement

Culture change is difficult, personally challenging, time consuming and requires a long-term commitment. All good reasons for leaders to search for an easier alternative that minimizes their involvement, especially given the challenges and demands of their jobs. Yet, they must be fully engaged for culture change to have a chance at success. So how do we convince leaders to own culture change?

What Doesn’t Work?

Let’s start with what doesn’t work. I’ve spent countless hours making presentations to leaders with the objective of convincing them that culture is an important business priority. Facts and figures from various studies illustrate the financial, competitive and other benefits of investing in culture. Great articles and case studies provide compelling arguments for the power of culture change. My own research shows the difference culture can make on innovation, customer loyalty, reliability and operational excellence.

If we’re lucky, this is sufficiently compelling to capture their attention and we can proceed to ‘what’s next?’ A lot of the time, however, the conversation stops here, simply because we’re talking about culture not operating models, strategy, business processes or other ‘hard stuff’. For many leaders, culture is just too vague and intangible. For people who are used to having the answers and knowing what to do, this is the kiss of death.

In the end, the vast majority delegate responsibility for culture and culture change to Human Resources but promise to help in (almost) anyway they can, keeping in mind the competing demands for their time and attention, as well as resources. Unfortunately, this rarely includes making the personal or systemic changes required for the culture to shift in a meaningful or sustained way. The bottom-line is leaders perceive that the cost and effort outweigh the benefits. This is magnified by urgent, short-term and more pressing demands, such as achieving the quarter’s revenue targets.

So, what does work?

This might seem crazy but talking to leaders about culture and the need for culture change simply does not work. That is, it doesn’t work unless you anchor it in a business need and provide a clear, practical solution they can understand. In other words, you have to speak their language and employ a business-driven approach.

Speak Their Language

About 10 years ago, a Human Resource executive told me he wished there was another word for ‘culture’. When asked why, he explained that senior leaders view culture as ‘vague, warm and fuzzy; as an HR thing’. As a result, it was close to impossible to get them to see culture as a business priority requiring the same level of attention as say, achieving financial results, improving business processes or developing strategic plans. I didn’t listen but instead directed my energy at strengthening my case. It was only when I finally changed the way I talked about culture that senior leaders began to really engage. The secret is to use language they understand.

This doesn’t mean avoiding the use of the word ‘culture’. In fact, organizations contact me because they want help with their culture. It is the language we use when we talk about culture where the opportunity exists. Terms like capability instead of culture attributes and expectations rather than behaviors help change the conversation. By using words they can relate to, leaders are more willing to engage in a deep exploration of the challenges and opportunities culture presents.

Take for example Bill, whose story is told in Lesson #1. It reads as if Bill was an enlightened leader intentionally and purposefully leading the way to achieve a meaningful change in culture. The thing is, according to Bill, the changes he made had nothing to do with culture. It was about effective leadership and business management. He solved a significant business problem by increasing the level of discipline with an emphasis on cost management and decision-making. To him, discipline was a capability, not a culture attribute, the organization lacked. He didn’t talk to people about changing the culture and never mentioned values, beliefs or assumptions. He referred to behaviors as expectations as in, “I expect people to be on time for meetings and appointments”. He didn’t involve Human Resources as, to him, he was simply doing his job so why would he need them? He did engage his direct reports to lead the process changes but otherwise did not involve employees. Based on his experience, he believed he knew what needed to be done and didn’t see value in asking people who, in his mind, didn’t have a clue what discipline was about.

I am not advocating that leaders embark on culture change without involving Human Resources. Nor, do I suggest that engaging employees isn’t worthwhile. In fact, both play an important role and are topics for later chapters. The point is culture change, intentional or accidental, can happen fast when leaders are actively engaged and own it.  Changing the way we talk about culture can go a long way towards achieving this, especially when it is accompanied by a business-driven approach.

Use a Business-Driven Approach

Most culture initiatives arise from either a people problem, such as employee attrition or low engagement, or a significant change, such as new senior leadership. Alternatively, a leader might attend a conference, read a book or hear something about culture in the media that catches their attention. While these may be valid reasons for initiating culture work, they rarely lead to the type of leader engagement required to achieve a meaningful outcome. For this to happen, senior leaders must see culture as a business priority on par with other challenges and opportunities. But, how to do this?

I’ve found that two conditions need to be met. The first is there must be sufficient pain as a result of culture related challenges to make it a priority. Pain can be pretty much anything that is interfering with the organization’s ability to achieve its goals. Difficulties executing strategy, integration challenges in a merger or acquisition, loss of top talent to competitors, capacity and scalability issues, declining financial results and loss of market share are just a few examples. The thing is most leaders don’t see these sort of challenges as having anything to do with culture, which leads to the second condition.  

Leaders must be open to considering that culture may be a factor contributing to the pain and/or getting in the way of effectively dealing with it. This isn’t necessarily easy as most leaders are sceptical when we talk about culture change as a solution to a business problem. This is, of course, entirely expected and reasonable given there are likely several factors contributing to the pain. These can be internal, such as outdated technology or inefficient work processes, and external, including the entry of new competitors, changing customer expectations and so on.

Trying to convince leaders that changing the culture will solve their problem is misguided and not going to work. What we want is for them to consider that while culture may not be the entire answer, it may well be a critical part of the solution. To this end, I never, ever talk about culture as the problem and culture change as the solution. Instead, the focus is on the business problem with capability development part of the solution. This is where using business language versus culture speak can make a difference. We start with engaging leaders in conversations about the business problem, not the culture, then expand the conversation to explore capabilities and the changes required to close the gaps that may exist.

Translate Their Role into Tangible Actions

What about convincing leaders to accept their role and lead the way? I’ve found the best approach is to not make this an up-front condition for embarking on culture change. Better yet, don’t talk about it at all until there is something tangible to discuss. Asking leaders to embrace a role that sounds vague, time intensive, uncomfortable and potentially threatening without this is setting ourselves up to fail.

By tangible, I mean the specific actions they need to take to close the capability gaps they identify. This includes behaviors, practices and creating the right set of conditions defined in very concrete terms. If for example, they identify the need for heightened agility, the required actions might include increasing delegation of authority limits, committing to a 24-hour response to requests for decisions, streamlining the approval process to a two-step process, and limiting Legal’s role in decision-making. These are very concrete actions leaders understand and know how to implement. This doesn’t mean they are easy, but they are manageable and achievable. If we accompany the actions with a plan that is realistic and has a high probability for personal and organizational success, we’re off to the races.

By speaking their language, using a business-driven approach and making their role tangible, we have significantly increased the probability that leaders will personally engage in culture change. The good news is this isn’t difficult for most Human Resources and Organization Development/Effectiveness professionals. We’re used to talking about business problems, gaps, solutions and action plans. You can’t be successful without this. All we need to do is apply the same language and approach to culture. The following case study, A Culture Conversation with Bob, provides an example of the first two strategies. Although the specifics vary depending on the situation and leader, the basic conversation framework absent probes and follow-up questions are the same. The topic of tangible actions is explored in a later chapter.

A Culture Conversation with Bob, CEO Transportation Company

The following dialogue is an abbreviated version of a recent conversation with the CEO of a major transportation company. To facilitate the conversation, I always bring a set of Culture Cards and Images with me and pull these out when it makes sense. These types of tools are effective in focusing the conversation on culture without using culture-specific language. The cards I use are from a model based on my research and are consistent with the work of other experts including Geert Hofstede, Roger House and Fons Von Trompenaars.

Question: What challenges are keeping you up at night?

Answer: We must successfully implement several new, large and complex initiatives while at the same time continuing to conduct business-as-usual and meet market expectations. This involves doing things we’ve never done before. I’m concerned that we won’t be able to deliver; that we’ll fail to deliver the expected financial results. If this happens, we will be under even more pressure and closer scrutiny than ever making it increasingly difficult to do what we need to do.

Question: What does success look like?

Answer: The bottom line is we hit our numbers and meet or exceed market expectations. This requires that we launch our new low-cost service on time and within budget; drastically reduce operating costs in our existing lines of business; and, complete a major technology upgrade without disrupting the business, on time and within budget. At the same time, we must maintain or improve our current level of service to our customers, retain our top talent and attract new employees with the skills we need for the future. I’m not optimistic. We’re already experiencing delays that are threatening both the launch of the new service and the systems upgrade.

Question: What could cause you to fail?

Answer: It’s too much. We’re stretched very thin given our current resources and capacity. People are already showing signs of burnout and I’m very worried we’re going to start losing not just our top talent but also the people we need to keep our core business running. Ideally, I would like to focus on streamlining work processes, getting rid of waste and increasing capacity before launching the new service offer and doing the technology upgrade. The problem is we can’t wait. We’re already being threatened by the imminent arrival of new competitors who are entering our market with a low-cost service. Our existing technology is old and can’t handle what we need it to do to be able to compete. Bottom-line is we must figure out how to make it all happen.

Question: What capabilities are needed to successfully meet these challenges and deliver the expected results? Capabilities are the abilities required to achieve your goals.

Answer: First, we need project management skills to make sure we plan and implement the changes effectively and efficiently. That’s why we’ve set up a Project Management Office to work with the business teams. Second, we must execute with excellence which requires discipline and doing things right the first time. We don’t have a good track record at this. We’re great at generating ideas but pathetic when it comes to execution and follow through.  Collaboration across groups is another area where we fall short. The challenges we’re facing aren’t isolated to one group or another. It is going to take all parts of the business working together to be successful. We can’t continue to fight over resources and have competing priorities. We must be aligned with our priorities. This means accepting that some groups are going to get more than others. This is simply the way it is. We only have so many resources and we need to use them where it matters most.  At the same time, we can’t lose sight of our people. We must show they are valued, and we care. Managers are going to have to spend time communicating and listening and do the big and little things required to keep their staff engaged. We cannot afford to lose talent due to stress and burnout. We also absolutely must stay focused on our customers and continue to deliver the exceptional experience we’re known for. This has been a key differentiator for us, and we can’t let it suffer, especially with all the changes happening and potential for uncertainty in how we are covered in the media. Finally, we absolutely must meet our numbers. Failure to achieve our financial targets would be disastrous. Funding for capital projects would be pulled back impacting our ability to move forward with the initiatives we must implement to keep pace with our competitors.

Question: What capabilities are existing strengths? Strengths are capabilities to protect and use to address the business challenge.

Answer: Our strengths are employee engagement, customer focus and doing what it takes to get results.

Employee Engagement. Our employees really care about our customers, the company and each other. They are passionate and take great pride in our successes. We need to protect this as it may be at risk given what I’m hearing about employee burnout.

Customer Focus. A big part of who we are is our commitment to providing every customer with a great experience. We genuinely care and treat each customer as a friend, family and neighbor. Our challenge is to find a balance between doing what is best for a single customer with what is best for all customers and the company. While this is a strength, it is also a challenge we are going to have to address.

Results Focus. Our employees step up and do whatever it takes to meet commitments, although this is becoming increasingly difficult. They must overcome significant obstacles such as broken processes, lousy technology and heavy workloads to make this happen. I’m seeing some cracks. We are still delivering on the big things, but people are taking shortcuts, which is causing issues with quality. Some of the lesser priorities are also being missed as employees make choices where they direct their time and energy. We have to be careful they focus on the right things, which means being very clear and consistent when setting priorities.

Culture Strategy Fit's Culture Cards Product

Culture Strategy Fit’s Culture Cards

Question: What capability gaps do we need to close? Capability gaps are the abilities required but lacking in the organization.

Answer: The main ones are those I already mentioned. Project management skills. Execution excellence.  Collaboration across groups. Managing our resources effectively. Aligning on our priorities. At the same time, we must manage employee burnout and continue to meet or exceed customer expectations while achieving our financial targets. All of these are important. We also have to do a better job communicating what’s happening and why it’s important to our employees.

Question: Select an image that best captures what you mean by [capability gap]. Culture Images are very useful in facilitating this discussion. I bring a set of 20 and asked Bob to pick one.

Note: The purpose of the image is to avoid the assumptions that often accompany words. For example, agility means different things to different people. To some, it means full autonomy to make decisions. To others, it is an approach borrowed from agile development in software engineering.

Answer: Bob selected an image of a chef’s kitchen in a high-end restaurant.  

Question: Why did you select this image?

High end kitchen with everyone knowing their responsibilities

Changing the Organizational Culture – Engage the Leader

Answer: A kitchen in a high-end restaurant runs like a well-oiled machine. Every person in that kitchen knows exactly what they need to do to make sure they deliver a meal that meets or exceeds their customers’ expectations. There are distinct roles with different responsibilities,but they work together seamlessly. They have the best of tools, such as equipment, food and so on, available to them. They are efficient and effective and do not waste resources. Everyone knows what they need to do, pay attention to detail, communicate and meet their commitments. They trust each other implicitly. They have exceptionally high standards and execute flawlessly. They deliver.

We need to be like this. We need to work together and execute seamlessly, work together, communicate and get results with the customer front and center at all times.

Question: What changes are needed to make this happen?

Note: Time permitting, this is an opportunity to get leaders starting to think about possible solutions.

Answer: The most pressing priority is to create capacity for the major initiatives we have planned. We need to stop doing things that aren’t adding value, streamline decision-making, get rid of out-dated policies and processes and anything else that is not essential. It also means saying no to new opportunities, no matter how tempting they are…we aren’t good at this. We like to chase after shiny new things. We also have to put a stop to some of the things we would like to do but simply can’t because of resources. This means discontinuing work on several important initiatives currently underway. People aren’t going to like this.

In other words, we can’t be a well-oiled machine without making some fundamental changes. We have to strengthen our foundation by getting back to basics. And, we must do it together as a team. Every leader and employee must get on board and do what is needed for us to be successful. We can’t continue to operate in fiefdoms protecting turf and resources.

End of conversation.

In Summary

The conversation with Bob is an example of a culture conversation that isn’t about culture. It is about the business. The challenges keeping him up at night. The obstacles getting in the way. The capabilities required. The changes needed. This might seem disingenuous and, to a point, it is. It is also effective. By speaking his language and focusing on the business, we are operating in his world of hard facts and concrete actions. This is something every leader can relate to. After all, problem-solving is what they are good at.

In fact, it is something every person working in or with an organization learns if they are to be successful. This means you are probably already doing this. If you are in Human Resources, you deal with business problems and solutions all the time. The difference is you can use words like talent acquisition and leaders know what you mean. You don’t have to translate this for them. If you’re having trouble attracting the right people, leaders understand the implications. The difference with culture is we have to make it understandable. We have to translate a ‘soft’ and vague concept into something concrete and relatable. Only by speaking their language, using a business-driven approach and defining tangible actions do we have a realistic chance of engaging leaders in a meaningful way in culture change.

In sum, leader engagement in culture change is absolutely essential but very difficult to achieve. There are so many obstacles getting in the way. To overcome them requires a new way of thinking, talking and approaching culture and culture change. It requires a paradigm shift.

Dr. Nancie Evans

Dr. Nancie Evans is co-founder and VP Client Solutions at Culture-Strategy Fit Inc. specializing in the alignment of organizational culture and strategy. She has developed a unique set of leading-edge diagnostic tools and approaches that provide leaders with deep insights into the culture of their organizations, how it is supporting or getting in the way of strategy execution, as well as the levers that they can use to drive rapid culture change.

Culture-Strategy Fit®

Culture-Strategy Fit Inc. is a leading culture and executive leadership consulting firm conducting groundbreaking work in leveraging culture to drive strategy and performance. It’s suite of culture surveys and culture alignment tools are used by market-leading organizations around the world.

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Culture Change: Senior Leaders Must Lead The Way

Culture Change - Senior Leaders Must Lead The Way

Culture Change: 30 Years of Lessons Learned

It’s been a long time coming, 11 years and multiple drafts, but I’m excited to announce that my book is finally looking like it is going to be completed. Yay! In my book, I share the many things I’ve learned over 30+ years of searching for the answer to one question: How do we achieve meaningful and sustained culture change in organizations?

This is one of the chapters from the book. I am offering it in the hope it provides some useful insights but also to ask for your feedback. I would sincerely appreciate any thoughts or suggestions you would care to share. Thank you in advance! Onwards….

Lesson 1: Senior Leaders Must Lead The Way

Who is accountable for an organization’s culture?  The answer is leaders. By ‘leaders’, I mean anyone at any level who others look to for guidance, especially people who hold senior positions in an organization. The reason is simple — leaders are the single most important factor in determining the success of any culture change effort.

If you rolled your eyes and said ‘duh…everyone knows that’, you’re not alone. After all, if senior leaders are committed to the change effort, they will make it a priority and allocate the resources, required to be successful. Right? The answer is ‘yes and…’

Absolutely, leaders must commit time, people and money if the change effort has any chance of being successful. The thing is they need to go further which means owning it. They must be fully committed to the change and personally involved in a meaningful way in all phases of the change effort. Sure, they are going to need help, but they are going to have to lead the way which means showing — not just telling — others what is expected, making tough decisions and creating the conditions for success. It can’t be a, nice to do, nor can it be delegated to Human Resources or others.

Isn’t Culture a Human Resources Thing?

In almost every organization I’ve worked with, Human Resources are responsible for culture. Leaders might say they own it, but the reality is they typically articulate values and, in some cases, identify the culture the organization needs, communicate this to employees and then hand off the heavy lifting to Human Resources to make the change happen. Unfortunately, this doesn’t work.

Don’t get me wrong. Human Resources plays a critical role in culture change. They own a lot of the processes that encourage and reinforce expected behavior, such as hiring practices, performance management systems, advancement criteria and so on. Leadership and organization development professionals can also provide leaders with expert guidance and support in areas such as behavior change, coaching and feedback and change management.  In other words, Human Resources can and should be strategic partners helping leaders with the change effort, but they cannot do it for them.

Why not? Three reasons —- behaviors, practices and environment.

Leaders’ Actions Send Messages to Others

Through their words and, more importantly, their actions, leaders send messages about the expected way of doing things. When words and actions are consistent — they walk the talk — the message is clear and pretty much guaranteed to influence others to behave in a similar manner.

Image of a department head leader offering assistance to one of the team members.

The thing is employees notice absolutely everything that a leader says and does. If a leader consistently arrives early for a meeting, his or her direct reports will do the same or risk being perceived as unpunctual and disrespectful of others’ time. If he or she always wear the appropriate safety gear on a work site, people know this is important and they can expect to be censured if they don’t do the same. Of course, the opposite is also true. A leader that is frequently late for meetings and appointments sends the message that it is okay not to be punctual. Likewise, a leader who blames others for his or her mistakes is telling people through his actions that avoidance of responsibility is okay.

What if there is a disconnect between what a leader says and does? The answer…people will default to actions as the real message. If a leader says candor is important and she wants employees to openly voice their concerns and then reacts negatively to their comments, guess what the message is? Candor means telling her what she wants to hear. A few situations like this and people will have figured out the rules — how to make her believe they are being candid while protecting themselves from harm. The leader is happy thinking employees are speaking candidly when the reality is far different. To make matters worse, the credibility of the leader has been damaged. People now know not to believe what she says but rather to look to her actions for direction.

The bottom-line is a leader’s words and actions must be consistent and role model what is expected — no exceptions and no excuses! No amount of effort by Human Resources can replace this.

Leaders Reinforce Culture in Day-To-Day Practices

Practices are the repeat patterns of activity or routines that people use as they go about their work. They are different from processes which involve the transformation of an input into an output. Practices cover a wide range of routines including the way decisions are made, information is shared, and people are recognized, just to name a few. They are the building blocks that help to determine “the way that things are done around here”.

While every employee use practices to some extent, leaders employ more of them more extensively which gives them greater influence over culture. This includes the approach they take to developing plans, conducting meetings, managing performance, developing employees, and so on and so forth. To illustrate the effect practices have on culture, contrast meetings that are managed in a structured and disciplined manner with ones that are loosely organized.

Leader asking questions to one of the team members

A disciplined approach to meetings typically includes a carefully designed agenda that is sent out well in advance. Materials such as briefing notes and reports are distributed prior to the meeting with clear instructions regarding expected action, such as read prior to the session and come prepared with questions. In some cases, there is even a clear ask such as, this item requires a decision while another seeks advice or feedback. The meeting itself starts on time and the agenda is tightly managed. The rules of engagement are clear and closely monitored. Minutes are taken with decisions and actions noted and distributed to the attendees. This approach is usually preferred by leaders who value efficiency and discipline. They assess the effectiveness of a meeting by the decisions made, issues resolved, and actions identified. Relationship building is, in most cases, viewed as secondary to achieving these objectives.

Loosely organized meetings are very different. These are usually preferred by leaders who believe the primary purpose is to share information, exchange ideas and build relationships. For these leaders, making decisions, resolving issues and developing action plans happens in other ways. It is therefore not surprising that their meetings often lack structure and discipline. If there is an agenda, it may or may not be followed. It might even be sent out in advance and include some pre-meeting materials but there is an implicit understanding that this is a guideline rather than a commitment. Often, a good portion of the agenda is never reached, and this is okay. Similarly, there may or may not be minutes depending on what happens in the meeting and if any decisions are made or actions identified.

This is just one example. If the same beliefs are reflected in other practices, there is a compounding and reinforcing effect. For instance, a leader who believes relationships are critical might take a consultative and inclusive approach to decision-making and problem-solving. Similarly, a leader who believes discipline and efficiency are the keys to success is going to apply this in other practices such as, setting clear objectives and systematically monitoring and measuring performance. The more different practices are consistent, the more impact they have on culture. This is what I call using a network of practices, which is discussed in more detail in a later chapter.

The practices used by leaders not only reflect their beliefs but are an indicator of their expectations of others. If a leader believes discipline is important, he is going to assess others performance and abilities using this as a criterion. Anyone who demonstrates a lack of discipline, as perceived by the leader, is taking the risk of being judged negatively. In fact, practices may be even more influential than behavior as they directly affect the way people work and interact and how they are perceived by others. Once again, this is not something Human Resources can do for leaders.

Leaders Create the Conditions for Success (Environment)

Leaders also determine the design of structures, systems and processes. They decide how space is used, what artefacts are on display (or allowed) and what traditions and rituals are practiced.  By the choices they make, leaders create the conditions that encourage and reinforce expected behaviors and practices.

My favorite way to explain this is to use a metaphor of someone trying to lose weight. It is easy to identify the behaviors to start and stop, such as eating more fruits and vegetables, cutting out foods with high levels of sodium and sugar, and exercising more. It’s also easy to identify practices to reinforce these behaviors such as using an app to track food consumption and exercise, weighing in on a weekly basis and attending regular meetings with other people who have similar goals. If I do these things, chances are pretty good I am going to lose weight at least in the short term. The challenge, as many of us know, is overcoming temptation especially when you’re stressed or tired. This is where the environment plays an important role by creating the conditions for success.

If the kitchen cupboards are stocked with salty snacks, cookies and chocolate, eventually the temptation is going to be too great to resist. Similarly, if other family members are munching away on high-calorie foods and drinks that you love, I can pretty much guarantee everyone of us is going to cave. Likewise, if you hate going to the gym and this is your main source of exercise, there is no way you will be able to sustain the motivation to keep going. This is what I mean by the environment needing to support the desired behaviors in order to create the conditions for success.

Supervisor leader overseeing work performed by team members.

We see this same pattern repeated over and over in organizations. A tremendous amount of effort and resources is invested in articulating and communicating the case for change, values and expected behaviors. Expected behaviors are then embedded in various Human Resource processes such as talent acquisition and so on. There may even be a commitment to coach and hold leaders accountable for modeling these behaviors. Yet, time and time again these efforts fail to result in meaningful, sustained culture change. Why not?

When we ask people to change their behavior but don’t align the system to support these behaviors, we are setting them up to fail. Human Resource policies, programs and processes are a critical part of this system. Aligning these to support the desired change is essential and fortunately usually happens, at least to some extent. The problem is other important parts of the system, many owned by other functions and groups, often get ignored.

Take Legal, for example. In large mature organizations, the Legal group is often a gatekeeper reviewing and approving contracts or arrangements. It is not unusual, to hear stories of long delays and the need for multiple levels of approval to get something done. This happens for very good reasons, such as the need to protect the organization’s best interests, meet its regulatory and legislated obligations, manage costs and get the best possible deal with suppliers. It does, however, contribute to slow decision-making and missed opportunities.

Let’s say things change. New competitors, emerging technology and changing market and customer expectations require increased speed and responsiveness to compete. In other words, the organization needs to be more agile which means decisions need to be made swiftly often with limited data meaning risks are going to be taken and mistakes made. This is a significant culture change for an organization that has been successful operating in a slow, cautious and methodical manner. The thing is, for the organization to become agile, the role of Legal and many of its core processes and policies need to change. They must align with and support agile behaviors and practices. This is threatening not only to Legal as a function but to its individual members. It also challenges existing beliefs as to the best and right way of doing which motivates people, often with good intentions, to resist the change.

Clear communication of the case for change accompanied by the effective implementation of change management practices can help to overcome resistance, at least to some extent. However, for the change to be successful and accomplished in a reasonable time, senior leaders must be actively involved in identifying and implementing the required changes to structures, processes, policies and so on. To be clear, they are not doing this alone. They need to engage subject matter experts and others whose expertise is critical to arriving at the best possible solution. The leader’s role is to challenge, push and test to ensure changes deliver the expected results. Ultimately, leaders must create the right environment so new behaviors can take root and flourish. They must be willing to make tough, unpopular decisions and hold people accountable in order to create the conditions for successful culture change.

The good news is culture change can be achieved in a matter of months, not years, when senior leaders effectively use a combination of behaviors and practices and create the conditions for success. To illustrate, let’s look at the story of Bill G., CFO of a large U.S. telecommunications company.

Bill’s Story

Bill had recently been hired to replace the outgoing CFO who was retiring. He brought to the role 25 years of experience and a proven track record leading several finance organizations in the telecommunications industry. The company he joined was a relatively young organization but growing quickly as it capitalized on new and emerging technology. It was known to be innovative and entrepreneurial with tremendous growth potential.

It wasn’t long before Bill realized that this entrepreneurial spirit included what he described as ‘an allergic reaction to anything resembling discipline, structure or process’. Employees, led by senior leaders, saw these as bureaucratic impeding their ability to be flexible, responsive and take risks; qualities that had played a major part in their success to date. As a result, past efforts made by the Finance team to introduce more discipline in areas such as budgeting, reporting and analysis never got off the ground.  Bill experienced this first hand at one of the early meetings he attended with the rest of the executive team.

The executive team was meeting to decide on the coming year’s advertising plan and budget. Several options were on the table for consideration requiring a sizable financial investment. The discussion was animated as executives shared their opinions as to the best way to proceed. This went on for a while with a lot of back and forth as people discussed the merits of the different options. When Bill suggested they consider the results from past advertising campaigns, there was silence. It turns out, there was no data available. Marketing didn’t have any performance metrics and wasn’t tracking results. Executives were making decisions involving millions of expense dollars based on intuition and personal preferences.

The more questions he asked and investigating he did, the more he realized this was the way things were done. Discipline was simply not part of the culture. He saw examples everywhere he looked from day-to-day practices such as meetings and appointments to decisions involving millions of dollars. While the entrepreneurial spirit was great, the lack of discipline was costing the company large sums of money due to rework, redundancies, poor decisions and so on and so forth. This was also contributing to productivity and performance issues, as well as taking people away from doing higher value work. The challenge, as he saw it, was to introduce more discipline without crushing innovation and agility.

The Solution Part 1 – Behaviors and Practices

Recognizing the difficulties in attempting to tackle the issue at the enterprise level, he decided to focus on things within his immediate control and sphere of influence. He started by introducing practices designed to bring more discipline into the way the Finance team worked starting with meetings and appointments. Bill reinforced these practices with his own behavior. For example, he made it clear that people were expected to be on time and prepared when attending meetings, no exceptions and no excuses. To this end, he introduced the following practices and behaviors:

Appointments and One-on-One Meetings

Practices

  • To schedule an appointment with Bill, people had to explain why the meeting was required and the expected outcome. If his input or a decision was required, relevant background information was to be provided so he could review it prior to the meeting.
  • Appointment times were strictly adhered to. If someone was more than 5 minutes late, the appointment was automatically cancelled, and the person was forced to reschedule another date. This was a big deal as it was extremely difficult getting time with him. It could be weeks before the next opening in his schedule. People quickly learned to be on time.
  • Bill’s schedule included time for travel to meetings, unexpected requests, preparation and other events. While there were times when emergencies required a change to his schedule, these were the exception and time was blocked to allow for canceled appointments to be rescheduled at an early date.

Behaviors

  • Bill was always on time for appointments and he expected the same of others.He read everything provided in advance. If the work provided wasn’t up to his standards, he would send it back and, in some cases, canceled the appointment. Initially, he provided clear written feedback as to what was missing and questions that needed to be answered. This happened once. After that, the person was expected to figure out what was missing and fix it.
  • At the end of one-on-one meetings, he provided feedback including what was done well and needed to be improved for the next time. For example, he expected people to provide a recommendation with their rationale when asking him for input or a decision. His feedback included coaching to help the person improve the quality of their recommendations.

Meetings

Practices

  • Meetings started and ended exactly at the scheduled time. If the meeting was to start at 9:00 a.m., he locked the door and started the meeting. People were not allowed to enter the meeting after it started. This included his boss and other senior people. It caused quite a stir at the beginning!
  • Bill introduced a set of practices aimed at improving the efficiency and effectiveness of meetings. These included publishing the meeting agenda with background information to be reviewed one week ahead of the meeting date. The agenda included the ‘ask’ for each item, such as provide input, identify issues or obstacles, make a decision or provide information.  Items that fell into the ‘provide information’ category were reviewed to determine if these could be effectively addressed in other ways and removed from the agenda. The amount of time allowed for each agenda item was determined by the complexity of the topic and the “ask”. In the meeting, these timelines were strictly adhered to albeit with some growing pains at the outset. Initially, agenda items were closed without having achieved the “ask”. As the team got better at using the available time, this became the exception rather than the rule.
  • He also implemented meeting principles that clearly defined expectations for behavior. These included being present and engaged which meant turning off cell phones and other non-essential devices. To address potential emergencies, he provided a person outside the meeting to contact. These principles were posted on the meeting room wall and used as a form of performance review at the end of each meeting. Specifically, the team quickly did a ‘green, yellow, red’ scorecard of each principle to indicate what they did well and needed to do better. A brief discussion of the ‘do better’ principles clarified expected changes for the next meeting.

Behaviors

  • Bill always arrived at least 5 minutes early for every meeting. If it was someone else’s meeting, he would wait 10 minutes and if the meeting hadn’t started, he would leave. Initially, this was a problem with his boss and his peers, however, he was able to manage the issue by getting their buy-in and agreeing to return to meetings if required. He made his point swiftly and effectively.
  • In the first meeting he hosted, one person made the mistake of not taking him seriously and answered a call. Bill stopped the discussion, walked up to the person and held out his hand for the phone. He told the person at the other end to call back when the meeting was over and turned off the phone. He then took the phone and dropped it in the garbage can. Everyone laughed, and the discussion continued. At the break, the phone’s owner approached Bill and apologized asking if he could have his phone back. Bill said no. The rules were clear and there needed to be consequences. If he wanted a phone, he was going to have to get a new one. The story traveled through the building like wildfire.

Within days, people began to show up on time for their appointments with Bill. Within a few weeks, people consistently arrived on time for meetings and not just his meetings but also meetings hosted by his boss and others in the organization. Meetings became more efficient and effective and people appreciated that they could depend on the fact that meetings would always end on time.

This discipline wasn’t restricted to appointments and meetings. He applied the same principles to performance management, written communications, business case preparation, presentations and an assortment of other practices. He used every opportunity to bring greater discipline into day-to-day work and interactions.

Four months after Bill joined the company, employees described a significant, observable culture shift towards increased discipline resulting from the behaviors and practices he role modeled. Although initially limited to the Corporate Finance team, they were already seeing evidence of change elsewhere as other leaders and teams followed his lead.

The Solution Part 2 – Creating the Conditions for Sustained Success

Leader and team members celebrating a victory with 'high fives'.

In the words of one employee, Bill’s primary goal was to increase the discipline applied to cost management and decision-making by implementing initiatives that would encourage “deeper economic and operational analysis from both a tool and process perspective”. The behaviors and practices he introduced were only the beginning. Bill recognized that addressing the big issues at the enterprise level required a substantial investment in core processes and technology, as well as changes to the way Finance was structured. These changes required careful planning and project management with implementation happening over a period of 24 months.

An Interim Solution – Paving the Way for Change

Prior to Bill taking over as CFO, the vast majority of Finance professionals were generalists who reported directly to business unit leaders. Their responsibilities were broad and included budgeting, cost and sales estimates, expense management, reporting and anything else the business unit leader needed. A few specialists reported directly to the CFO handling Corporate level fiduciary requirements, such as Treasury, Investor Relations, Financial Planning and Analysis (FP&A), and Controller/Accounting.

The Finance generalists concentrated their efforts on meeting the needs of the business unit leaders. As a result, every business did things differently. They had their own way of estimating sales and revenue, budgeting, reporting, managing costs, analyzing results and so on. When it came time to pull together financial information at the enterprise level, the Corporate team had a mess on their hands, if they could get the information they needed from the business at all. This led to long delays and inaccurate and incomplete financial information that no one trusted.

Many of the processes required to solve this problem were already in place. The issue was they were not being followed. One option was to mandate that the businesses comply with the Corporate processes, however, this would put the Finance generalists in the difficult position of having to push back on leaders and not deliver what they wanted. This wasn’t realistic given business leaders set the Finance generalists’ objectives, assessed their performance, determined rewards including merit increases, and had a significant say in advancement and development opportunities. Asking the generalists to put Corporate needs ahead of the business and go against the wishes of the business leader was setting them up to fail.

In the short-term, Bill decided to do things that didn’t totally resolve the situation but certainly improved it. The first was to insist on a greater role in setting expectations and evaluating the performance of the Finance generalists. By making this a shared responsibility, he was able to align their objectives with his priorities while at the same time providing an incentive to consider Corporate Finance requirements when they set priorities. Second, he sought agreement from business leaders to comply with the processes most critical to addressing the issues with the timeliness and accuracy of financial information. Given the severity and visibility of the problem, it was relatively easy to get the support he needed. With this in place, he quickly deployed resources to ensure expectations were clear, and the processes and tools understood.  

Phase Two – Process Changes

With the immediate problem addressed, Bill directed his attention at making the changes required to achieve his goal of increasing the discipline applied to cost management and decision-making. To this end, he identified and set about implementing a set of initiatives targeted at improving the timeliness, quality and quantity of financial information available to business managers when making decisions. This included launching a major Activity Based Costing (ABC) initiative, adding rigor to the approval process for new hires and capital funding, and spearheading a new business priority and objective setting process. He also partnered with the CIO to lead the implementation of a decision-support system (data and analytics). These initiatives were prioritized and carefully planned so as not to disrupt business-as-usual while ensuring progress was made as quickly as possible.

Recognizing this was not a strength in Finance, or elsewhere, Bill established and staffed a new Project Management Office (PMO). The PMO was responsible for helping the various project teams effectively plan, implement, monitor and report on their progress. Although not entirely successful, due to new hires who clashed with the existing culture, it resulted in a level of consistency and transparency that had been absent from past initiatives.

Phase Three – Structural Changes

Approximately six months after the business leaders agreed to follow the prioritized Finance processes, there continued to be major issues with the timeliness and accuracy of financial information. Despite their assurances, the business leaders had quickly reverted to their old ways of doing things insisting that the Finance generalists make their needs a priority. While most of the generalists did their best to deliver the information required by Corporate, workload pressures and competing demands meant delays and inaccurate and incomplete information was the norm.

The situation came to a head when the company was called to task by outside analysts for overestimating projected revenue and failing to notify the market that expectations were going to be missed. Although painful, this was the opening Bill needed to restructure the Finance function. He immediately moved to change reporting relationships so the generalists reported directly to him and indirectly to the business leaders.

Making this happen was not easy. The business unit leaders fought hard to maintain the status quo. They argued that the current structure allowed them to focus their Finance staff on business priorities, such as pricing, competitive bids and so on. They feared that a centralized structure meant they would lose control of these resources which would cause delays in getting the Financial support required to effectively manage their P&L. In the end, the financial forecasting and reporting issues outweighed their concerns and the CEO supported Bill’s restructuring plan.

Almost overnight, things started to improve. The Finance generalists still had a difficult task as saying no to business leaders is never easy. Knowing their boss, Bill, supported them and would step in to help when needed went a long way to giving them the confidence and courage they needed. Indeed, in the early days, there were several stories of Bill confronting business leaders and C-suite executives who tested the new way of doing things. This only had to happen a few times for the situation to improve but the message was clear. This was the new world order…take it or leave it.

Of course, sustainability ultimately depended on Finance’s ability to deliver timely, accurate financial information that addressed the company’s fiduciary obligations and a need for greater discipline in cost management and decision-making. If the problems persisted after the change, things would have quickly reverted back to the old way of doing things. Fortunately, the changes resulted in an immediate improvement to the quality and accuracy of financial information and only got better as the more complex, longer-term initiatives were implemented.

Two years after he was hired, Bill had achieved his goal of increasing discipline in cost management and decision-making. He also changed the culture. By changing core processes and structures, he created the conditions to encourage and sustain higher levels of discipline not just in Finance but across the company. However, as the business unit leaders had feared, there was also a decrease in the flexibility and responsiveness that was such a valued part of the company’s entrepreneurial culture. This contributed to a level of resentment and disapproval of the changes Bill had introduced, although most leaders acknowledged that it was the right thing to do. This rebalancing or calibration of culture attributes is part of the challenge of changing culture, and a topic for a later chapter.

In Summary

Bill’s story is an example of leader-led culture change. He concentrated his efforts on changes within the scope of his role and decision-making authority and used the tools at his immediate disposal to move things forward. This was not a ground-up effort to engage employees to get their buy-in and support. You may also have noticed that Bill’s story doesn’t make mention of defining expected behaviors, communicating these to employees and embedding them in Human Resource processes and practices. Nope…this was an influential leader leading the way through his actions. This is not to say there isn’t value in engaging employees or partnering with Human Resources, which can be powerful ways to accelerate change. It just isn’t the approach Bill used which, contrary to popular opinion, was very effective.

Image of Simple Instructions for Leaders who wish to lead organizational change in their company.

The thing is achieving meaningful and sustained culture change requires that leaders lead the way. They do this by role modelling values and behaviors, using day-to-day practices, and creating the conditions for success. When this is done effectively, culture change is pretty much guaranteed.

Even more exciting is the fact that this is something any leader at any level can do. You don’t have to be in a senior management position. Anyone in a leadership role can use their words and actions in an intentional and purposeful way to shape and change culture. You may not have the power to change enterprise level structures and processes, but you can change the culture in your team and, perhaps in so doing, influence the culture of the organization. Furthermore, when a critical mass of leaders purposefully and authentically uses a similar set of behaviors and practices, the potential for positive change increases dramatically. When the organization system is aligned to support the change, well…the sky is the limit.

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Dr. Nancie Evans

Dr. Nancie Evans is co-founder and VP Client Solutions at Culture-Strategy Fit Inc. specializing in the alignment of organizational culture and strategy. She has developed a unique set of leading-edge diagnostic tools and approaches that provide leaders with deep insights into the culture of their organizations, how it is supporting or getting in the way of strategy execution, as well as the levers that they can use to drive rapid culture change.

Culture-Strategy Fit®

Culture-Strategy Fit Inc. is a leading culture and executive leadership consulting firm conducting groundbreaking work in leveraging culture to drive strategy and performance. It’s suite of culture surveys and culture alignment tools are used by market-leading organizations around the world.

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The Power of Culture Camps

Culture camps are a fairly new phenomenon in the world of corporate culture. They offer leaders the unique chance to learn about how different groups have developed—and maintained—extremely successful company cultures.

The Zappos Model

One of the leaders in this new cultural arena is Zappos. One of the web’s leading online clothing and shoe retailers, Zappos has built a reputation for a fun, collaborative, and unique working environment. Led, in part, by senior human resources manager Christa Foley, Zappos has built an organization which develops and hires around a central corporate culture. This focus on a central corporate culture includes hiring only those who match the brand’s unique cultural values. This practice, in turn, has led to better business performance, due to improved employee engagement and happiness.

So, What Are Culture Camps?

Zappos’ model for company culture has been so successful that the company has branched out, offering corporate training through a new division called Zappos Insights. Through this new endeavor, leaders who are serious about developing and fostering a dynamic corporate culture can travel to the Zappos campus in Las Vegas and learn first-hand what has made the company such a success.

Culture camp is essentially an immersive experience where those looking to emulate a successful brand’s culture can jump right in and learn first-hand what makes them so great. At the Zappos experience, this includes meeting with the company’s CEO, learning the company’s values and human resources practices, how management engages with employees, and other aspects of company procedures and policies.

What Are the Benefits of a Culture Camp?

While the Zappos Insights model appears to be a lot of fun, there is a lot that leaders can learn from the concept of culture camps. As Jim Whitehurst, CEO of Red Hat notes, “culture is a learned behavior, not a by-product of operations.” Leaders are critical for shaping the culture of their brand. This is something Zappos clearly understands. Company culture, after all, is your company’s brand.

As we’ve covered here in the past, enacting change, or instilling company values, can only occur with a proactive drive from the top.  The leadership at Zappos defined its culture early on. To do this, CEO Tony Hsieh sat down and wrote a list of 37 core values which were essential to him. Then, he emailed it to all his employees, seeking suggestions or additions. Why? So, he could create an open and collaborative environment.

Culture camps allow leaders not only a chance to examine what makes a successful brand’s culture work but also allows them an opportunity to step back and really think about what matters most to themselves. Using this soul searching and external advice, they can return to their own companies and drive the change they truly want.

Even without participation in another company’s culture camp, leaders can use camps in their own organizations to help accelerate culture change and improve the onboarding of new hires. By creating a program of their own, using the Zappos model, leaders can experience what it takes to intentionally shape and change culture.

The camps can also be used to provide new and existing employees an immersive experience where they experience the values and beliefs in action and learn the behaviors conducive to the ongoing success of their company and brand. Culture camps can even have the added benefit of helping new employees avoid potential “cultural landmines” which can negatively impact their effectiveness and even derail their career.

Inspiring cultural change may seem like a daunting task, but it doesn’t have to be. If you need help defining or improving your business’s culture, check out some of Culture-Strategy Fit’s excellent cultural products and services, or give us a call today at 1 (800) 976-1660 for a free consultation.

Why Employees Leave Companies With Great Cultures

Why Do Employees Leave Companies With Great Cultures

Corporate culture is one of those topics that has recently floated down from the business world’s ethereal zeitgeist to finally take its rightful place among other equally-important strategic issues in practical, real-world company conversations. Today, however, many C-level executives have found themselves wondering, “Why do employees leave companies with great company cultures?”

A company’s culture is “the way it does things,” as in, “That’s the way we do things around here.” But, more specifically, it consists of three components: behaviors, systems, and practices. “A great culture,” writes Melissa Daimler of Harvard Business Review, “is what you get when all three of these are aligned, and line up with the organization’s espoused values.”

Executives and managers often get deluded into thinking their companies have a great culture when, in fact, they do not. This happens for a variety of reasons, ranging from the manager/executive being out of touch to his/her misunderstanding over what exactly the company’s culture is. A company’s culture is not ping-pong tables and free yoga classes. Those things are superficial perks. Actual culture, on the other hand, is far more fundamental. It has an impact on both employees individually and the organization as a whole in a very deep and daily sort of way.

So, what are some of the signs that your purportedly “great” company culture may not be so “great” after all?

Your Company’s Culture Is Unclear

Maybe you think your company’s cultural values are self-evident. Are you really sure about that? Because unclear values can lead to drift and eventually to counterproductive behavior. It’s easy for “it’s-not-my-job syndrome” to rear its ugly head when nobody in the culture knows what the company values. Leaving your company’s values to develop as they may create a culture clouded by the haze of uncertainty.

Your Company Does Not Embrace Openness

The more transparent a company’s culture, the more likely it is that the inevitable problems can be routinely identified and fixed before a crisis hits. Every time a mistake or failure comes to light, and lessons are drawn from whatever went wrong, a company is a step closer to a culture built for growth rather than just maintenance.

You Don’t Respect Your Employees’ Time

A really good CEO at the head of a great company culture will think about the bigger picture and realizes people have lives outside of work. That’s the number one way to prevent people from feeling like they might want to be somewhere else. The time from 5 p.m. on Friday to 9 a.m. on Monday should be people’s own time, not the company’s. It should be people’s choice to work on the weekends or not. When you provide this level of freedom, it makes it that much more reasonable to set high-expectations for people while they are actually at work. It’s a surefire way to help people love their work, and people who love their job/company will organically work more anyway, so really it’s a win-win.

One of the most important steps in creating a great company culture is understanding your business’s unique strengths and weaknesses, and the best way to do that is via CultureStrategyFit. So if you need help improving and or developing your company’s culture, give us a call today at 1-800-976-1660 for a free, no-obligation consultation.

The Importance Of Culture In M&A

The Importance Of Corporate Culture

Failure to address corporate culture is the key barrier in up to 85 percent of failed M&A transactions. Similarly, more than half of the respondents in a recent survey by IntraLinks said that corporate culture is the most important factor leading to deal success. These examples demonstrate that problems arise when two companies merge but do not agree on how work will be done. Here’s our guide to the importance of culture in M&A.

Identifying Company Culture

Despite their knowledge that corporate culture is important, many organizations struggle with how best to convert an appreciation for cultural differences into a definitive plan of action to execute a transaction successfully. Ideally, senior leaders are engaged early in the process, ensuring a clear understanding of cultural differences and identifying and prioritizing specific actions that will inform, influence, and accelerate the integration effort.

Addressing your company’s culture at the earliest possible point is essential to focusing your integration efforts. As organizations navigate the earliest stages of a deal (for example, strategy and planning, target identification, and preliminary due diligence), they should engage leaders on the topic of corporate culture and set a baseline for their own organization. Companies must specify the behaviors required for success; identify the non-negotiables, or areas where change is not welcome, and ensure corporate alignment on aspirational cultural attributes.

Understanding Your Target Company’s Culture

When considering M&A targets, you should apply a cultural lens to test inter-organizational “fit,” identify potential red flags and inform the negotiation process. Publicly available information (such as annual reports, news articles, and employee blogs) can provide meaningful insight into the target’s corporate culture even before a company approaches the target.

Once your company isolates an M&A target and begins due diligence, it can apply its preliminary understanding of the target’s culture to the formulation of a deal thesis and an integration strategy. In order to fully understand your M&A target, you must look into not only the company you’re looking to acquire itself but also the individual employees it’s comprised of. This understanding often impacts the degree, depth, and timing of integration activities.

Success In Cultural Integration

The keys to addressing culture in M&A transactions are to begin the process early, engage leaders, and use data to inform integration planning. The final step before actual integration is to choose wisely — place bets on interventions that will have the greatest impact in the near term.

Team leaders and those in charge of their company’s M&As must have the discipline to start early and get the businesses to take ownership (the position from the businesses’ point of view and make it second nature). You should also try and engage leaders and work with key company-talent to help put in place all of the necessary drivers of change. Understanding a company’s culture, for M&A purposes or otherwise, is a comprehensive effort, so the more talented people you include in the discussion, the better!

Contact Culture-Strategy Fit today at 1-800-976-1660 for comprehensive cultural help with your next M&A.

Where to Next for the CEO & Culture?

where to next for the CEO and company culture

A recent article in BOF, How Gucci’s Company Culture Fuels Business Success, about how the CEO of the company, Marco Bizzarri, has used culture to drive an impressive business turnaround speaks clearly to what every CEO needs to be doing about culture in 2018.

Every CEO needs to be wading deeply into their company’s culture and shaping it to deliver purpose, strategy, and brand. At the same time, they need to protect the reputation and long-term success. To Bizzarri, culture is a business imperative that needs active CEO leadership and intervention. As he states in closing the article, “I think that the old way of managing a company is finished, especially for CEO’s who are used to working in the same way. We are human beings, we tend not to innovate. We tend to protect what we were doing in the past.”

So, what exactly does this article describe so effectively? What do CEOs need to be doing about culture in 2018? We’re glad you asked. CEO’s creating a healthy and successful company culture will:

1) Identify the behaviors that underpin agility, innovation, and high performance

Make sure that these behaviors are consistently demonstrated by everyone – no exceptions, no excuses. Bizzarri talks about attracting the right people. This is futile if those people enter an environment where the company values and culture are only demonstrated by some. He clearly calls upon everyone, from his newest hire to his senior C Suite executives, to demonstrate the key behaviors Gucci wants as part of its future.

Bizzarri speaks to what some of these valued behaviors are: respect, collaboration, transparency, creativity, and risk-taking. These are the foundation for company-wide agility, innovation, and high performance.

Every CEO in 2018 needs to be explicit about the specific behaviors needed across the organization. This includes foundational behaviors that strengthen productivity and manage risk (respect, collaboration, agility) and strategic behaviors that ensure a successful future (innovation, customer experience).

2) Lead by Example

Too often top leaders define a desired culture, talk about it, even hire for it, but then allow top performers to violate that culture. This is a difficult struggle that requires courage, especially when quarterly results hinge on this performer’s output.

A top performer may drive brand vibe or customer and investor confidence. Allowing violations of values erodes the underlying robustness and agility of the organization. More to the point, it creates significant risks to reputation and viability. Take one look at the numerous Entertainment and Media scandals of the past several months for abundant proof.

As Bizzarri says, “You need to show that you believe in that and that you [remove] all the people who do not follow this kind of respect you want to create in the company.”

CEOs should lead their company culture by example

3) Make it an Ongoing Activity

Bizzarri states, “You need to show on a daily basis that you really believe in these values.” This requires tireless vigilance, especially at the level of senior leaders. These are the individuals who set the standard for what is acceptable behavior. Messages about culture ripple throughout the organization daily. CEOs need to make sure they are the right ones.

We were part of a meeting at a Retail organization recently. In this meeting, a Division President and his GMs paused for a short time to allow Marketing to demonstrate a potential design for new uniforms. Two male employees demonstrated male uniforms and jackets. As the female Marketing Director took off the new windbreaker to reveal the female uniform, a sound was heard across the room.

This sound seemed to suggest that this woman looked good in the uniform more than the uniform was a good selection. The senior leader asked for a break and immediately pulled his team into a side room. He asked each person what had happened in the room and what each of them thought he or she needed to do about. Accountability was individual and collective. Every leader returned and apologized to the Marketing Director.

More importantly than making the situation right, this was treated as another learning experience for the various leaders. They were able to collectively reflect on how their behaviors were received by others, and how they could better create a safe and inclusive environment.

4) Shift Organization Practices

Bizzarri describes how he has intervened to shift some of Gucci’s practices to adapt to the external customer change of a more Millennial market. This is a perfect example of adaptation to a complex, dynamic marketplace where traditional ways of managing a business no longer work. In 2018, every CEO needs to be searching out practices that aren’t aligned to the desired culture. They need to switch or realign these practices in order to deliver strategic goals and growth.

Gucci’s substantial turnaround may be due to its CEOs willingness to break with traditional routines and search for new ones. The examples of changes Bizzarri talks about are instructive:

  • A Shadow Comex – a shadow team of younger employees providing input to the executive committee
  • Resourcing of talent and ideas from external talent sources around the world, rather than persisting in traditional practices
  • Use of an off-site meeting to pull influential people together to understand how to work together in new ways
  • Decision making based on expert knowledge versus hierarchical position

Each of these builds on current culture strengths while creating new and adaptive approaches to working together.

Every organization operates using four kinds of practices:

  • Managing – planning, financial management, resource management, risk management, etc.
  • Operating – what the organization does to deliver products and services
  • Social – the way people work together
  • Organizational Learning – how the organization improves and adapts

New CEOs often have the vision to spot where changing a few practices can shape the culture. A perfect example of this was when Alan Mullaly took over at Ford. Sometimes, CEOs who have had a long, successful career need help.

One such CEO brought 180 global leaders together to focus on cross-boundary collaboration as a strategic culture priority. The CEO then explored with them what needed to be different. It became painfully apparent that what had brought them success in the past was not working anymore. Deep insights set the stage for redesigning several Managing Practices.

measure your company's culture progress

5) Measure Your Progress

One of the most difficult challenges for CEOs is understanding the reality of the current culture. This includes how the company operates and where they should pay attention.

Organizations are complex, with culture strengths that can contribute to strategy or undermine it. They have culture weaknesses that may create vulnerability and risk. Subcultures within departments, divisions, professions, and generations all need to be understood so leaders know what needs attention.

In 2018, CEOs need to be asking how culture will be measured in their company. They need to:

  • Look broadly at culture to understand its foundation and how strong and resilient it is for change
  • Understand the unique culture DNA that needs to be valued and leveraged
  • Track where and how strategy is being supported by changes to culture.

This means more than measuring Engagement, Compliance, or Quality. All are important. They’re the parts of the elephant if we think of the old metaphor, but not a cohesive picture of culture and its impact on future success.

In 2018, CEOs need to wrestle with their culture measurement system and make sure it is feeding important data for action up, down, and across the organization.

Gucci is experiencing its strongest period of financial growth in 20 years with 20 consecutive quarters of revenue growth in a slowing market. This means it’s achieving not just organic growth, but also taking market share from its competitors. Bizzarri has made clear choices and responded with creativity, persistence, and courage to shape the business and its culture for competitive success.

In 2018, CEOs still need to worry about strategy and transformation, about risk and reputation, about brand and engagement, but they need to step up their focus on culture on a broader and deeper level if they want to protect the organization and survive an increasingly complex and dynamic world.

Where to Next for the CHRO & Culture? 5 Things Every CHRO Should be Doing in 2018

what CHRO should be doing in 2018

The new year brings with it a time to reflect on what’s ahead and what we need to accomplish. For CHRO’s and other HR leaders, this will be a tough year. Not only is the external environment more competitive, dynamic, and complex, but inappropriate or disrespectful behavior and inequitable practices are less and less acceptable. On top of all of this, organizations need HR to support new business models, digital and business transformation, and creative ways of doing work.

At the center of this is the question of whether the organization’s culture has the right kinds of cultural DNA to support strategy and brand while protecting reputation.

So, what are five things every CHRO should be doing in 2018 to meet these challenges?

1) Re-Enroll Top Leaders in Their Role as Culture Architects

Another way to say this is: raise the bar. Some CEOs and their executive teams are already immersed in understanding their culture and intentionally shaping it based on a shared vision of the future culture needed for success.

Many, however, are saying that while top leaders pay attention to some aspects of culture (Compliance, Safety or Engagement), their perspective of the culture isn’t complete. It’s more like seeing parts of an airplane without understanding if the plane is ready to take-off and land in a new location. Most executives are ready for new approaches to developing culture and HR needs to be in the game.

In 2018, CHROs need to re-enroll CEOs and their executive teams in culture development. You need to ask:

  •     Is the executive team acting as culture architects, cohesively focusing on what needs to be different in the culture?
  •     Are they clear about culture priorities, opportunities, and risks?
  •     What are they doing about these priorities, opportunities, and risks?
  •     Do their own behaviors embody company values or are they inconsistent?
  •     Are they in this together, shaping culture for the future, or are some members opting out, clinging to outdated behaviors and practices?

Now is the time to have these conversations with the executive team, so they can raise the bar on their role as culture architects.

2) Take the Long View

Culture development is a journey that requires CHRO’s to continuously help the organization build its culture story and develop new kinds of culture muscle to meet long-term needs. It takes time, so CHROs need to be patient, persistent, and ready for intense periods of dialogue and learning. Kathleen Hogan, CHRO at Microsoft, has been part of its culture change. She says, “I also can’t over-emphasize the significance of perspective over time. It’s a journey that requires endurance, belief, and optimism for the future.”

taking the long view on company culture

Taking the long view means:

    1.    Creating Meaning – understanding what is happening inside and outside your company that requires change. This means connecting the dots between Mission, Strategy, Brand, Leadership, and Culture. It also means making sure communications and dialogue improve understanding of the desired future culture and how this connects everyone to Purpose and Strategy.
    2.    Activating – building desire and accountability for developing the future-state culture and making sure company leaders own culture change, not just HR. HR owns some of the levers for culture change and should, of course, continuously align these to the desired future state. Indeed, in 2018 CHROs should be critically examining the organizational design and people systems to spot where traditional approaches are just not cutting it. Activating requires enrolling every leader and team in strengthening the culture muscles needed for the challenges ahead.
    3.    Learning and Iterating – when the future-state culture is defined and desired behaviors become clear, the time is right to experiment with new ways of working together. HR can play a key role in supporting pilots, gathering anecdotal evidence of culture change, and identifying systemic barriers. An important part of this is making sure leaders are supported as they learn. Leaders may want to go outside to find out more about agility or innovation or bring their teams together to develop culture action strategies. They may reach out for executive coaching or need support for team development. The CHRO needs to lobby the CEO to make sure that resources are available to support culture change.

3) Keep Holding Mirrors Up

Given the leader behavior scandals of 2017, CEOs and Boards will be asking more questions about how to understand company culture and its risks. CHROs need to make sure they have a robust culture measurement system that can feed meaningful data to leaders for action. HR already has access to some terrific data and, when combined with other data points, insights can be unlocked about underlying beliefs, assumptions, norms of behavior, and practices that support success or create risk.

To do this, the CHRO needs to develop a plan to frequently bring key data to the executive team to unpack the story of the culture, its dynamics, risks, and opportunities. Next, the CHRO needs to persist in seeding data into the executive agenda. This may mean partnering with other departments such as Marketing, Safety, or Quality. These groups also have measures that reflect culture. Frequent snapshots of where progress toward the desired culture is being seen and where it has stalled will help top leaders understand the culture, what needs attention, and where they can intervene. Finally, the CHRO needs to present all of the data from a future-focus perspective. This will help top leaders understand the implications for the delivery of strategic imperatives.

Consider the following as part of a robust culture measurement system:

      •     Quantitative – statistical, trending

    Engagement survey – a targeted survey to understand employee loyalty

    Diversity and inclusion

    Customer service issues, trends, and risks

    Safety trends, issues, and risks

    Compliance trends, issues, and risks

      •     Qualitative – diagnostic, priority setting

    Culture survey – a broad and deep culture measurement to understand overall culture strengths, development needs, dynamics, and vulnerabilities

    Culture pulse – frequent checks on the employee experience

    Leadership assessments – the strength of leadership capability to build a strong foundation, culture, and teams

      •     Observation – emergent, potential to learn and migrate successes

    Story gathering and analysis – changes to practices, behaviors, and beliefs that reflect the future-state culture and get results needed for strategy. It’s beneficial to look more and post change to assess whether culture change is being sustained

    Anecdotes – seminal events unpacked, project or initiative post-mortems/retrospectives

4) Focus on What is Experienced

While focusing on engagement helps leaders understand employee loyalty and perceptions of the company, it is what employees, customers, suppliers, and contract/contingent workers are experiencing that reveals how healthy the foundation culture is and how the journey to the future culture is progressing.

No “fast growth” company like Uber should be shocked to learn that a toxic culture is being experienced by staff and contractors. No large company with hundreds or thousands of contingent workers should discover in the press that its culture holds back the innovation pipeline or damages the customer experience. No organization should be surprised to be called out in #MeToo postings.

creating a healthy workplace culture in 2018

The CHRO in 2018 should be on a campaign to ‘Know Our Culture’ from different perspectives. These include:

      •     Top leaders – where misalignment to values is so damaging to reputation and culture development
      •     Talent – those under contract such as in Media, Entertainment
      •     Employees – by groups and demographics
      •     Contractor and contingent workers – how they experience the culture, how it influences their beliefs and behaviors

This is a tall order but can be staged as quarterly, annual, or every second-year processes. For example, one animation company surveys its employees with a broad and deep culture survey every second year and with quarterly Culture Pulses. Their Talent gets their own custom survey annually. These provide deep insights for building unique competitive culture DNA that attracts the best Talent and performers in the industry.

5) Keep the Board Apprised

Given the toppling of so many leaders in Media, Entertainment and Politics at the end of 2017, the Board will likely ask the CEO and CHRO how they will be stewarding culture and managing its risk in 2018.  An annual presentation of Engagement Survey results or summary of the Compliance Audit is unlikely to be sufficient to build confidence that culture risk is being managed.

Wise CHROs should consider how to help the Board understand the organization’s unique culture DNA, its strengths to be leveraged, and priority areas for attention. With the CEO, they need to talk to the Board about how culture is being developed and prepare them for hard choices ahead: organizational redesign, removal of culture violators, shifts in managing systems etc..

In 2018, the CHRO has a huge role to play in culture development. The need for firefighting will not go away and neither will the need to upgrade HR processes and systems. Nevertheless, in 2018, CHROs need to carve out more time for culture, helping leaders and stakeholders understand the way it operates, building the future culture story, activating everyone, and then supporting learning and iteration.

Culture-Strategy Fit shares its knowledge and tools through the Culture Resource Center, a hub of culture activities, tools and surveys to support organizations intent on shaping culture fit to strategy. Sherrill Burns, the Co-Founder, writes frequently about how to leverage culture for competitive success.