Business changes are constants nowadays, as accelerating technology, economic volatility, and globalization mean the days of business as usual are over. In response, many businesses have had to pivot, innovate, or rethink their strategies completely.
But leaders are finding that in some cases, those steps are challenging or even impossible to accomplish without changing the culture that underpins the organization. A change in strategy could require a change in the whole culture mind-set of the company: “the way we do things around here.” However, executives must own and engage in the process. Only by such ownership and engagement can leaders ensure their business is fully aligned and that they have the right organizational structure, the most-relevant systems, the best management practices, and the brightest talent in place to move forward.
WHAT DO WE MEAN BY CULTURE?
An organization’s culture largely comprises a set of intangibles: the shared beliefs, values, and assumptions that no one questions day to day but that profoundly affect how the people inside the organization think, behave, and react. If leaders want to improve performance or accelerate innovation, for example, they may need to move people from acceptance of one set of shared values to acceptance of a new set, so that they will think and behave differently.
How do companies change those shared values? or their culture mind-sets? What are the levers for culture change? The external environment—particularly, an organization’s industry—deeply influences that organization’s culture. But because it is nearly impossible to change that broader context, it is crucial to identify which internal levers can be pulled to modify culture. The most powerful lever is leadership itself. And in turn, leadership can cause changes in other important levers in the organization’s design, including strategy, systems, structure, and management practices.
THE ROLE OF THE LEADERSHIP TEAM
The role of senior leaders in culture change cannot be overstated. Although tactical plans and work streams can be delegated, leadership must take ownership of up-front alignment work and continued sponsorship. As a first step, the CEO and executive team must work together to create a shared understanding and direction. They also need to tackle the way the organization is designed, if they find that reward systems, for example, or even the structure itself fails to support, or indeed even opposes, the kind of culture needed to reach the new goals or apply the new strategy.
Once they’re aligned on the way forward, the executives become the culture carriers and have the following responsibilities:
Cascading the alignment process through the management ranks
Explaining the reasons for change
Communicating the vision
Outlining what will be involved in effecting change
Maintaining an active sponsorship role for the work involved in the new strategy, the new goals, and the organizational design changes
This will mean learning on the job. A leadership team that is intentionally and actively learning as it goes along is much more likely to fail fast by catching problems quickly and immediately adjusting; a learning leadership team is also much more likely to pick up and reward early new behaviors and in doing so, model the behaviors of high-performance cultures.
Plus, to keep on top, leaders need to stay in touch with the organization’s external stakeholders by seeking feedback, experimenting, and scanning for both mistakes and successes.
Figuring out the strategy and changes needed to support a new direction is tough enough, but getting everyone on board and aligned can be even tougher. A joint process for developing a shared mind-set within the leadership team itself is essential. If executives engage in this collaborative work, commitment to the process throughout the organization will be more robust. A shared mind-set about what kind of culture would best support the company’s future direction serves as a means whereby leaders can ensure that systems, structures, and management practices are in line with strategy and goals. Thinking systemically like this is vital if leaders are intent on changing the company’s culture.
If a leadership team isn’t already good at managing the kind of robust but messy dialogue that considers divergent perspectives before arriving at a shared view, then it should consider bringing in an outside facilitator or team coach. The outside person can skillfully promote good processes so that the team can become better able to grapple with a complex organizational challenge such as aligning systems in support of a new culture. Moreover, promoting effective team processes and alignment stimulates improved team performance in general.
WHAT SHOULD THE NEW ORGANIZATION LOOK LIKE?
Once the leadership team has done the hard work of agreeing on a new direction and on the culture required to support that direction, the team will be ready for the next stage, which is assessment of the degree to which the existing organizational design is already aligned with desired culture changes. Organizational design includes structures, systems, and management behaviors. Do they support the desired culture—or do they need to change? Changes to those variables can prompt shifts in the culture—influenced, of course, by the behavior of and communication from the leadership team (Exhibit 1).
As an example, a medical device company experienced a drop in sales across a diverse range of its products and realized it needed to shift from a product-focused sales strategy to a customer-focused sales strategy. Some of the salespeople were selling operating tables to surgeons, and others were selling anesthesia systems to anesthesiologists. The company knew it needed to meet a health system’s multiple needs through one sales rep or an integrated sales team. And it had to navigate product-review committees and procurement departments. This change in sales strategy required a major culture shift: from a competitive, individualistic culture built around one-to-one relationships to a collaborative, strategic culture built around client systems. To support that change and that culture shift, the sales force was restructured, and targets were changed from individualonly targets to a mix of individual and shared targets. Rewards followed suit.
In addition, management talked frequently about its vision of a sophisticated, integrated company and the specific behaviors needed to achieve it. There was some attrition because of the new sales skills required, but over time, new values and behaviors took root. More-complex sales lengthened the sales cycle, but volume and revenue per sale increased significantly, and the company reversed its declining numbers, even as the culture was transformed.
We will now examine structure, systems, management practices, and talent in more detail as well as the key questions around each for leaders to consider. (Click on '+' to expand toggles).
The tangible benefits of organic growth are numerous. When you grow your business through strong management and Transforming culture
The extent to which an organization will have to change its culture to support a new strategy will depend on where the organization is starting from: clearly, the greater the gap between where the entity is now and where it wants to be will affect the level of transformation. Root and branch change in underlying values and beliefs is a huge project, not least because values and beliefs are held in place by so many interconnected forces within the system. Attempting culture change simply through a new strategy, a vision statement, or a human resources initiative will only end in failure. The fundamental changes required and sustained attention to the change over time demand the active engagement and leadership of the CEO and executive team first and foremost. Successful culture change leaders implement new values and beliefs not just by their own behavior and communication but also by mechanisms that promote or inhibit behavior in the organization. Working together as a team to mold and apply mechanisms for the good of the future business is a key role of leadership.