Dirk Verburg

Culture change is firmly back on the map! More and more companies are starting to reflect (again) what their culture is and what it should be.

More often than not, such a culture review is initiated by the CEO. The reason is that CEOs have a unique position in organizations: they often see both the current performance of the organization, as well as its unrealized potential. In case CEOs do not see this unrealized potential themselves, their Supervisory Boards, analysts and (activist) shareholders will point it out to them quickly enough.

Unrealized potential

This unrealized potential can take many forms. Examples include the time it takes to take and implement decisions (impacting the speed of innovation of the organization), lack of costs consciousness (impacting the profitability of the organization), or, by far the most popular one: the ‘silo mentality’ in the organization (impacting the revenue) .

Almost always this unrealized potential in terms of innovation, profitability, and revenue, stems from the behavior (rather than the capabilities) of the people in the organization. Given the fact that almost anyone will be familiar with the phrase ‘culture is the way we do things around here’, the link from these behaviors to ‘the’ culture of the organization is quickly made.

The classic approach to culture change

Once this link is made, many organizations embark on a culture change project. More often than not, this will take the shape of a ‘from-to’ wish list with values: from ‘slow’ to ‘fast’, from ‘expensive’ to ‘economic’, from ‘exclusive’ to ‘inclusive’, from ‘product-focused’ to ‘customer focused’, from ‘inward-looking’ to ‘outward looking’, from ‘individual’ to ‘team’, from ‘conservative’ to ‘progressive’, from autocratic’ to ‘coaching’, etc. In other words: it is a list of behaviors that will take the organization from its current reality to the ideal future.

HR staff and external facilitators are usually asked to bring the new culture to life in the form of re-education workshops. In these workshops, staff are asked to reflect on the problems associated with the values of the old culture, visualize how much better the organization could perform with the new values, and commit to concrete actions to implement these.

At the same time, many organizations will adapt their (HR) processes and programs to reflect the new culture, for instance by incorporating the ‘new behaviors’ in its recruitment and performance management processes, as well as in leadership development programs.

Although these types of exercises are quite harmless, their impact is often limited.

A limited impact

The reason for the limited impact of these processes is three-fold.

• History – First of all, in established organizations, it has taken tens of years, and sometimes even a century or longer, to create the company culture. According to Edgar Schein, ‘The culture is a set of learned solutions that have produced success, comfort and identity’. The idea that something that has taken so long to create, and has become so ingrained in the behaviors of the members of the organization, can be improved with such a superficial approach, seems to be quite naive1.
• Results – Secondly, there is a reason why people behave the way they do, and that is not related to their intelligence or limited perspective, but because their behaviour ‘works’ in the organizational setting in which they find themselves. It is important therefore to find the ‘root cause’ of this behaviour.
• Isolated – Finally, and perhaps more importantly, it is hard to address elements of an organization culture in isolation. Almost all CEO’s of large companies I know, mention the ‘silo mentality’ in their organizations as one of their major challenges. These silos can be market-facing (business units), or functional (e.g. engineering versus production). At the same time however, many of these CEOs stress the importance of individual accountability of the heads of these business units and functions, to drive results. Some even welcome a bit of ‘sibling rivalry’.

You do not need to be a genius to see that the behavioral preference of these CEOs is an important factor to maintain the very silo mentality they would like to address. To state the obvious: if BU leaders are kept individually accountable, they are likely to keep their Product Line, Regional, and National leaders individually accountable as well, for the same reason why their CEO keeps them responsible: to ensure results.

This does not mean that BU leaders do not want to cooperate with other Business Units because they are ego-centric, it simply is a lower priority, an ‘if and when’ decision, rather than a ‘must do’.

The question for your CEO

Does this mean CEOs should not embark on a culture change project? Of course not. However, the first thing they need to reflect on is how their behaviors have created and/or maintained the very culture they seek to change. Subsequently, they need to reflect on the question of how they need to change, to move the culture of their companies in the desired direction.

Business leaders need to understand that they no longer live in a ‘tell me’ world, but in a ‘show me’ world, and that their ‘walk’ has become infinitely more important than their ‘talk’.

For example, suppose business leaders want to move to a cost-conscious culture. In that case, flying business class around the world to ‘tell’ this to their local management teams in business reviews and highlight this to their staff across the globe in town halls is one option. A more effective, but far less attractive, one might be to ‘show’ the importance by flying coach.

Ouch.

1. It is however possible to damage a great culture in a short amount of time (see for instance this article about Boeing) ↩