Putting Culture at the Center of Organizational Change

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A 2013 Booz & Company study, “Culture’s Role in Enabling Organizational Change” by DeAnne Aguirre, Rutger von Post, and Micah Alpern analyzes the results of a survey of 2,200 executives, managers, and employees from a broad range of companies across the world. This research sheds light on current perceptions of organizational culture.

This study shows a widespread belief that organizational culture is a key element of company success. For example, as the authors report, Eighty-six percent of C-level executives and 84 percent of all managers and employees say culture is critical to their organizations’ success, and 60 percent see it as a bigger success factor than either their strategy or their operating model.

However, this is contrasted with the astonishing statistics about the need for cultural change: A full 96 percent of respondents say some change to their culture is needed, and 51 percent think their culture requires a major overhaul. About 75% of the respondents believe their company needs significant culture restoration, which tracks closely to the proportion of people disengaged at work. The goal of the study wasn’t primarily to measure the need for cultural change. The survey did not ask what types of cultural change was needed or desired.

This study suggests that the great majority of companies have cultures that reflect the contemporary models of the late industrial era of business, where the unraveling of social trust between employer and employee has only accelerated in the past few years, and where work stress levels are at a historical high.

The real goal of the study was to explore the role that organizational culture plays in business transformation efforts. Projects to enact enterprise change usually are the result of the perceived requirement to adapt to a changing market environment. Relative to that goal, the survey results are more like a criticism of management than any guarantee of the success of change efforts, in general, and more precisely, the authors states:

Only 24 percent said their companies used the existing culture as a source of energy and influence during the change effort.

Creating Sustainable Advantage with Culture and People

Business Leaders have been challenged in leveraging their organizational culture for marketplace success. Peter Drucker once remarked, “Culture Eats Strategy for Breakfast”.

Culture is an outgrowth of leadership and can be changed to meet organizational goals. This dynamic interplay between leadership and culture is critical if even the most brilliant of strategy is to be effectively implemented.

There have been no standards in defining culture. It’s complicated. Sometimes it’s even paradoxical. Your employees, partners, and other stakeholders will perceive your culture in different ways and even use different words to describe it. With all the other challenges your business is confronted with, it is easy to see why organizational culture has not been a priority for the leader. However, there is real power to be reaped in nurturing this intangible asset.

“Business leaders and the financial and industry analysts that follow them have also come to recognize that establishing and fostering the right corporate culture is not simply a way of staying out of trouble,” said Lou Gerstner of IBM and again said, “but represents a fundamental driver of sustainable differentiation and winning in the marketplace.”

The competition moves faster than it used to. “Having the best product or service or making the perfect strategic move doesn’t buy much time at the top. The landscape has shifted from looking for that long-term sustainable competitive advantage to managing a portfolio of transient advantages, moving from one short-lived advantage to the next.” As Rita Gunther McGrath wrote in the Harvard Business Review

Sounds difficult, doesn’t it? That’s because it is. But this is where culture comes in. Like most organizations, your competitors have typically ignored culture. They’ve been focusing on strategy and operations and culture simply became a luxury that they would get to once they achieved some success. But the goal of culture is to drive the success of the enterprise. Waiting to focus on your culture until after you become successful actually sentences you to a never-ending culture of mediocrity. This, in turn, reduces your capability to succeed. It’s a negative “lever”. Instead of magnifying the force you want to apply. A mediocre culture increases the distance to your goals.

Focusing on culture not only removes this negative lever, it can exchange it with a positive one if you do it right. And, unlike products and strategies, which can be quickly copied, the culture advantage has more sustainable power. The fact that it is complicated and challenging means that any advantage you achieve over the competition will be difficult to match. So, how do you secure this kind of advantage? It starts with understanding what culture really is.

Organizational Culture Defined

Let’s start with “values”.  At the core, culture is about what is valued. This can include framed “values statements” or “principles statements”. Arthur Anderson and Enron had value statements in their headquarters about principles like integrity, however, it turns out making financial performance at all costs was the guiding principle so that’s how people behaved. Your culture is the collection of words, actions, and perceptions that explains and supports what is really valued by the system.

And that means it’s complicated. There are four factors in this definition that create your culture: language, actions, perceptions, and tangibles. You and your people activate the first three. Culture is a complex combination of what we say it is, our behaviors, and the underlying assumptions and ideas behind it. As you might expect, those three areas are often unpredictable, which is one reason why culture can be so disorderly. It becomes something that you have to put together, understanding you’ll find some paradoxes along the way.

For example, we’ll state we value customer service, but we’ll also say we value being dedicated to the long term. Those values are reasonable, but at times are quite completely opposite to each other. One is proactive and one is reactive, and to analyze where the culture really stands on that contradiction, you’ll have to assess several things at once. It’s the combination of what people say and how they behave do that will eventually determine how those two values are equalized.

Additionally, you have to factor in the “tangibles.” Tangibles are the non-human parts of culture. Tangible things like dress code, office location, office decor, office layout, etc. These also reveal what is valued, so they have to be included in your assessment of what your culture in truly is.

This definition is powerful because it enables action. Language, actions, perceptions, and tangibles give you all the areas you can work with. They give you areas where you can test, change, and discover. And they keep the conversation about values moving, rather than stuck down a path that leads toward a boring new set of inspirational posters—but no improvement in performance.

Now, think about your organization’s culture. Think about the language, actions, perceptions, and tangibles they define and support what your organization truly values.

The Benefits of Accounting for Relationship Capital (RC)

Relationship Capital (RC) as an open standard which is becoming an important metric in distinguishing one leader from another and one organizational culture from another. Quantifying the quality of trustworthiness amongst your team and with your key stakeholders in this hyper-connected and transparent world is to be expected.

How you behave is as important to your business success as what products you create or services you deliver. By accounting for these commitments and perceptions you gain the following benefits:

• RC is a social & peer-to-peer reward for your stakeholders (i.e. employees, partners, suppliers and customers/clients) that motivates new levels of performance.
• RC quantifies the “Golden Rule”.
• Provides a real-time appraisal.
• Relationship Capital (RC) reveals the quality of character.
• Creates a point in time view of an entity’s (person, company, AND business group’s RC)
• Contributes to the creation of a real-time, dynamic, common global vocabulary to be user by all members of the community.
• Creates a social community of companies and individuals dedicated to the promotion and adoption Relationship Capital (RC) in their business interactions.

By leveraging open standards of Relationship Capital (RC) we will provide business leaders more understanding of how to lever these intangible assets of culture to meet and exceed expectations with all stakeholders that is good for business and the overall community.

Standards of Organizational Culture

If you are a leader that is trying to drive a large change especially one centered on aStandards of Organizational Culture, you need to have a change vision. This is a picture for your people of what the organization culture will look like after they have made significant changes, and it also shows them the opportunities they can take advantage of once they do that. It helps to motivate people, and it’s foundational to any successful change you’re trying to make.

A change vision is not the same thing as a corporate vision. Both are strategic, but anyone who wants to successfully make a large-scale change in their organization needs to understand how they’re distinctive.

The following is the Standard of Trust Group’s Standards of Culture Maturity Matrix that validates this research.

The Standards of Culture Maturity Matrix

The Standard of Trust Group Standards of Culture Maturity Matrix is a framework for categorizing an organization’s cultural attributes from Level Zero to Level Three Community Mindsets.   Level zero is a community characterized by a “chaotic” mindset up to the Level three community mindset of “Do The Right Thing”.

• Conformity Mindset
• Acquiescence Mindset
• Do-The Right-Thing Mindset

We define community in our framework as a social group of any size interacting with common standards for Knowledge, Behavior, Relationships, Acknowledgement, and Striving.

There are no fixed dividers for the level zero to level three cultural communities. Since an organization’s culture is dynamic, categorizing its community level is a snapshot in time. Organizational cultures are living ecosystems of purpose, values, and behaviors.

Conclusion

Every successful large-scale organizational change that we have seen has, as a part of it, has a change vision. And what that means is an image of after we have made the changes on whatever culture dimensions, this is what we are going to look like. And if we look like that, our organization is going to be able to take advantage of the great opportunities that are a function of changes that are happening in this technology-enabled and hyper-connected world.

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"The only constant in life is change." – Heraclitus

Such is true for life, as it is for business. The entire ecosystem our organization operates in—our customers, competitors, suppliers, partners, the company itself, etc.—is constantly changing and evolving. Change can be driven by emerging technology, regulation, leadership change, crisis, changing consumer behavior, new business entrants, M&A activity, organizational restructuring, and so forth.

Thus, the understanding of, dealing with, and mastery of the Change Management process is one of the most critical capabilities for our organization to develop. Excellence in Change Management should be viewed as a source of Competitive Advantage.

Learn about our Change Management Best Practice Frameworks here.