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How do you institute a change in an organization’s culture? Why can’t corporate culture be enforced in a top-down fashion?
Changing organizational culture is the first step to implementing any other changes in a company (e.g. operational or restructuring). Any organizational changes will likely be illusory unless there’s a transformation of the broader culture because policy, practice, and process are all ultimately downstream from culture.
In this article, you’ll learn what exactly is meant by “organizational culture,” why it’s important, and what it takes to change it.
Organizational Culture: What It Is and Why It Matters
Leaders know that culture is the lifeblood of their organizations and that the right culture can make the difference between success and mediocrity. But what exactly is organizational culture?
According to CEO and venture capitalist Ben Horowitz, culture is the way employees make decisions and act based on their perception of underlying premises and shared beliefs. Culture derives from what leaders state explicitly and also what they enforce implicitly by example and through the organization’s incentive structure.
Therefore, it’s important to be intentional about the culture you’re designing in your organization. If you’re not intentional in shaping your culture, your employees will shape it in ways you might not like.
According to Horowitz, there are three ways an intentional culture boosts a business:
1. First, an intentional culture serves the company’s vision by ensuring that employees know what to do to move the company forward, and they consistently do it.
2. Second, the right culture can boost individual and company performance by giving employees a common purpose. Successful cultures help employees see that their work matters to the overall mission and that they all direct their daily actions and decisions toward the same goal.
|In Measure What Matters, John Doerr takes this argument further and says that culture is, most of all, a shared sense of purpose. He cites research showing that companies with positive cultures outperform those without them. According to Doerr, this is because a cohesive company culture where everyone understands their purpose helps employees make decisions quickly and reliably.|
2. Third, a great culture plus a great product or service is powerful—it can make an impact beyond a single organization and disrupt an industry and an entire system, changing the business landscape forever. Horowitz explains that industries develop default modes of behavior that replicate in every new company that comes up in the industry, and they become that industry’s culture. If an organization develops effective new behaviors to deal with the industry’s or system’s challenges, and the product or service the company provides is successful, other companies begin copying the culture in the hopes of being equally successful.
TITLE: What You Do Is Who You Are
AUTHOR: Ben Horowitz
The 4 Principles of an Organizational Culture
Now, that you understand the power of intentional organizational culture, let’s examine what designing a culture entails in practice. According to Patrick Lencioni, the author of The Advantage, to establish a consistent company culture, the leadership team must establish four principles:
Principle #1: The Organization’s Core Purpose
According to Lencioni, all organizations function to help people in some way. To determine your organization’s core purpose, reflect on what your organization does and why. Your what should be pretty straightforward, but your why will probably be somewhat unique—who are you trying to benefit and how? The possibilities are endless, but your answer must be specific, true, and concise.
For example, if you run a dry cleaning business, your what would be “we wash and dry people’s laundry.” Your why could be “we wash and dry people’s laundry so that clean, professional-looking clothes are accessible to all.”
Principle #2: Behavioral Values
Healthy organizations must identify their behavioral values so employees align with and uphold the company’s cultural expectations. Lencioni recommends writing these values as they would look in action rather than as one-word adjectives—this makes them more specific and actionable for employees.
For example, avoid one-word values like charity, altruism, and drive. Instead, say “a passion for helping those who are less fortunate,” “willingness to sacrifice personal wants for others’ needs,” and “tenacity to accomplish personal and professional goals.”
Principle #3: Success Strategies
Lencioni explains that healthy organizations should have three primary strategies that they use to achieve their core purpose. To identify these strategies, brainstorm a long list of all the possible ways that you can achieve your purpose. Then, divide similarly themed ideas from your long list into groups and label each theme—for example, ideas that are related to keeping consumer costs low can be lumped into an “affordability”-themed group. Finally, narrow down the three themes you think are most important to upholding your core purpose—these will be your primary success strategies.
Lencioni says that this method will ensure that your company’s actions align with and progress your core purpose. This will result in organizational clarity and consistency, two factors that are vital for a healthy culture.
Principle #4: The Short-Term Goal
Finally, healthy organizations should have a single, short-term goal that’s their top priority. This will ensure that the organization solves issues that could harm it and continues to improve. Your short-term goal should be achievable within three to 12 months and should be a shared effort among the leadership team.
To determine your short-term goal, consider one thing that must be done in the next year or less to improve or maintain your organization. Then, create a to-do list—determine exactly what must happen to solve the problem or achieve the goal. Finally, determine the areas of improvement your organization must focus on to accomplish each item on your to-do list.
Changing Organizational Culture
According to John P. Kotter, the author of Leading Change, culture can’t be enforced by managers in a top-down fashion. It has to develop organically over time by hundreds or thousands of people. In the course of change, this often means that aspects of the old culture need to be eliminated if meaningful change is to take place.
For example, if your company has a goal of launching a business-facing product line to complement its consumer products, that might require changing organizational culture to a more formal, traditional format to present a more staid and conservative appearance to potential clients. This might mean changing some elements of your early, casual startup culture and doing things like instituting formal dress codes and eliminating perks like Summer Fridays or take-your-pet-to-work day.
|Commentators note changing organizational culture is one of the hardest things to do as part of a change effort. Although Kotter argues that culture change cannot be imposed top-down, some argue that leadership does, in fact, play a significant role in reshaping the values, practices, and assumptions that comprise an organization’s culture. One approach is for leadership to use a vision to tell a story about the organization’s future. Once the vision is in place, leaders hand the reins to managers, who implement new procedures, define new roles, and reorganize budgetary resources to begin actively changing organizational culture. If these first two methods still don’t produce culture change, as a final measure, coercion and punishment can become necessary—including firing those whose attitudes and values no longer align with the new culture.|
Ensuring Culture Fit
An important part of changing organizational culture is having current employees participate in regular training sessions to instill in them new ways of thinking and behaving. You should also take cultural fit into consideration in your hiring decisions when evaluating prospective employees. Candidates should be evaluated not just on the basis of their skills and experience, but also on how well their personalities and values harmonize with the new culture.
|Personality vs. Experience: Top Entrepreneurs Weigh In|
The subject of whether to hire based primarily on experience or personality is a controversial one—some of the world’s top entrepreneurs are split on the question.
Virgin Group founder Richard Branson favors hiring based on personality, emotional intelligence, and cultural fit with the company. Branson argues that, while job-specific knowledge can always be taught, the emotional or temperamental attributes that make someone a good or bad fit for a company are innate. For Branson, if someone has the wrong personality, no amount of training can overcome that.
On the other hand, Robert Herjavec, founder and CEO of the Herjavec Group (and one of the judges on Shark Tank) says that a candidate’s skill set and level of focus are the most important attributes when it comes to hiring decisions. Herjavec says that an interview needs to be structured to help the interviewer distinguish between good performers and those who are merely good at presenting themselves in interviews.
Case Study: Microsoft Culture Change
When Satya Nadella took over as CEO of Microsoft in 2014, the company was in decline: Sales had fallen considerably and the employees were dissatisfied and disillusioned. Nadella believed that as CEO, his first and most important job was to revitalize the company by changing its organizational culture to one that would lead to a positive work environment by:
1) Speaking and listening to employees. Nadella showed that he was open-minded and ready to listen by soliciting honest feedback through his surveys and meetings.
2) Engaging with staff. Nadella hosted meetings in which senior managers could share more personal experiences and ideas with one another. Beyond getting to know senior managers, Nadella argues that CEOs must remember that they lead an entire company, not just senior management. Thus, a CEO must always stay in touch with the broader base of employees as best as they can, and they must seek decisions that benefit the company overall.
3) Clearly and succinctly defining Microsoft’s mission. Nadella writes that having a clear mission inspires others and gives them a sense of direction. To get everyone on the same page, Nadella and his team streamlined and defined the company’s mission, objectives, and culture. The key message: Microsoft’s mission is “to empower every person and every organization on the planet to achieve more.” By simplifying the message, they energized people and enabled them to see how their work fit into the company, fostering a shared purpose.
4) Encouraging people to learn together as well as work together. Nadella believes that team-building exercises and creating an environment in which constant learning is actively encouraged helps bind a team and encourages employee growth. It also contributes to innovation, as we’ll discuss in the next section.
Changing organizational culture is not an overnight process. For a new culture to flourish, the behaviors and attitudes of the old culture must die out, which takes a while. However, once the new culture begins to turn, the changes you’ve instituted will start to become self-perpetuating. They’re no longer new and don’t require constant feedback and correction; instead, they just become the way things are done.
If you enjoyed our article about changing organizational culture, check out the following suggestions for further reading:
In Leading Change, John P. Kotter argues that in a fully globalized and ever-evolving economic environment, successful firms are those that can implement successful long-term change. Successful organizational change, Kotter argues, depends on the quality of leadership―people who can articulate a vision, inspire belief and confidence in it, and empower mid-level and junior managers to implement it on a tactical level. He outlines a set of strategies and techniques to help change leaders shape and direct organizational transformation, including establishing a sense of urgency, articulating a clear vision, setting measurable benchmarks to gauge success, and changing organizational culture to ensure that the new way of doing things lasts.
Managing Transitions is a guidebook for any leader who wants to survive organizational change. Renowned organizational consultants William and Susan Bridges argue that in order to accept external change, organizational leaders and team members must first go through the three-step emotional (internal) process of transition. Using the well-established Bridges Transition Model, William and Susan Bridges outline a set of human-centered management strategies that enable organizational leaders to support their teams through the necessary transition and emerge a more stable, cohesive, and purpose-driven organization.
In Reinventing Organizations, business consultant Frédéric Laloux identifies an emerging breed of company that operates from a new set of rules. Instead of serving an ego-driven focus on power, these visionary organizations embody principles of self-direction and individual authenticity while following a collective higher purpose. Laloux claims that humanity is on the cusp of a new paradigm in how we organize ourselves and suggests ways that businesses can adapt to this transition that will elevate how we work and how we live.
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