Cultures evolve over time—sometimes slipping backward, sometimes progressing—and the best you can do is work with and within them, rather than fight them. Research has found that almost every enterprise that has attained peak performance—including the Four Seasons, Apple, Microsoft, and Southwest Airlines—got there by applying five principles. Such companies see culture as a competitive advantage—an accelerator of change, not an impediment.
In this article, we’ll walk through the five principles, using examples from our research and client experience. Following them can help an organisation achieve higher performance, better customer focus, and a more coherent and ethical stance.
1. Match Strategy and Culture
Too often a company’s strategy, imposed from above, is at odds with the ingrained practices and attitudes of its culture. Executives may underestimate how much a strategy’s effectiveness depends on cultural alignment. Culture trumps strategy every time.
Some corporate leaders struggle with cultural intransigence for years, without ever fully focusing on the question: Why do we want to change our culture? They don’t clearly connect their desired culture with their strategy and business objectives. Many times organisations have an entire laundry list of hoped-for cultural traits: collaborative, innovative, a meritocracy, risk taking, focused on quality, and more. The list is too vague and too long to tackle. It sounds great but provides nothing in the way of differentiation.
Contrast such nebulous aspirations with those in an organisation in which a few cultural traits truly do match and support the strategy, like the Mayo Clinic. World renowned for its ability to bring together specialists across a range of medical fields to diagnose and effectively treat the most complex diseases, the clinic promotes unusually high levels of collaboration and teamwork, reinforcing those traits through formal and informal mechanisms.
2. Focus on a Few Critical Shifts in Behaviour
Studies show that only 10% of people who have had heart bypass surgery or an angioplasty make major modifications to their diets and lifestyles afterward. We don’t alter our behaviour even in the face of overwhelming evidence that we should. Change is hard. So you need to choose your battles.
Where do you start? First observe the behaviour prevalent in your organisation now, and imagine how people would act if your company were at its best, especially if their behaviour supported your business objectives. Ask the people in your leadership groups, “If we had the kind of culture we aspire to, in pursuit of the strategy we have chosen, what kinds of new behaviours would be common? And what ingrained behaviours would be gone?”
Say your organisation is a former utility or government agency interested in becoming a better service business. If it excelled at service, how would people treat customers differently? What kinds of interactions would be visible in any new offices you opened? How would employees propose new ideas or evaluate one another? How would they raise difficult issues or bring potential problems to others’ attention? And how would employees react when they actually saw colleagues doing things differently?
When choosing priorities, it often helps to conduct a series of “safe space” discussions with thoughtful people at different levels throughout your company to learn what behaviours are most affected by the current culture—both positively and negatively. This approach was taken by a national retailer that was looking to build a culture with a strong customer focus. The retailer’s leaders enlisted the help of internal “exemplars”—people who were known for motivating their teams effectively. A group of senior executives interviewed them and isolated a set of crucial motivating behaviours, such as role-modeling good customer service. Store managers received training in the behaviours, which were also translated into specific tactics, such as ways to greet customers entering the store. The stores that have introduced the new behaviours are already beginning to see results, including improved same-store sales in key product areas and fewer customer complaints.
The behaviours you focus on can be small, as long as they are widely recognised and likely to be emulated. Consider the response one company had to the discovery that a major source of employee frustration was its performance-review process. The company used a 360-degree evaluation mechanism, but employees were often unpleasantly surprised by the results. So management introduced a simple behaviour: asking people who were providing input whether they had ever given the feedback to the person being reviewed. As a result of this straightforward question, colleagues began to share constructive criticisms with one another more often, resulting in fewer demotivating surprises and a better dialogue about performance.
When a few key behaviours are emphasised heavily, employees will often develop additional ways to reinforce them. As GM was emerging from bankruptcy, the company decided to spur innovation by placing a renewed emphasis on risk taking and the open exchange of ideas. After one colleague complimented another on his performance in a meeting, their team lightheartedly began a practice of handing out “gold star” stickers to recognise colleagues exhibiting strong character and candor. The practice soon began to spread. While the stickers probably would have been received skeptically as a top-down initiative, as an organic peer-to-peer custom they helped reinforce GM’s larger cultural evolution.
3. Honour the Strengths of Your Existing Culture
It’s tempting to dwell on the negative traits of your culture, but any corporate culture is a product of good intentions that evolved in unexpected ways and will have many strengths. They might include a deep commitment to customer service (which could manifest itself as a reluctance to cut costs) or a predisposition toward innovation (which sometimes leads to “not invented here” syndrome). If you can find ways to demonstrate the relevance of the original values and share stories that illustrate why people believe in them, they can still serve your company well. Acknowledging the existing culture’s assets will also make major change feel less like a top-down imposition and more like a shared evolution.
The same surveys of employee behaviour, in-depth interviews, and observation that you use to diagnose your culture’s weaknesses can also clarify its strengths. Executives at one financial services firm, for example, conducted a survey to test employees’ readiness to follow a strategy that involved going head-to-head with a new, aggressive set of competitors. The survey revealed a number of serious cultural challenges, including passive-aggressive behaviour, inconclusive decision making, and pervasive organisational silos. But it also showed that staff members were unusually willing to commit time and effort toward the strategy; they really wanted to help. This enormous strength had been largely untapped. That realisation helped executives rethink how they communicated the strategy, and more important, how they interacted with employees to support the new behaviours.
Another strength companies can leverage is the employees who are already aligned with their strategy and desired culture. Most companies, if they look hard enough, will find that they have pockets of activity where people are already exhibiting the new, desired behaviours every day—just as the “exemplar” store managers did at the retailer.
4. Integrate Formal and Informal Interventions
As you promote critical new behaviours, making people aware of how they affect the company’s strategic performance, be sure to integrate formal approaches—like new rules, metrics, and incentives—with informal interactions. (For a menu of tools, see the exhibit “Mechanisms for Getting the Most from Your Culture.”) Only a few companies understand how to do this well. In some instances, most corporate leaders favour formal, rational moves and neglect the informal, more emotional side of the organisation. They adjust reporting lines, decision rights, processes, and IT systems at the outset but overlook informal mechanisms, such as networking, communities of interest, ad hoc conversations, and peer interactions.
Mechanisms for Getting the Most from Your Culture
Google is a good example of a company that makes the most of its informal organisation. A senior leader there once compared the company to universities that plan out paved walkways when they expand their campuses. At Google, he said, “we would wait to do the walkways until the employees had worn informal pathways through the grass—and then pave over only those getting the most use.”
Whether formal or informal, interventions should do two things: reach people at an emotional level (invoking altruism, pride, and how they feel about the work itself) and tap rational self-interest (providing money, position, and external recognition to those who come on board).
At Aetna, Rowe explicitly sought out informal interactions with employees. These included social visits, ad hoc meetings, impromptu telephone discussions, and e-mail exchanges. He and Williams focused on getting cross-sections of people to reflect on how they were feeling and on identifying their sources of anxiety and concern. Separate nonhierarchical forums among peers and colleagues were also held across the company to discuss Aetna’s values—what they were, what they should be, why many of them were no longer being “lived,” what needed to happen to resurrect them, and what leadership behaviors would ensure the right employee behaviours.
One early and important networking effort by Rowe was to identify a core group of “key influencers”—potential leaders who could offer invaluable perspectives on the cultural situation, regardless of their level in the hierarchy. Rowe began interacting with a cadre of about 25 influencers and within a few months expanded the group to include close to 100. These discussions not only gave him insights about the staff but created a rapport between him and a respected group that disseminated his message both formally and informally.
Measure and Monitor Cultural Evolution
Finally, it’s essential to measure and monitor cultural progress at each stage of your effort, just as you would with any other priority business initiative. Rigorous measurement allows executives to identify backsliding, correct course where needed, and demonstrate tangible evidence of improvement—which can help to maintain positive momentum over the long haul.
Executives should pay attention to four areas:
- Business performance: Are key performance indicators improving? Are relevant growth targets being reached more frequently? What is happening with less obvious indicators, such as local sales improvements or decreases in customer complaints?
- Critical behaviours: Have enough people at multiple levels started to exhibit the few behaviours that matter most? For example, if customer relationships are crucial, do managers update the CRM database on a regular basis?
- Milestones: Have specific intervention milestones been reached? For example, has a new policy successfully been implemented? Are people living up to their commitments to key account targets?
- Underlying beliefs, feelings, and mind-sets: Are key cultural attitudes moving in the right direction, as indicated by the results of employee surveys?
This last area is usually the slowest to show improvement. Most people will shift their thinking only after new behaviours have led to results that matter—and thereby been validated.
When designing cultural metrics, remember that you get what you measure. An overemphasis on quarterly sales results, for example, can trigger inappropriate pressure on valued customer relationships. And if a company, in an effort to become more customer-centric, defines “engage with your client more often” as a critical behaviour and measures it in number of calls per week, its staff may make lots of phone calls without increasing business. Similarly, focusing on retention metrics as an indication of overall engagement and job satisfaction may not be as useful—or as important—as what happens to retention of top performers once a cultural initiative gets under way.
Companies should also use their tracking efforts to remind people of their commitment. Some organisations send out a five- or 10-question survey every other week, asking how often particular behaviours have been exhibited. These surveys serve as good a basis for dialogue and act as a simple reinforcement mechanism.
If not approached correctly, measurement efforts can quickly become cumbersome, time-consuming, and expensive. It’s better to include a few carefully designed, specific behavioral measurements in existing scorecards and reporting mechanisms, rather than invent extensive new systems and surveys. In some cases, it may also be worth focusing on interactions within key subpopulations—such as midlevel managers or those in business-critical functions—whose own behaviours have a disproportionate impact on the experiences of others or on business success.
Cultural Intervention as the First Resort
All too often, leaders see cultural initiatives as a last resort, except for top-down exhortations to change. By the time they get around to culture, they’re convinced that a comprehensive overhaul of the culture is the only way to overcome the company’s resistance to major change. Culture thus becomes an excuse and a diversion, rather than an accelerator and an energiser.
But cultural intervention can and should be an early priority—a way to clarify what your company is capable of, even as you refine your strategy. Targeted and integrated cultural interventions, designed around changing a few critical behaviours at a time, can also energise and engage your most talented people and enable them to collaborate more effectively and efficiently.
Coherence among your culture, your strategic intent, and your performance priorities can make your whole organisation more attractive to both employees and customers. Because deeply embedded cultures change slowly over time, working with and within the culture you have invariably is the best approach. The overall change effort will be far less jarring for all concerned. Simply put, rather than attacking the heart of your company, you will be making the most of its positive forces as your culture evolves in the right way.