| This is the result of an extensive set of discussions among a group of organization development consultants and internal HR staff under the auspices of the Change Affinity Group of the New Jersey Human Resource Planning Society.
Key Questions for Discussion:
- What is culture change?
- What are the major models?
- What is the role of executive management in culture change?
- What is the role of HR in culture change?
- What works and doesn’t work in culture change?
Summary of Key Thinkers’ Ideas
- John Kotter’s perspective.
- “Culture” refers to norms of behavior and shared values among a group of people.
- “Norms of behavior” are ways of acting that persist because they are rewarded and the group teaches these behaviors to new people, sanctioning those who do not conform.
- “Shared values” are important concerns and goals held by most people in the group: they shape group behavior.
- In Kotter’s model, changing the culture is the last of eight steps, not the first.
- “Even when there is no personality incompatibility with a new vision, if shared values are the product of many years of experience in a firm, years of a different kind of experience are often needed to create any change. That is why culture change comes at the end of a transformation, not the beginning.”
- Culture is not something you can directly manipulate, as if by decree. Culture change occurs after you have successfully altered people’s actions and their new behavior has produced success, which can be traced back to the new actions and behaviors.
- This is not to say that culture issues don’t arise in the early stages of a transformation. But to try to change the culture as a first step is a bad idea what proof do you have to offer that it’s the right way to go?
- Remember, you are always trying to engender an adaptive culture, one that benefits the four main constituents: shareholders, employees, customers and management. This type of culture values good leadership and management. It also encourages teamwork at the top, while minimizing layers of management and bureaucracy, as well as counterproductive interdependencies.
- Anchoring change in a culture.
- Culture change comes last, not first.
- Lasting change depends on results. You must show new approaches work and that it’s worthwhile to change.
- Requires a lot of dialog.
- May involve turnover of key people who block change.
- Promotion practices need to be changed to be compatible with the new practices. New leaders should be compatible with the new culture and champions of it.
- Shallow roots require constant watering.
- Kotter uses an example of a technology-oriented company to illustrate the point. As long as the new general manager was around to focus the organization constantly on speed to market and the customer, progress was made substantial progress. When the GM retired, because the underlying cultural belief that “good technology will solve all our problems” had not changed, the company quickly regressed over two years.
- In an organization, the less visible shared values and group norms are, the harder they are to change.
- Culture is powerful for three reasons.
- Individuals are selected and indoctrinated to support the existing culture.
- Culture propagation occurs through the actions of hundreds or thousands of people in the organization.
- This reinforcement happens without much conscious intent and is therefore difficult to challenge or even discuss.
- There are different culture-change scenarios, some much harder to accomplish. For example:
- The core of the old culture is not incompatible with the new vision. The challenge is to graft new practices onto old roots, while eliminating inconsistent practices. This is least difficult to do.
- The core of the old culture is incompatible with the new vision. This is a much more difficult situation to cope with.
- Kotter and Heskett in Corporate Culture and Performance.
- Alan Wilkins’ study reflects the beliefs of many academics that culture is very hard to change. In 22 cases Wilkins studied, even the managers admitted failure in 16 instances.
- Kotter and Heskett studied 10 cases of major culture change that seemed to be successful. The companies were Bankers Trust, British Airways, ConAgra, First Chicago, General Electric, ICI, Nissan, SAS, American Express TRS, and Xerox. They found:
- “The single most important factor that distinguishes major culture changes that succeed from those that fail is competent leadership at the top.”
- All ten cases of major change occurred after an individual with a track record for leadership was appointed head of the organization. Each had a track record of producing change.
- In their new jobs they created change on a grander scale.
- These leaders demonstrated the close interrelationship of competition, leadership, change, strategy and culture.
- All of these leaders either:
- Came from the outside.
- Came to their firms after an early career somewhere else.
- “Grew up” outside the core of the company.
- While a limited sample, one can theorize that an outsider’s perspective is important to change.
- In all four very large companies in our study, the change leader had spent considerable time in the company before taking over, thereby developing a good sense of the resources in the company.
- Complete outsiders tended to be successful at smaller companies.
- Why you can’t change culture from the bottom up.
- The sheer resistance to change in an organization requires great power to overcome, and that power resides at the top.
- Interdependence in organizations makes it very difficult to change anything important, without changing everything. Only people at the top can do that.
- Delta Consulting’s (David Nadler) perspective: Discontinuous Change.
- “Organizational culture” is a set of commonly shared values and beliefs. It influences the behavior of people and is reflected in work practices, i.e., how we do things here.
- “Values” are the fundamental axioms or established feelings about the desirability of some quality, like innovation or individualism.
- “Beliefs” are perceptions about the connections of things such as events and outcomes, for example: “Hard work will be rewarded,” or “challenging the boss will get you shot.”
- Culture is reflexive: Beliefs shape behavior, but behavior also shapes beliefs. Values affect beliefs and behavior, but beliefs and behavior also affect values.
- Often espoused beliefs and values are not consistent with the beliefs and values that can be inferred from observed behavior. This lack of alignment can cause great dysfunction.
- Most organizations are a mixture of many cultures: one in R&D, another in Sales, etc.
- External forces, historical forces and internal forces all shape behavior. Managers can most affect internal forces giving them a lever to change culture.
- In changing culture, there are three critical areas to address.
- Content of the change (vision of the new culture).
- Do a culture audit: What is the culture like, what needs to be changed?
- Leadership is essential for successful culture change.
- Key champions at all levels are required.
- Leverage points for change (what and how to change).
- Full-blown culture change requires change in all the key elements of organizational context: structure, business processes, measurement, appraisal and rewards. If, in fact, you do all these things, Nadler argues that culture change will be the ultimate outcome.
- Values must be articulated in terms of expected behavior. Establishing one value as more important than others is important to give people a set of priorities.
- Good technique used at AT&T, where Senior Executives interviewed people lower in the organization about the new values and how they saw them being implemented. This is a good check on implementation, and helps senior executives understand the issues involved in the effective transformation of a culture.
- A key test of culture change is who is getting promoted, the good guys or the bad guys
- What happens to someone delivering good results but not living the new values? This is a critical dilemma for leadership. Support and coaching for change must be offered; if a person refuses or does not change, then they must be removed. GE under Jack Welch was very strongly committed to having executives both get results and live the values. If they did not live the values, and did not improve, they were out.
- Tactical choices (when and where to change).
- Culture and values are the very foundation upon which the overall change agenda rests.
- Interventions into culture should be sequenced separately from the hardware changes. One effective sequence is to have culture initiatives occur sometime after the announcements of structural and work-process changes.
- Use bottom-up interventions also, e.g., education and training, meetings, forums, etc.
- Migrate change laterally from one organization to another. Use beta sites and skunk works to try out changes and work out the kinks. Transfer that learning to the next site. Customer visits can be a very powerful tool in this change. Customer needs get the attention of almost any level in the organization.
- Built to Last. By Collins and Porras.
- They do not talk about changing culture, but about what great companies do to maintain their cultures, which they describe as cult-like. This is useful to consider once you decide what you want to change the culture to.
- The cultures in visionary companies are not soft or undisciplined:
“Because visionary companies have such clarity about who they are, what they’re all about, and what they are trying to achieve, they tend not to have much room for people unwilling or unsuited to their demanding standards.”
- Visionary companies are not great places to work, at least not for everyone. If you can’t embrace their ideology, they expel you like a virus. If you do not fit their practices, they will weed you out in the hiring process or shortly thereafter.
- Cult-like cultures are key to preserving the core ideology of a company.
- Visionary companies have these characteristics about their culture that are cult-like:
- Fervently held ideology
- Tightness of fit
- Visionary companies create these cultures through practical, concrete things:
- Orientation and training programs
- Internal universities
- On-the-job socialization with peers and immediate supervisors
- Rigorous up-through-the-ranks policies such as promoting from within, and hiring young people and shaping their minds from the start.
- Exposure to pervasive myths of heroic deeds
- Corporate songs, cheers, etc.
- Tight screening practices; hiring and removal in first few years
- Incentives and advancement are closely linked to core ideology
- Awards, contests and public recognition are closely linked to core ideology
- Tolerance for honest mistakes, but severe penalties or termination for breaching core ideology
- These cult-like cultures succeed because they are balanced by mechanisms to stimulate progress, e.g., taking on challenging tasks (Big Hairy Audacious Goals or BHAGs).
- Adhering to a small set of core beliefs allows these companies to grant a good deal of operational autonomy.
- The authors conclude: “It means that companies seeking an ’empowered’ or decentralized work environment should first and foremost impose a tight ideology screen and indoctrinate people into that ideology, eject the viruses, and give those that remain the tremendous sense of responsibility that comes with being a member of an elite organization. It means getting the right actors on the stage, putting them in the right frame of mind, and then giving them the freedom to ad lib as they see fit.”
- The Last Word on Power: Executive Re-invention for Leaders Who Must Make the Impossible Happen. By Tracy Goss.
- The power to make the impossible happen.
- As a leader your source of success in the past is probably preventing you from making the impossible happen now. You must re-invent yourself, put past success at risk to make the impossible happen.
- “I define this advanced level of power as the ability to take something that you believe could never come to pass, declare it possible, and then move that possibility into a tangible reality.”
- She claims there is a set of theories and methods for learning to make the impossible happen, and that these can be taught.
- Reinventing yourself does not imply that something is wrong with you; it’s a process that takes you to a new place, to unfamiliar and unknown territory.
- Executive re-invention is primarily an ontological journey. Ontology is a branch of philosophy concerning the nature of reality and different ways of being.
- If you are going to re-invent your organization, then in order to succeed, you must first re-invent yourself. (Note: This is an alternate strategy to Kotter, where re-invention occurs when a different type leader takes over. None of Kotter’s success stories seems to have re-invented themselves.)
- Goss uses the analogy of a Navy SEAL and corporate leaders. The green recruit, despite being among the top 1% of officers in Navy, needs considerable training to take on the impossible missions assigned the SEALs. Similarly, the top 1% of leaders in organizations when they get to the top are not prepared to take on the impossible; they need training.
- Transformational change is an oxymoron. “Transformation” is a function of altering the way your being, to create something that is currently not possible in your reality. “Change” is a function of altering what you are doing, to improve something that is already possible in your reality.
- To transform yourself, you must transform your context, that is, the way you think, talk and act.
- “Language is the only leverage for changing the context of the world around you. This is because people apprehend and construct reality through the way they speak and listen.”
- “By learning to uncover the concealed aspects of your current conversations and learning to engage in different types of conversations, you can alter the way you are being, which, in turn, alters what’s possible.”
- The seven stages of leadership re-invention. First four have to do with freeing yourself from the past; last three, with building your capacity to make the impossible happen.
- Uncovering your winning strategy: learning to understand what has really created your current level of success.
- Experiencing the limits of the universal human paradigm at work in your actions. The universal human paradigm colors all choices, decisions and actions. Simply stated, it says: “There is a way that things should be, and when they are that way, things are right. When they’re not that way, there is something wrong with me, with them, or with it.” This paradigm is inherited simply by being brought into a group or culture.
- Learning to put everything at risk: becoming willing to operate with no guarantee you will succeed, with your eyes wide open to the high odds of failure and the accompanying consequences.
- Inventing a new master paradigm that provides you with a new source of power: making a series of declarations that constitute a new master paradigm (Similar to personal vision).
- Inventing an impossible game to play: making bold promises in a game you have chosen to play
- Breaking the addiction to interpretation: every problem and dilemma is seen through the way it contributes to your invented future, rather than through filters from the past.
- Operating beyond the limits of your winning strategy: building the capacity to bring about your “impossible future.”
- “The Reinvention Roller Coaster: Risking the Present for a Powerful Future.” By Tracy Goss, Richard Pascale and Anthony Athos.
- Incremental change is not enough for many companies today. These companies need to re-invent themselves. Re-invention is not changing what is, but creating what isn’t. A butterfly is not more or a better caterpillar, it is a completely different animal.
- “When a company reinvents itself, it must alter the underlying assumptions and invisible premises on which its decisions and actions are based.” In other words, it must change its context.
- The first step is for a company to uncover its hidden context. A company is only going to do this when it is threatened, losing momentum or eager to break new ground.
- “The journey to reinvent yourself and your company is not as scary as they say it is; it’s worse,” says Mort Meyerson, chairman of Perot Systems. You do it only out of the conviction that the only way to compete in the future is to be a totally different company.
- Shifts in context can only occur when there is a shift in being. Nordstrom’s is used as an example. Their way of being is summarized as “Respond to Unreasonable Customer Requests.” Those that have tried to copy Nordstrom’s have not understood their fundamental way of being and have failed.
- A declaration from a leader, like Sir Colin Marshall’s pronouncement that British Airways would be “the world’s favorite airline” (when, at the time, it was one of the worst), does a couple of things:
- Creates possibility
- Stimulates interest and commitment
- A declaration is different from a vision statement, which provides a more elaborate description of the desired state and the criteria against which success will be measured.
- Key to re-invention is the re-invention of the leader (see Goss notes).
- Managing the present from the future
- Assemble a critical mass of key stakeholders.
- Many more than just the top 8 to 10 leaders.
- Should include key technologists and leading process engineers.
- Group should be sufficiently diverse to ensure conflict, which will get issues on the table so they can be resolved.
- Have to decide how it’s going to happen.
- Do an organizational audit to generate a complete picture of how the organization really works.
- Understand the competitive situation.
- Reveal barriers to moving from “as is” to the future.
- Core values.
- Key systems.
- Strategic assumptions.
- Core competencies, etc.
- Create urgency. Discuss the undiscussable.
- A threat that everyone perceives, but no one is willing to talk about, is most debilitating to an organization
- Book of Five Rings Japanese guide for samurai warriors. Written four centuries ago, directs the samurai to visualize his own death in the most graphic detail before going into battle. Idea being, once you have experienced death, there is not a lot left to fear: one can then fight with abandon.
- This helps explain the value of discussion about not changing and the dire consequences to a company in a difficult business situation.
- Harnessing contention.
- Conflict jump-starts the creative process.
- Most companies suppress contention.
- Control kills invention, learning and commitment.
- Emotions often accompany creative tension, and they are often unpleasant.
- Intel plays rugby; your ability at Intel to take direct, hard-hitting disagreement is a sign of fitness.
- Many excellent companies build conflict into their designs.
- Engineering organizational breakdowns.
- Breakdowns should happen by design, not accident.
- In trying to manage back from the future, concrete tasks will have to be undertaken; continuing on the current path will not get you there. Often you don’t know how to make these tasks occur. This will generate breakdowns, which can generate out-of-the-box thinking and solutions, if the situation is managed/lead correctly. Continuous open dialogue is key to working through breakdowns.
- Setting impossible deadlines is another way to encourage breakdowns and out-of-the-box thinking.
- Organizational Culture. By Edgar Schein, MIT (He, Kotter and Heskett are in similar places.)
- “Let me begin bluntly there is no such thing as the “right” culture and culture can not be fostered or installed.”
- Success of the company creates organizational culture. If the founders had a wrong set of assumptions about how things are, they would have failed. The right set of assumptions is relative to the business environment. The longer the company is successful, the more stable the culture becomes.
- Pronouncements that we must change our culture either will be denied or cause levels of anxiety that trigger intense resistance to change. Therefore, you will fail if you take culture head on.
- If the present culture is dysfunctional, or out of line with current environmental realities, then take these steps:
- Start with what the business problem is. The issue is not about culture, but about the mission of the organization and whether it is being fulfilled.
- Figure out what needs to be done strategically and tactically to solve the business problem. What does the organization need to do concretely to solve its survival or growth problems?
- When there is clear consensus on what needs to be done, examine the existing culture to find out how present tacit assumptions would aid or hinder that. Some parts of the culture may be fine, or certain subcultures within the organization maybe fine.
- Focus on those cultural elements that will help you get to where you need to go. It is easier to build up the strengths of a culture than to change dysfunctional elements. The diversity of a culture and its subcultures almost always have strengths to leverage.
- Identify the culture carriers who see the new direction and feel comfortable moving in that direction. This helps create role models, these people are often found in subcultures or in marginal roles in the organization.
- Build change teams around the new culture carriers. Different parts of the organization, because of environmental needs, may have to go in a different directions to produce the desired changes in thinking and acting.
- Top management must adjust the reward, incentive and control systems to be aligned with the new strategy.
- Ultimately the structures and routine processes of the organization must also be brought into alignment with the desired new directions.
- All of this takes a great deal of time and energy across many layers of management and many task forces and change teams. It is fueled by the need for a solution to a clear business problem. Culture change occurs as a by-product of fixing fundamental problems.
- If the culture prevents correcting the business strategy, that culture will be broken by destroying the group that carries the culture. That means firing a lot of people, or the organization will die.
- Culture is not a suit of clothes to be changed at will. The residue of past success, it is the most stable element in an organization.
- “Organizational Change.” Consortium Benchmarking Study conducted by the American Productivity and Quality Center.
- Overview of findings.
- Successful organizations believe the organization’s culture must be changed.
- Organization change requires vision, tenacity and a long-term horizon.
- Organization change requires commitment from top management.
- Organization change requires extensive communication with all stakeholders. Employees must be empowered and educated so they can exploit their new power.
- It is necessary to systematically measure progress and results.
- Key elements of success.
- Culture change
- Work force involvement
- Communication and measurement
- Supportive Human Resource systems
- A shared sense of urgency for change
- Triggers for change.
- Organizations on the brink of disaster that had engaged in change efforts consistently rated triggers higher than organizations not currently in dire circumstances.
- Highest ranking triggers
- Changing regulatory or legal environment
- Customer dissatisfaction
- Declining or increasing profits
- Second ranked triggers
- Declining or increasing market share
- Declining or increasing revenue
- Rising costs
- Technology change
- Third ranked triggers
- Employee morale
- Merger or acquisition
- Public Image
- Organizational Development and Change. By Thomas Cummings and Christopher Worley.
- Definition: Examination of different definitions suggests that organizational culture is the pattern of basic assumptions, values, norms and artifacts shared by organizational members. These shared meanings help members to make sense out of the organization. The meanings signal how work is to be done and evaluated, and how employees are to relate to each other and to constituencies such as customers, suppliers and government agencies.
- Corporate culture is the product of long-term social learning and reflects what has worked in the past.
- Diagnosing organizational culture culture change efforts begin with diagnoses.
- Behavioral approach
- Assesses key work behaviors that can be observed.
- Describes how specific relationships are managed and tasks performed (see example, pg. 483).
- Competing values approach
- Culture can be understood by how an organization handles dilemmas around four contradictory values. (see model, pg. 484).
- Four sets of competing values: Participation vs. goal achievement; internal focus vs. external focus; stability vs. creativity and innovation; organic processes vs. mechanistic processes.
- Deep assumptions approach
- Very difficult and time consuming to do.
- See pg. 485 for details.
- Culture change.
- There is considerable debate over whether it can be done or not.
- Given the problems with cultural change, most practitioners in this area suggest that changes in corporate culture should be considered only after other, less difficult and less costly solutions have either been applied or ruled out.
- Knowledge about culture change is in its formative stages; however, here is some practical advice if you embark on the journey:
- Start with a clear vision of the firm’s strategy and the shared values and behaviors needed to make it work.
- Have top management commitment, because culture change must be managed from the top.
- Symbolic leadership is critical: leaders must walk the talk. In successful cases of culture change, leaders almost always demonstrate a missionary zeal for new values and behaviors.
- Support organizational changes in structure, reward systems, HR systems, information systems and leadership style.
- Pay careful attention to the selection and socialization of new-comers, as well as the termination of deviants. This is particularly important for key leadership roles. Jan Carlzon of SAS replaced 13 of 15 top executives.
- Manage ethical and legal issues effectively. Don’t promise values for culture change that the organization can not deliver on.
- Corporate Culture: Removing the Hidden Barriers to Team Success. By Jacalyn Sherriton and James Stern.
- They believe that corporate culture change is needed for successful implementation of formal teams.
- Senior managers trying to implement teams continue to act individually: they are concerned about control over the teams and concerned that consensus decision making is too time consuming. They often set a very bad example, for example, by protecting their turf.
- Team members are typically not used to working in teams. They often are uncomfortable and lack the communication skills to make the teams work effectively.
- Introduction of teams while downsizing or facing threats of downsizing creates forces that are antithetical to teams.
- Corporate culture is defined by four elements.
- Ritualized patterns of beliefs, values and behaviors.
- Management environment created by management styles, philosophies, what is said, done and rewarded.
- Management environment created by systems and procedures.
- Written and unwritten norms and procedures.
- They believe that you can make a direct assault on culture change differing with Kotter, Heskett and Schein.
- Their book describes successful change in subcultures when top-level support was either absent or sporadic.
- They feel that each major functional organization such as marketing or R&D has its own subculture, as do divisions and other large units of the organization.
- Subcultures are influenced by the overall corporate culture, but subcultures are never the same as the overall culture.
- There is much more freedom to change a subculture than is commonly realized or acted upon
- “There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success than to take the lead in the introduction of a new order of things.” Niccolo Machiavelli
- How pervasive is the issue of culture and change? They did a survey of 100 companies and found that recently:
- 15% had been involved with a merger.
- 22% had been acquired.
- 41% had formed alliances.
- 78% were increasing the utilization of teams.
- 95% were involved in at least one of these initiatives that culture impacts significantly.
- Only 51% of respondents felt that their organization understood the need to address culture issues in making these changes.
- Only 31% of respondents felt their organization had the skills and knowledge to address organizational culture issues.
- Only 36% had assessed the culture and identified changes needed.
- But 56% (highest) had plans for training to address culture change.
- Gives a good detailed approach to what needs to be done to change culture. They also describe in some detail the culture needed to support teams. A lot of how-to’s. Very practical, particularly, if you need to work around some organizational constraints.
- Model does not put as much emphasis on the external environment, vision and strategy as other models.