The big four banks need to change their culture. So do the retail super funds and the financial advice industry. And 7/11. And Retail Food Group. Domino's Pizza. Cimic. IOOF. And the insurance industry. The Army. Victoria Police. Facebook. The Catholic Church. Parliament. Elite sports. The media. Aged care. It’s the first priority for the new CEO of the National Australia Bank, as it is for the new coach of the Adelaide Crows. And most people you speak with will say, “my company/my organization is overdue for a culture change too.”
Every day, the business media carries this refrain. Companies have stopped defending offensive behavior as down to “rogue elements” and have joined the chorus too. To do so, of course, is to accept the need for systemic change.
Company culture is an important leadership issue, because it’s about the organizational dynamics of the company, which are a significant responsibility for CEO’s, executives, and boards. Generally, in organisations, we look to supervisors and middle managers to bring leadership to their teams, to shape effective teamwork, relationships, and a sense of identity and purpose. As managers move on into senior roles, so their leadership efforts need to be directed towards system dynamics. While there are some dynamic principles in common across levels, senior roles require a wider scope which includes organizational branches, divisions, business units, and the company as a whole. Arguably, this responsibility is a very significant part of senior roles, along with strategy, major resource decisions, Board relations and the interface with the external environment.
Unfortunately, it seems that many of the very people with this system responsibility fail to understand how culture works, nor how to effect change. They are joined in this shortfall by the business media.
This article aims to outline how organizational cultures work, and how those responsible can lead in order to bring about worthwhile changes in them.
Company culture is the domain of leadership, rather than management – that is, it’s focused on people and the relationships and dynamics between them. It’s the sum of the repeated patterns of thinking and behaviour which have become established and automatic over time. Once established, it’s very hard to change because it provides the structure and fabric which holds the place together. And for each of us, once we’ve been at that company for a while, as we become accepted and make a viable place for ourselves, it comes to feel like the ‘normal’ way to think and behave; it just ‘makes sense’ to do things that way. It becomes largely invisible to us. It provides the currency of discourse – the language by which we understand the world, problem-solve and make decisions together. And as the culture defines ‘normal’, it also makes it difficult to disagree, question or challenge how things are done.
It doesn’t work to rational rules; instead, it’s ‘non-rational’ (rather than ‘irrational’). It’s made up (ie constructed) over time, on the back of shared history, sometimes shaped by the style and philosophy of the founder, especially in private companies. Large organisations usually contain several corporate cultures, which can learn to tolerate each other, or at times contest for power. Sometimes we can even see this contest acted out at executive team level. The executive team is usually a mirror to company-wide dynamics.
As the company culture gets bedded down over time, it will also define who has power and influence, and who will be most rewarded and for what. This in turn creates stakeholders and beneficiaries invested in the status quo.
Culture is particularly expressed, disseminated and maintained through stories – not the “official’’ stories in brochures and speeches, but those which are passed on day-by-day, which relay “how things really happen around here”.
If we want to understand the nature of a specific company culture, we need to act like “organisational sociologists”. This entails collecting the real stories in circulation about how things happen, who has power, and whether peoples’ behavior reflects the espoused company values or something else. It also entails observation of the workings of the human system, and of the artefacts in offices and at work stations which are most meaningful to staff.
It not only involves observing rituals, such as ceremonies, meals, social functions, welcomes and farewells, but also staffs’ reactions to them. And it involves exploring company symbols, some of which will assume an important status as emblematic of peoples’ best aspirations and pride with achievement, but can also serve as a focus for staff disillusionment.
It is unlikely that insiders in the system will be able to do cultural mapping of this kind nearly as well as outsiders.
Culture cannot be legislated at the whim of any one group, for example the top team. It is not maintained or changed by decree – such as when executive teams fix on a set of values, or a mission, then hand it down to everyone else. People only enact thinking and behaviours which ‘make sense’ to them, not because their senior managers think they should. This means that culture is subject to influence rather than command and control.
Maybe, like me, you’ve seen companies where the executive and/or board decided what the corporate values should be; then they wordsmithed them; then they had them printed in silver or gold, framed and mounted on the office walls. And when you ask staff what they think of the corporate values, they can’t say what any of them are!
In the same vein, there are many current examples of CEO’s, charged with culture change, who talk of how they “carry the new values to their staff” through a newly-invented framework, often known by an acronym. One high-profile banking CEO recently talked of his “EPIC” framework (meaning – Empathy Perform Imagine Connect), which was guiding their culture change program. He went on to say, “I’m the personal sponsor of it. I think this would be – could be the biggest impact I can have on the company, to build leaders who have those sort of capabilities, not just at the top level but the top thousand, the top 2000 leaders.” When questioned further, however, he wasn’t really sure how those capabilities would be built nor integrated into a new culture. Somehow, the framework was going to “do the trick”. If only it was so easy … or so rational! This kind of naivety is common among senior executives.
The gap between executives and their staff, illustrated above, is, of course, a key element of why standard culture change programs don’t generally work. Leadership, after all, can only exist in relationship.
Probably the other key element in culture change failure (I know of one critical government agency which has recently embarked on culture change in some key areas internally which they have been working on since 1977) is to use entirely inappropriate methodologies. Most corporate culture change is attempted by top-down, rational, logical, formal and linear processes; in short, by using the methods and tools of rational business management. Of course, these tools can do a great job in the technical, financial, safety, quality, strategic and planning domains, and resource decisions.
However, these methods are of little use when it comes to the stuff of leadership and culture – the truly human aspects of the company as a human system. Here, a very different set of rules applies. This is the world of beliefs and values, identity (and personal identification), information-sharing, direction, shared purpose or vision, morale, interpersonal communication, trust and openness.
All of these very human matters are personally-held, subjective, and uncontrollable. No manager can insist or enforce that their staff should trust each other, for example; their staff will trust each other, and share valuable information, and co-operate … only if it makes sense to them to do so, and if it feels safe to do it. In this context, “leadership” is the capacity to generate and maintain the dynamics which support morale, trust, and shared purpose, etc. Since executives cannot make this happen through command and control, or rational, logical injunctions or exhortations, they have to lead through influence, engagement and creating the enabling conditions (such as honest, skillful and caring feedback).
It’s only real, actioned leadership behaviours which can stimulate new corporate cultures. Hopefully, those behaviours will be found and encouraged at all system levels. Nonetheless, they are not negotiable as accountabilities for executives, who need to go well beyond motherhood phrases, executive retreats, and rational, cognitive pronouncements. CEO’s need to go much further than “sponsoring” culture change, which is a perspective which is patronising, disconnected, remote, and intellectual.
There are at least 10 specific leadership behaviours which senior people, in particular, do well to be competent in and demonstrate constantly, so as to give leadership to their organisations. Understandably, these behaviours overlap with at least 15 proven culture change approaches which maximise the change dynamic. These include such things as modelling, participation, and storytelling.
Modelling is fundamental. Whatever culture you’re after, if the executives don’t do it, no-one else will. Senior people can’t ask their people to be relationship-focussed, while they stay remote and in the company of managers like themselves; or ask for less waste if they are seen to be greedy or self-serving; or encourage co-operative effort while handing down all the decisions or showing a “we know best” attitude. Put bluntly, when a CEO says 'we are all in this together', or asks for restraint, but earns 250-times that of the ordinary staffer in their business, the staff will have a different view, and the CEO is not in a position to engage honestly with those around them.
To support the kind of corporate culture which most managers say they want, executives will model direct and honest communication, free of “weasel words”, they will welcome challenging questions, honest statements and feedback from staff, and they will do so verbally and non-verbally. They will match their actions to their espoused values. They will welcome face-to-face engagements with their people. They will lead by example. They will show a willingness to explore, debate, and learn. When they make mistakes, they will “own up” to them”. They will take the time to connect with and understand their colleagues. They will understand the importance of the symbolism of their actions (I have seen two companies where the CEO’s had a special elevator to take them directly from their office to their carpark … presumably so they didn’t have to talk with their staff).
Many senior managers, knowingly or not, mark their participation in the organizational system by not really participating. A core issue here is that you cannot not participate in your company; the question is therefore, “in what way do you participate?” Are you really fully engaged in the system of which you are a part – interpersonally and emotionally as well as intellectually? Managers are generally encouraged – through management development and business courses – to be “objective”, impersonal, detached, outside and sometimes above the system, in the manner of field marshals, strategists, and planners. The justification has always been that from that position, they can make better, more rational decisions.
Unfortunately, the same attitude of being above, rather than in, the system also serves to objectify the organization and the people within it. It easily becomes a psychological stance which is disconnected, cold and distant. Staff can see it as arrogant and superior. From here, senior people are not in the right place to lead, in contrast to manage. Leadership activates the whole person, skillfully and productively, both for the leader and the follower. No-one ever gave their heart, their loyalty, their trust – to a robot.
The culture of any organization is carried by stories. Stories tell everyone how things “really” happen, how power and status are expressed, what the “real” values – those which are lived, rather than espoused – are, what success looks like, how to behave and how to relate to others. They illustrate what you have to do to “belong”. They convey who the organisation’s heroes are, or have been, and why that’s the case. The same applies to villains.
If the company’s stories don’t change, the culture hasn’t changed.
Stories are the lifeblood of corporate culture; they make it alive, creating images and feelings which impel people’s actions, bind them together and serve to illustrate how to think and behave. They shape our thoughts and aspirations through actual characters, with real feelings and motivations, told in a language which is compelling because it is full of sensory description, as opposed to the sterility and abstract formality of “corporatespeak” (the language of powerpoint).
Story reflects, expresses and disseminates organisational culture. It is connective, personal and seductive, rather than authoritative. It can bring a desired future to life. It is a leadership art most often avoided by senior managers, whilst seeking to influence and persuade.
Fortunately, there are also plenty of instances of leadership which authentically shape and change company cultures. Some I have witnessed include:-
During the GFC, an IT company was hit by a significant downturn in work. It was a company in which all staff had actively articulated their shared values, which had a strong collegial feel. So the executive decided to find a way that all staff could weather the crisis together. Everyone, including the CEO, took the same proportional pay cut, all agreed to reduce their hours, and everyone arranged to use up some of their leave entitlements. In the end, almost all staff were able to retain their jobs in the long term.
A new CEO of a large business modelled trust and engagement continuously. Every time he met with managers and staff, he spoke directly and honestly; every time he was publicly challenged or questioned, he would physically turn towards the person, welcome what they had to say, and answer it personally and honestly. Staff attrition rates dropped significantly over the next year. Many managers reported a renewed “faith” in the business. The level of honesty and co-operation on the executive team lifted, and long-standing issues between several of the team were “sorted”.
A large governmental agency was keen to build a new culture of relational leadership. After several months of effort, success stories (and some about the struggle of change) were emerging. The protagonists were invited to relate those experiences at gatherings such as internal conferences. Like a snowball, every time managers were asked to work with a more “relational” approach, but couldn’t initially see how to do things that way, their colleagues would re-tell the exemplary stories, and that in turn would trigger a fresh effort. Some of those stories “did the rounds” for several years.
A change process was begun in an antiquated industrial plant. Shortly after, a new plant manager was appointed, and he decided to take part in a week-long residential workshop which the supervisors and workers were going through, to help build relationships and skills for the change. On the suggestion of his supervisors, he ended up taking part fully in every one of the workshops over an 18-month period. The power of his example and participation was enormous, and over the next two years all the workers participated in decisions much more, and the business was turned around.
This article has suggested that those with the most responsibility for organizational culture will benefit from a largely different approach to culture change – involving leadership, relationships, human methods, and direct engagement. That will require a different approach to leadership and executive development itself, in which change, learning, development, and growth are often synonymous. Arguably, good leadership always involves change; so does second-order, or substantive, learning. That principle applies to both individuals and organisations.
Good leadership development needs to focus on specific leadership behaviours, rather than fluffy, abstract concepts such as visions and core values, or business problem-solving exercises. And that development will only work if it is done “live” – in the room, in the development group itself, where everything that the participants do has real consequences. This may be in course groups with group projects, project management teams, or executive teams. “Experiential learning” occurs best when it involves real experiences, followed by reflection. Simulations, role-plays and other “let’s pretend” approaches are inadequate to the task.
Our postscript is that, sitting in the background, there is an embedded dilemma which relates to all leadership matters, including culture. It is about the nature of this responsibility in the worklives of senior managers. This is the crunch: All managers are to be accountable for both business management (resource decision-making and control) and leadership (subjective and non-rational human dynamics) - but, in the latter area, managers are being held accountable for a range of forces which they actually can't control. This is one of the great 'undiscussables' in modern management.