Six Bold Steps to Transforming Organizational Culture
In 1999, ANZ, one of the top twenty banks in the world, was confronting a problem that had become too pressing to ignore anymore: sagging employee morale. Years of widespread restructuring and downsizing had taken its toll on ANZ’s internal culture, leaving it highly political and bureaucratic. But fortunately, ANZ’s management realized that before company’s performance could be lifted, the employee morale had to lift—and for that to happen, the culture had to change. Accordingly, it embarked on a journey of cultural transformation to create a high performance, values-driven organization.
By 2006, ANZ’s share price had risen to $ 27.28 from $ 14.45 in 2000, cost to income ratio improved from 65% to 45.6% during 2000-2005 period and staff engagement score was 60% in 2006, highest of all major companies in Australia and New Zealand. In short, the organization’s strategic decision to invest in cultural transformation paid rich dividends and put it on the path of growth and high performance.
According to a Bain & Company study [note 1], 81% leaders believe that an organization lacking high performance culture is doomed to mediocrity. Culture of an organization is never static, and almost every organization faces a situation during its growth journey when the present culture needs conscious change either to cope up with new demands or to raise the performance to the next level.
Symptoms to indicate the need for cultural transformation
How can the leadership of an organization diagnose if their culture is the real roadblock on their path to superior performance? If your organization is facing one or more of the following challenges, it’s time to consider a cultural transformation effort:
A rapidly shifting landscape in terms of technology or markets or competition, and a feeling among the leadership team that your organization is stuck in the old ways.
A new strategy is being implemented but somehow the organization is just not delivering the expected results.
Everybody is trying hard and in spite of good intentions, the organization is unable to convert intention into results.
A climate of pessimism where general feeling is that “this place cannot improve”.
Recent slippages in performance, such as downward trend in growth or profitability, threatening to undo all the good work done over the years.
Series of missed opportunities.
Stagnating or declining employee satisfaction/engagement levels.
Undesirable churn in high value customer accounts or non-renewals in spite of normal remedies.
A clear mandate to take performance to a significantly higher level.
If the symptoms above do really point towards the need for cultural transformation, the next important question is: How to change something as widespread and significant, and yet intangible as culture? Here is a roadmap of a cultural transformation journey.
Six steps to cultural transformation
1. Get committed
The first imperative for a successful cultural transformation is the commitment of the CEO and top leadership. The journey is normally a few years of concerted effort and no quick fix is possible. You need patience as usually new trends begin to show in about a year’s time—not less. Without the full backing of the top leadership, such a long journey is not sustainable.
2. Articulate the goals clearly
Cultural transformation is not an end itself; organization should set clear goals to be achieved as a result of a cultural transformation exercise. For instance, if growth of a certain order is a key goal, then you may need both organic and inorganic growth, which in turn will provide the cultural context. A company which is driven by “play safe” culture and low on “experimentation”, for instance, may need to change these behaviors if it were to achieve its growth targets.
The goals will also need to be communicated to all the employees in a manner that they can make sense of it and accept the need for change as well as the urgency.
3. Conduct cultural audit
Before setting the direction of any transformation effort, one of the biggest challenges is to get a handle on specific behaviors that need change. Instead of guesswork to identify the areas of change, what is needed is objective data that represents the organization’s current culture. That’s where the culture audit comes in.
It is an exercise to determine how is the company performing on a comprehensive set of behaviors, such as “Drive for performance”, “Commitment to quality” and “innovation”. Further more, audit helps to figure out if there are any significant differences across divisions or functions or levels? This analysis coupled with new business goals will lead to a clear set of behavioral objectives: Which behaviors need change and which ones can remain unchanged?
4. Design interventions and track results
Having determined the behaviors that need change, it is always advisable to initially focus on few key ones that matter more. For instance, if innovation is the corner stone of future success, then a whole set of behaviors, such as innovation and experimentation, need to be shifted. If organization is in dire need of enhancing the culture of performance, then behaviors such as accountability, meritocracy and rewards might need to change.
Next, organization would need interventions designed to bring about the required changes. These range from organizational design, policy changes, process redesign to softer aspects, such as, training/ sensitization or exposure. Carefully laid out milestones for each intervention as well as the overall transformational goals would need tracking.
5. Demonstrate resolve
One key ingredient for success in any cultural transformation journey is the visible changes in the behavior of top leaders: They need to “walk the talk”. For example, if “openness” is one of the new behaviors, then they need to tolerate dissent and support barrier-free communication across the organization.
6. Make new behaviors stick
Assuming organization is making good progress in shifting its culture, the next important challenge is to make the changes stick. There is always the danger of sliding back to old ways the moment business outcomes show favorable trends. The responsibility rests, once again, squarely on the shoulders of top leaders. They must continue to be the role models and advocates of the new behaviors.
Unlike ANZ, not many organizations take the bold step of examining own culture and embarking on a journey of cultural transformation. After all, cultural is so intangible and invisible. And yet, culture is the source of every day behaviors of employees, organizational performance and the very future of an organization. And the future can be transformed by transforming the organizational culture.
Note 1: Building a Winning Culture by Paul Rogers et al, Bain & Company