A company's culture can be overt or covert; it can add value or cost. If your company's way of operating is not serving your business, then you're history, says Gerard Egan and he lists his strategies for changing those limiting behaviour patterns.
Culture is one of those 'soft' things that's as hard as nails: hard to do; capable of delivering hard results. Many managers talk about culture but they also talk about the weather, so first a couple of introductory remarks and assumptions, and then a brief quiz.
Let's begin with a simple behaviour-focused definition: culture is the shared assumptions, beliefs, values and norms of the company insofar as these drive shared patterns of behaviour - 'the way we do things here'. The bottom line of culture is the institution's shared patterns of behaviour, including strategic behaviour, operational behaviour, decision-making behaviour, information-flow behaviour, managerial behaviour, supervisory behaviour, leadership behaviour. There is nothing soft about a company's shared patterns of behaviour at all.
A 'preferred culture' is one that serves the business. Companies such as Johnson and Johnson have not only always published and preached their preferred culture, but have translated it into behaviour. The example usually cited is the Tylenol poisoning crisis. As soon as the company heard that this product might be contaminated, it immediately yanked it off the store shelves, the CEO went on television indicating what was being done about the case, and the company moved quickly to 'tamper-proof' packaging. It said that the customer's safety was a top priority and acted on it - immediately.
The 'culture-in-use' should be the preferred culture. Often it is not. There is a culture-behind-the culture which carries the real beliefs, values and norms that drive patterns of behaviour within the company. These remain unnamed, undiscussed, undiscussable, or even unmentionable. In the US, brokerage and insurance companies have been charged with fraud. What's the culture-behind-the-culture in these institutions? These covert cultures lie outside ordinary managerial control.
A company's culture, whether espoused or covert, adds either value or cost. The cultures of General Motors and IBM have added enormous self-confessed cost. The flexible, business-focused cultures of such companies as Intel and Motorola currently add a great deal of value. When AT and T's chief executive, Robert Allen, came on board, culture transformation was high on his list. He knew that culture was not soft-side nonsense. He understood the pragmatic economics of the workplace too well. He set out to change those parts of the culture that did not serve the strategy well. Now try the quiz, marking each question on a scale of 1to 10, where 1 is low and 10 is high.
1 Our preferred culture has been spelled out and communicated to all.
2 We have linked our preferred culture to bottom-line results.
3 All new employees are routinely socialised into our preferred culture.
4 Our managers have a shared framework for understanding and dealing with culture.
5 Managing the culture is an explicit part of every manager's job description.
6 We have a clear idea of what culture-management skills are.
7 Managers are chosen because they have the competencies needed to manage the culture.
8 Managers who are deficient in culture-management skills are given training to bring them up to speed.
9 We routinely monitor and fine-tune our culture just as we would monitor and fine-tune any key asset.
10 We continually strive to make our culture-in-use congruent with our espoused culture.
11 We encourage subcultures that add value to different parts of our business.
12We can confidently say that our current culture serves our business.
13 We can demonstrate how our culture adds value to our bottom line.
What? You didn't do that well. Then join the club. There are very few companies that take culture seriously enough to turn these statements into effective practice.
Challenging and changing culture
There is a two-part assumption here. First, that culture can be changed. There are too many companies who have changed or are currently changing their cultures to think otherwise. When British Airways began moving towards privatisation, it knew that it had to change many things. But a top priority was changing a culture of indifference to a culture of service. Without a culture of service it would not be able to compete in the global marketplace.
Second, culture change need not take forever. Many say that culture change, although possible, takes a long time because the deep beliefs and values of the company are too covert and entrenched to manage easily. If people are told that culture change will take five to 10 years, many will lose heart or interest.
Furthermore, many businesses in need of substantive culture change don't have five to 10 years. The marketplace is breathing down their necks. They need 'brief therapy', not years of psychoanalysis. It is true that the stronger the assumptions, beliefs, values and norms that drive patterns of behaviour, and the larger and more complicated the institution, the more difficult it is to get at and change the culture. The trick is to have a wholehearted culture-change strategy and bang away at it. The goal of culture change is not a full personality transformation. The goal is sustainable patterns of behaviour change that serve the business in key areas. The goal is to effect enough change to make a difference.
There are two parts to culture change: auditing the culture to determine what needs to be changed; and developing and implementing culture-change strategies. The first question to ask is, 'What kind of battle do we face?' Challenging and changing culture needs to be based on a solid understanding of what the culture of this company or institution or unit is. This means exploring 'our way of doing things' in every key dimension of the company by identifying key shared assumptions, beliefs, values, norms - especially the covert ones - identifying the institution-limiting patterns of behaviour they generate; determining what keeps these patterns of behaviour in place; and doing a cost/benefit analysis of challenging and changing the culture.
My advice: forget off-the-shelf culture audits. Too many of them describe some 'perfect' culture and then ask you the degree to which your company lives up to it. There is no such thing as a perfect culture. The one that serves your business is the one you need. Dig out the assumptions, beliefs, values, norms and patterns of behaviour embedded in what managers already know - that is, the patterns of behaviour found in strategy, operations, structure, human resource management and leadership.
Unlike the weather, you can do something about culture. Here are some ways of moving from talk to action. The first step is to identify the preferred culture, the one that will serve the business right now.
Strategies based on business realities
The culture-change strategies in this group are based on strategy, operations, structure, human resource management systems, management/supervision and leadership. Since culture is embedded in these processes, changing them can change the culture.
- Use strategy as a starting point. Set out in a new direction that requires total rethinking of the culture. A change in strategy can be in itself a culture-change tool. This may mean an entirely new strategy or a significant change in the current one. For example, a rape crisis centre which specialised in direct services to the victims of rape had grown a bit stale. A couple of the counsellors, sensing the staleness, moving beyond this direct service orientation, assumed an advocacy role from time to time. They pleaded the cause of victims and potential victims with the courts, the police, local government and the community itself.
- Use contemporary approaches to operations such as quality, customer service and work process re-engineering to leverage culture change. Many of the so-called business fads of the last five years are fads only in terms of the hype they have received. The best of them should probably be called 'contemporary management approaches'. Three of them that focus primarily on operations are total quality management (TQM), customer service, both internal and external, and re-engineering. All of these, rightly executed, challenge outmoded culture paradigms. They work best as culture-change strategies, however, when this focus is built into the programme right from the start. Total quality management includes the quality of the culture. In one hospital, a nursing group, after using a TQM process to get its own house in shape, lobbied administration for a systemwide TQM effort. Every group would be targeted: administration, doctors, nurses, lab technicians, the information-system warriors, the pharmacy group, radiologists, business office personnel and so forth. Since total quality demanded cross-functional teamwork, the change effort had to focus on covert and undiscussed norms like: 'turf must be protected to preserve the professionalism of each functional group'. The quality of health care would not improve until some walls came tumbling down and a team ethic pervaded the institution.
- Use reorganising to challenge and change culture. Much of the reorganising that goes on - centralising and decentralising, creating new boxes while eliminating old ones, putting people in new jobs, changing role definitions - is a veiled attempt at culture change. One food processor built a new plant precisely because it had not been able to change the staid, business-limiting cultures of its other plants. The members of the management team of the new facility were given orders to create a new, more open, more entrepreneurial culture - the kind needed to stay alive in a competitive industry. After it was up and running, teams from the older plants were sent on scheduled visits to 'infect' them with the spirit of the new culture.
- Turn human resource management systems into levers for culture change. Recruitment, socialisation, promotion, training and development are all potential levers. Southwest Airlines socialises its new employees into its strategy and its culture, then provides them with the technical skills they will need. Xerox makes no bones about it - it promotes culture carriers.
The basic principle in this category is to link culture change to every key project, programme or change effort. This makes sense since many change efforts fail because they do not take account of cultural realities.
- Act your way into a new way of thinking. When we think of change, we think of action. This action approach is borrowed from personal-change programmes and is similar to the Twelve Step methods used in Alcoholics Anonymous. The managers of a manufacturer realised that their inability to reduce waste was held in place by a set of shared cultural assumptions, attitudes and norms. One norm was 'don't worry about waste; speed is more important and entails a bit of waste'. A SWOT (strengths, weaknesses, opportunities, threats) analysis team spent six months studying 'lean manufacturing' technologies and processes and visiting plants where they had been successfully adopted. Then, instead of attacking dysfunctional attitudes and norms, the team flooded the place with action strategies for reducing waste. The formal campaign lasted a year. By that time there were enough converts to this new mode of thinking, and enough champions of pushing this new way of doing things that the new culture drove out the old.
- Use crises to gain leverage for culture change - even create crises. Many culture-change success stories start with a company in crisis. The system is more open, permeable, vulnerable at such times. Normal rules are suspended, including the covert norms of the entrenched culture. The principle is: kick the dysfunctional culture when it is down. If there is no particular crisis, create one. One company overdramatised, at least to a degree, the impact of the entry of a new competitor into its market. A highly visible get-the-invader campaign including placards and pep rallies was mounted. The whole process served to reinforce the merchandising values - value pricing, quality merchandise, customer service and added equities such as same-day or next-day delivery - and put a battle-cry edge on them. The campaign went on for about three months. The fact that sales improved dramatically helped no end.
Many of the strategies outlined so far are powerful but indirect challenges; a more frontal attack is possible.
- Use guerrilla warfare tactics when the company is being turned around. A turnaround is a kind of resurrection of the business. It provides many opportunities for dislodging cultural crud. Since some rules, both formal and informal, are suspended for a while, certain robust interventions into the culture are permitted. In one company involved in a turnaround, the CEO hired as a consultant a man who had run his own company and had a reputation for being fair but tough. He reported directly to the CEO. His role was to be a kind of wandering guerrilla. He could show up almost anywhere at almost any time and ask 'naive' and even 'impertinent' questions. 'Why are we doing that this way?' 'What purpose does this serve?' 'If that unit disappeared, would the company suffer, would anyone even notice?'
- Blitz the place with programmes that promote the new values. If you want a different culture, mount programmes that promote it. At BA many thought that senior managers were being profligate when a steady stream of mandatory meetings on 'putting people first', customer service and managing a service business flowed through the place. While these were presented as training programmes, it was evident that they were actually frontal attacks on the entrenched culture.
- Use symbolic acts to bury the old culture and highlight the new. Symbolic acts can be very powerful. While in themselves, they do not change anything, they send powerful messages. Effective leaders, knowing the power of such acts, use them sparingly but artfully. They capitalise on opportunities to send messages about culture change. Lee Iaccoca, former chairman of Chrysler and leader of its turnaround, seized such an opportunity - or so it is reported. The workers at Chrysler, grateful for the part he played in turning the company around, took up a collection and bought him a gift - a Chrysler, of course. He was to accept the gift at a noon pep rally in one of the assembly plants. The plant manager made a short speech and then handed Iaccoca the keys to the shiny black Chrysler on the plant floor. Iaccoca looked at the key, looked at the car, and then said to the plant manager, 'I can't take that car.' A hush went over the place and the manager, obviously nonplussed, stammered, 'But, sir, it's yours, it's a gift, you have to take the car.' 'Oh, I'll take a car all right,' the chairman said, 'but give me the next one that rolls off the line.' In an instant everyone understood that every car that rolls off a company assembly-line should be fit to present to the chairman.
- Leverage cultural dissonance. In cultures that don't serve the business, the values-in-use differ from the espoused values. Drawing attention to this dissonance is annoying. It's the pebble in the shoe. Sometimes people will act to move the culture in the right direction just to get rid of the annoyance. One of the subsidiary companies of a large corporation took this approach. The values and norms that impeded the business were named and discussed at the beginning of every management committee meeting. A large chart was drawn up to measure the company's progress in fighting outmoded values and norms. Milestones were celebrated.
- Get a critical mass of carriers to adopt the new values. If an institution's employees are the silent carriers of the old culture, then they need to become the vocal carriers of the new. Andy Grove, the CEO of Intel, promoting the on-the-edge culture needed in high-tech enterprises, says to his managers, 'If you have not challenged your boss in the last two weeks, you're not doing your job.'
- Take the imperial approach. Simply mandate the kind of culture the company needs. Why not save all the effort and indirection involved in the strategies outlined above and just go do it? 'Let's make it simple', the person would say, 'and do a few things.' In one medium-sized family-owned bakery, the patriarch and majority shareholder got so fed up with the way the business was going that he simply announced a change in 'the way we do things here' at a meeting of the extended family. His manifesto had three points: 'You get paid for what you do and what you accomplish. This is a business and not a family picnic'; 'You become a manager only if you can manage. Reporting to a real manager is not a family disgrace'; 'We invest in the business. We don't bleed the business to make the family comfortable. If you want something for your children, create it.'
He was amazed at how little opposition there was. What he had not realised was that there were other family members who were just as fed up as he was.
Jack Welch, the CEO of highly successful General Electric, had a lot about culture in his recent annual report. He stressed three values - 'stretch', 'speed', and 'boundaryless'. Stretch would send most managers reeling. It means using dreams to set business targets without any idea of how to get there. Incremental goals are out - they lack passion. The company is to reward stretch goals and 'quantum leaps' forward towards them.
Speed means a flow of new products with 'drumbeat rapidity'. There's a new product announcement from the appliances business every 90 days. Speed in all processes, he says, is allowing the company to shift its centre of gravity towards the high-growth areas of the world.
Boundaryless means no more fiefdoms. Representatives of all functions are to vie not for the privileges of turf but to bring to market 'the world's best jet engine, or ultrasound machine, or refrigerator'. And all of this is driven by leaders at every level who can 'energise, excite, and coach rather than enervate, depress and control'. And if this package is not for you, no matter how impressive you are otherwise, then you're history.
The principle is simple: fashion a culture that serves the business. This, of course is the GE formula. What's yours?
Gerard Egan's Re-engineering the Company Culture is available from Egan/Hall Partnership, tel. 0302-310163.