Posted by Marc Kaplan on April 18, 2017.
Culture is top of mind for leaders around the world and has become widely recognized as a competitive advantage in executing organizational strategies. Organizations need to be ready and able to adapt their culture as their strategies evolve. Deloitte research found that 86 percent of executives surveyed rate culture as “very important” or “important,” and 82 percent say “culture is a potential competitive advantage.”1 However, the same survey revealed that only 12 percent of companies believe their organizations are driving the “right” culture. This may not sound like an issue, but research shows that when culture and strategy are aligned, companies can show as much as 50 percent differential in performance,2 certainly something worth working toward.
The good news? While culture may feel ambiguous and difficult to get one’s hands around at times, it is real and measurable.
Culture change is something that takes thoughtful planning using a systematic and data-driven approach. Understanding current-state culture and identifying the ideal future-state culture is the easy part of the equation. Driving lasting culture change is the tough part. Organizations that know how to do that will likely have a competitive advantage in executing their strategies. Over many years, we have identified three key components that organizations should keep top of mind for successfully executing and sustaining culture change: driving change from the top, approaching culture holistically, and measuring and managing culture actively.
Drive change from the top
At its most basic, culture is the way things are done in an organization, and that is all about behaviors. Changing culture means changing behaviors, and that needs to be led and modeled from the top. Through their decisions and actions, leaders set the tone for the organization and shape culture every day. Success largely depends on CEO sponsorship and executive team ownership. People will look to the leaders to see if the tone is being set from the top.
If an organization is seeking to drive more courageous and bold behaviors, are the leaders operating this way? If so, it is a reinforcer for broader organizational behavior. If not, it calls into question the commitment to the very behaviors being asked of others more broadly. Leaders need to not only role model the behaviors but also make it a priority and focus on it with the same rigor as setting strategy, business planning, and strategy execution. When successful, culture change is leadership owned, leadership driven, and a leadership priority.
Approach culture holistically
While HR has a role in shaping culture, it is not an HR-owned activity. That’s not to say that aligning incentives, communicating the culture, and hiring and developing for these cultural attributes is not important. The HR-led activities around culture are absolutely necessary, but they are not sufficient on their own, and this is why many organizations have fallen short on driving culture change. True sustainable culture change requires changing how work gets done.
Culture change is not soft and squishy. It is hard hitting. It is about driving business results and needs to be embedded in how work gets done at every level. Organizations achieve culture change by embedding these new behaviors in key processes, such as the annual planning process, succession management and talent review process, product launch process, and other organizational value-adding events. The measure of success is in work getting done more effectively.
Measure and manage culture actively
Culture change is hard work and does not happen overnight—it takes time to shift behaviors and embed them into processes and systems. Like any organizational change, culture change should be measured, monitored, and adjusted over time. This means a data-driven, analytical approach that yields insights about where and how to embed the behaviors into key organizational processes. With the size and global complexity of many organizations today, data is critical in order to develop precise interventions at the right time in the right way in the right areas. And given these complexities, it is imperative to prioritize one or two key culture changes and focus on getting those right before moving on to other components.
Organizations can only absorb so much change at once, and quick wins and focused results start to build the energy and belief that culture change is possible. It is a journey, and focusing on the most important areas to address first will help make the impact where most needed. As the saying goes, you can only eat an elephant one bite at a time. Culture change is all about prioritization, discipline, and data, and should be actively managed over time.
Culture is real, measurable, and meaningful. It impacts performance and often determines whether strategy execution succeeds, which is why organizations are increasingly focused on driving culture change. Sponsorship from the CEO and leadership team, a holistic approach, and active planning and management are keys to success. Those organizations with the competency and discipline to drive culture change will have a competitive advantage in unlocking higher performance.
1 The New Organization: Different by Design, Global Human Capital Trends 2016, Deloitte.
2 James Heskett of Harvard Business School (for World Financial Review, 2011).