CEO and co-founder of i4cp, Kevin Oakes, explains the importance of needing to spearhead a culture renovation in order to drive profits, growth, and business sustainability.
A few months ago, the U.S. House of Representatives’ Transportation Committee released its final investigation on the Boeing 737-max crashes that killed 346 people. The report cited that, among other things, a “culture of concealment” by Boeing and the FAA was a significant factor which led to the crashes.
A few years earlier, Wells Fargo suffered an account fraud scandal that resulted in millions in penalties and billions demanded to be paid in lawsuits. A “cutthroat sales culture” was cited by many as the primary culprit.
Despite the enormous influence of an organization’s culture on financial performance and risk mitigation, culture is still frequently dismissed as too fluffy, esoteric, or abstract to have much of an impact. Surprisingly, even the corporate governance process has traditionally overlooked, or at least underestimated, the magnitude of culture’s impact on the financial stability of an organization. For years unhealthy cultures have posed tremendous risk to shareholder value, yet that risk went largely undetected by corporate boards until it was too late.
The pandemic has introduced additional complexities. The dramatic shift to remote work has created new cultural norms and nuances, which has necessitated new leadership capabilities. As well-being, workforce flexibility, return to office, and other issues have impacted the day-to-day life of most leaders, organizations have increasing concerns about the toll on culture.
If improving corporate culture isn’t currently on the agenda, there’s a good chance it will be soon.
While the word transformation has long been used to describe culture change, it is not what successful companies do. I’ve yet to come across a company that has truly “transformed” its culture into something completely different. Companies that effectively changed their cultures were successful because they were renovating what they had – respecting their past and their core values – not starting from scratch and completely rebuilding or transforming.
“You really need to figure out what’s at the core of your culture—what you want to keep and what you want to evolve and grow,” said Pat Wadors, Chief People Officer of Procore. “Just throwing away your culture is really hard to do, and I wouldn’t suggest you do that. In fact, you have to give a nod to your past in order to move forward,” advised Wadors.
François Locoh-Donou—who became CEO of F5 in 2017—understood the cultural dilemma many new CEOs often face.
“When I joined F5 as CEO, it was almost 20 years old,” said Locoh-Donou. “There was a culture that I inherited, and then there’s the culture I envisioned us evolving into. The notion of Culture Renovation, while I wasn’t using the term then, is exactly what I was trying to do.”
While renovating is the right approach, it doesn’t mask a simple fact: culture change is hard. In fact, only 15 percent of companies are successful at making long lasting, positive changes. To find out why, my company, the Institute for Corporate Productivity (i4cp), conducted extensive research and interviewed countless executives. We then distilled our findings into 18 steps—a Culture Renovation blueprint—for companies to successfully plan, build, and maintain a culture makeover. Here are a few key steps from our blueprint:
- Develop and deploy a comprehensive listening strategy. The worst thing executives can do is lock themselves in a conference room and decide what the culture is today. Chances are high they will get it wrong. Instead, use technology and multiple channels to conduct a sentiment analysis of the workforce in order to have a more accurate picture.
- Paint a vision for the future. Because culture change is often initiated when an organization has experienced poor performance, the temptation is to blame former leaders and admonish the mistakes of the past. Resist that impulse. Instead, architect a future vision which the workforce can rally around and aspire to achieve.
- Identify influencers and blockers. Network science shows that certain people in every workforce have greater social influence than others. Influencers and energizers are everywhere – often hiding in plain sight from senior leaders – and coworkers seek them out to ask for their views more frequently. Leaders can identify these potential “culture ambassadors” through formal or informal network analysis techniques and ensure they understand and are on-board with renovation efforts.
- Establish a co-creation mindset. Successful companies enlist, align, and empower the workforce at all levels of the organization in the renovation effort. They crowdsource ideas to ensure that most feel they had a hand in developing and executing on the change initiative.
- Ferret out the skeptics. Probably the hardest part of culture renovation, successful organizations made sure that non-believers and blockers were either convinced of the change merits, or otherwise decisively moved out of the organization.
Given the many disruptive forces companies are facing, having a culture that evolves along with the market is a main ingredient for organizational effectiveness. Even in very successful companies, culture is never something to be taken for granted…resting on laurels has been the death knell for many famous organizations. The goal for leaders should be to future-proof the organization, and corporate culture is the key to making that happen. But, the reality is that renovating culture is never quite complete.
“You can’t freeze culture in a declaration,” advises Kathleen Hogan, Microsoft’s chief people officer.
Nor can you assume it’s not having a significant effect right now on your organizational success.