Part II Memo to Members of the C-Suite (and others)

In my previous letter I asked a simple question: why do leaders call everything a culture change when, more often than not, the change is in strategy and not culture? 

Culture change is a very big deal. It can be threatening to those who have been successful at making positive contributions to the company. 

With a better approach to change, leaders would work to sustain a strong culture as the foundation for a smoother transition and better business execution going forward. 

Corporate Culture Evolves: Very Slowly

Where does culture come from?

Most people in the field of organizational development have very different definitions of organizational culture. CEOs rarely understand culture beyond a gut feeling. 

The company’s DNA stems from the founder and the first hires. The next generation of employees learns how to succeed in the company by adopting the same behaviours and attitudes. Culture is deeply rooted in the values and stories of the organization.

As time passes and new leadership comes into the organization, sometimes that new leader believes they should make their own imprint on the existing culture. Consequently, they begin to introduce new behaviors that influence the way they think things should be done. 

When employees experience this sudden shift, they often resist, and the leader becomes isolated. People disengage. Productivity decreases. Complaints rise. Retention of highly qualified employees becomes an issue as they seek employment where they will feel more engaged and aligned. The execution of the business plan suffers.

Eventually, the board realizes it’s not working out. This can take years, however, and the business may already have suffered financially and with employees and customers. 

Research in this area has been very consistent. Instigating a true culture change (a change in the values) only works between 10% and 25% of the time. If it is successful, the research shows it can take from four to seven years to make a change in values meaningful. 

Yet, most CEOs today do not have employment contracts that last that long.

Leadership and Cultural Stability

That lack of stability in the leadership ranks creates a lack of stability in organizational culture. 

In meeting a commitment to the Board to “shake things up,” the new leader will break with the past, introduce new ways of doing things, and call it a change in the culture.

Instead, it’s often the case that a new CEO should go “Back to the Future” by re-establishing the authentic company DNA (culture) that once made the organization great. The newly appointed leader needs to learn how to live the values and behaviours of the founders. Time and again, from Home Depot to HP, we see how new leadership with new ways ends up destroying what made a company successful in the past. A number of years back, I worked with a major Canadian retirement fund on the articulation of their values with a leader who’d been acknowledged as the Canadian CEO of the Year. When this CEO retired, he offered to help the newly appointed CEO learn and adopt the organization’s values. The newly appointed CEO said that he would not take the job if the outgoing CEO remained in or near the building. The company proceeded to undergo a three-year downturn in its business. 

Another example: We worked with a Canadian corporation well over 150 years old. The leadership worked diligently to conform to the culture’s “code of conduct.” Employee productivity and product quality were outstanding, and the organization was recognized as one the best in the world in its category. New leadership came on board and immediately set out to rewrite the values and vision. The employees spent enormous effort persuading the new CEO why the values were important and should be kept in place. Eventually, the CEO reluctantly conceded but insisted on a vision change. 

Don’t underestimate CEO ego, insecurity, and the drive to make a personal impact whether it’s warranted or not. Boards and consulting firms also apply inappropriate pressure to make change for its own sake.  

Do You Really Want to Change Culture or Strategy?

Imagine this: A new CEO comes on board a leading bank. She makes a passionate speech about the need to redefine the organization by making it more agile and helping it embrace technology and develop a relentless focus on the customer. She insists this will only happen if the bank’s culture is changed. 

• Stop and ask yourself some questions.
• What are the values of the bank?
• Have those values actually changed? 
• Do they need to change in order to become more agile, technology-savvy, and customer-focused?

If not, then a plea for change is not to culture but strategy change. This new CEO can inspire that change more effectively if she draws on the strength of the organization’s culture to justify and catalyze a change in strategy. 

Everyone will agree to a well thought out strategy with new goals and objectives but not everyone is open to changing their behaviours. When was the last time you changed your mind on a matter of principle you felt passionately about? 

In fact, the correctness of the strategy can be measured by whether it will move the company towards the aspirational vision while supporting all employees in continuing to live the values. If the vision pulls at the heartstrings, it’s likely a good one. If it doesn’t then the strategy should be reconsidered before the organization rejects it at all levels and locations to continue to live the values. If NO, the strategy is wrong, not the vision or the values.  

7 Culture Tips for the CEO, New or Old

1. The company’s success is rooted in its cultural DNA. Don’t try to change organizational values, except through a slow evolution; celebrate and leverage them as doing what is right.
2. Don’t focus on a culture change when you are not changing the culture. Use the culture as your foundation to introduce desired business changes and execution.
3. Leadership’s cultural stability is key to building and sustaining the trust and respect of employees. 
4. Boards of Directors need to realize that new leaders must be selected not by their “past track record” alone but also by their life-long alignment with the organization’s values. 
5. Culture is not to be taken lightly it is a highly emotive subject.
6. Take it with a grain of salt when a consultant says you need to change your culture.
7. Understand the values are your code of conduct. When your team hires new employees or promotes internal employees, the values must be part of the assessment process upon which a person, regardless of knowledge, education, past experience, is not hired, or promoted, if they are not aligned to the values.

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You can read more on my perspective on how strong corporate cultures drives passion, productivity, high engagement and pride in my book on values, culture and leadership: Inside the Box. Through my lifelong inquiry and work on values, I have realized that this is the essence of business ethics. I have helped leaders work through the decision-making process by focusing on doing what is right by their values to ensure ethical business practices, to serve their employee community in responsible ways.

If you want to learn more on the structured behavioural interview process and how to hire for fit to your values, please read The Talent Edge: A Behavioural Approach to Hiring, Developing, and Keeping Top Performers. If your company is interested in a workshop on how to conduct Structured Behavioural Interviews, how to write company-specific and authentic behavioural statements, wish to learn more about an anchored rating scale for more objective and accurate scoring of interview responses; please contact me directly at david@sagltd.com.

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