“Company culture is the backbone of any successful organisation.”
Gary Vaynerchuk
Most of you will agree that organisational culture is vital and lays the foundations for everything else. But a healthy culture doesn’t always happen organically. Often, organisational culture is lacking and, in some cases, even can be described as toxic. When a culture isn’t healthy, the backbone begins to crumble, and consequently, everything around it, resulting in problems that may include a lack of productivity in teams and staff retention issues.
Cultural transformation is the answer to healing this weakened backbone and preventing it from fracturing further.
What is Cultural Transformation?
Cultural transformation is shifting an organisation’s assumptions, behaviours and structures. It involves realigning its culture with its core values, vision, mission, and strategic objectives. Perhaps things have slipped, and a back-to-basic attitude is required by re-visiting the company’s original vision before it gets clouded with other things.
The Iceberg
Think of culture as an iceberg. The part visible above the water is the behaviours, outcomes, and frustrations witnessed daily. They are the consequences of culture. Meanwhile, the larger submerged part of the iceberg obscured beneath the surface is the ingrained values, beliefs and assumptions that drive the culture and outcomes you experience. Changing this is a challenge, to say the least.
What Does Cultural Transformation Involve?
Broadly speaking, cultural transformation is a three-step process based on the classic culture change model. It involves;
- “Unfreezing” the beliefs in an organisation.
- “Change” through role-modelling and setting new behaviours and beliefs.
- “Refreezing” allows the organisation to lock in a new culture.
Leaders should frame the model in four distinct steps;
- Diagnose, name, and validate the organisation’s culture.
- Reframe the cultural narrative.
- Role-model and communicate cultural change.
- Reinforce a new belief system.
There are many ways to do this. You should consider;
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Identifying Misalignments
Discovering where things have been going wrong, whether through people or processes.
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Developing Plans to Adopt Necessary Changes
Once identified, plans can be implemented to initiate a cultural transformation.
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Building Awareness
Making every employee aware of the issues/challenges and ensuring culture is the priority for all.
Research shows that transformations are more likely to succeed when the proposed culture change aligns with the company strategy, values, and goals. This can be difficult to achieve as teams have different priorities. An internal product team will be focused on continuous improvement and quality control processes, while a sales team, in contrast, will be focused on the market and customer behaviour. The organisation will work at cross purposes if they don’t find the common thread.
Collective Vision
Senior business leaders should identify a common cultural aspiration requiring the different departments to aim for collectively. They should ask the managers to consider their approaches to management in the context of how they create value for the whole organisation, not just their department. Alongside this, managers should be asked to consider which actions are necessary on their part, to transform the organisation. This will involve conducting workshops and focus groups to debate the merits of different approaches to management. Eventually, a list of standard management practices and a change story should emerge from the discussions.
Manager’s Role
Managers should be able to tie their day-to-day work with the organisation’s broader strategic objectives. Senior business leaders should ask managers to commit to KPIs directly linked to the achievement of this aspiration, as well as the desired management practices or behaviours.
The change can be very uncomfortable and cause tension between departments and the senior leadership team instigating the change. Reinforcing the common cultural vision can mitigate some of this. So, too, does allowing the managers to retain ownership and accountability for the change, how it will happen, and who is responsible for what.
Mindset Shift
Essentially, leaders must change mindsets and identify discrete day-to-day individual behaviours that need to change. For example, you may wish to encourage managers to become more collaborative with their team in their decision-making. Or perhaps have them provide more incentives to team members for knowledge sharing and working across silos.
No one intervention will suit all, but companies can apply four established change management levers, in some combination, to shift individual mindsets and behaviours relevant to cultural aspirations. Managers can create and implement standard interventions in these four areas:
- Role Modelling
- Understanding and Conviction
- Formal Reinforcement Mechanisms
- Confidence and Skill Building
Once the transformation is implemented, company culture should be monitored continuously. This way, it can be identified quickly if/when another transformation is required.
Why is it Important?
While most executives recognise that cultural transformation is imperative, far fewer understand the connection between business transformation and culture change. Companies cannot fully embrace digital transformation, new business models, or implement new ways of working without supporting changes in organisational behaviours and norms.
A strong culture is essential for a company’s overall health and competitiveness. As Peter Drucker says:
“Culture eats strategy for breakfast.”
A recent study by Boston Consulting Group found that companies that focused on culture were five times more likely to achieve breakthrough results in their digital transformation initiatives than those that didn’t.
The Starbucks Story
Starbucks Founder and CEO Howard Schultz, was an inspiring leader who created a values-driven company culture for the coffee brand, leading to sustained growth and product quality over 14 years. His vision for the company was strong and innovative, but when Schultz took a step back from the company in 2001, things unravelled.
In 2008, Starbucks hit an all-time low during the financial crisis. They were forced to close 600 underperforming shops and lay off thousands of employees. Schultz returned from his role as chairman to lead the company into its next era of success. He brought the focus back to leadership, culture, and quality products and did the following;
- Closed hundreds more underperforming stores.
- Retrained the remaining teams on making an excellent espresso cup.
- Overhauled the company leadership.
- Instituted a customer loyalty programme.
- Created an alliance with Arizona State University for all employees working 20 hours per week to qualify for free online tuition.
- Implemented loyalty rewards for both customers and employees.
He reinforced company values through new policies and procedures, a leadership overhaul, and re-training of employees.
This culture change was highly successful. In 2022, Starbucks accounted for a brand value of approximately $61.7 billion U.S. dollars, coming second only to McDonalds.
The Benefits of Cultural Transformation
Reduced Risk
When done periodically, cultural transformation becomes more iterative than a large-scale overhaul. Issues are identified before they have a chance to harm the organisation.
Efficiency Gains and Improved Customer Service
The changes facilitate communication throughout the organisation. Teams begin to understand and adopt the overall purpose and model it to each other and clients. This leads to more efficient internal processes and improved customer service.
A Heightened Ability to Innovate and Compete
A new culture that encourages inclusive behaviour and welcomes diverse opinions creates innovation as employees feel safer taking risks and sharing ideas.
Increased Productivity and Revenue at a Lower Cost
Higher levels of satisfaction among employees can improve employee engagement and retention. Such an environment can increase productivity and revenue while reducing costs.
If you would like to learn more about Cultural Transformation and the related services we offer, please contact us at www.mastersinminds.com.
