Keys to Driving Culture Change

An organization’s culture has proven potent in driving employee engagement, productivity and, some might argue, general happiness. In theory, firms with more positive and inclusive corporate cultures perform better than those that don’t — and have the financial results to prove it.

Talent Management spoke with Dan Denison, author of Leading Culture Change in Global Organizations: Aligning Culture and Strategy and professor of management at Swiss-based business school International Institute for Management Development (IMD), about the role HR plays in driving culture change.

The following are edited excerpts from the interview.

What’s the biggest culture problem firms face today?
I think the biggest problem is just the ferocious global competition and the need for short-term survival. It’s hard to plan a vision until you’re clear how you’re going to survive short term, and it’s important for building a culture because the steps that we take to survive a crisis are always the lessons that stick, the lessons that are the strongest ones over time. And so you can’t say, ‘Well, we’re going to do this and that and fight hard to survive, and then when we survive we’re going to take a deep breath and step back when we’ve got some resources and we’ll build a culture for the long term.’

A culture is the collection of lessons that a company learns as they survive together as a team, as a tribe, as an organization. And I think that’s the biggest problem: you have to solve short-term problems every day with an eye on the future, because that’s the way that those lessons really stick.

What are the most important lessons for leaders to drive culture change?
The one thing that comes out of the book is a focus on rituals, habits and routines. There’s a lot written on corporate culture about what you can see on the surface, and the values and what you can’t see. … Every little habit that we have has its visible parts, has its values that underlie it and has the parts that we’ve stopped thinking about and are just instinctive. The main lesson that you learn from this is that organizations, like people, are creatures of habit, and the change process is always a dilemma, because you can’t dig up all of the habits and change everything at the same time. You have to be very strategic about that and you have to understand what the points of leverage are.

But I think the key point that you want to emphasize is that organizations are complex bundles of habits and routines that have developed over time, and when you start to try to sort out those habits and routines it gets pretty challenging. You can’t make the change on a superficial way; you can’t write the new corporate values and annual report and expect it to stick. You have to unravel and recreate the new ones.

What role does HR or talent management play in shaping organizational culture?
It plays a big role because HR policies touch everyone in the organization. They’re one of the clearest expressions of the value that an organization puts on its people. In a lot of ways, culture of an organization is the way that you establish the brand of the organization in the talent market. HR puts those principles, those values, into practice in the labor market every day, so they have a huge strategic role in shaping it.

I think the other thing that’s important is to understand both how good that can be and how bad that can be. We work with organizations where their HR leadership and their team are the most principled, visionary, business-savvy people in the organization that are constantly stewards of the organization’s culture because they understand how it’s important to compete in the labor market and in the business. On the other end, we see talent and HR organizations that are totally consumed by just kind of getting the right people in the right jobs and trying to stay ahead of that responding to the direction they’re given by their leaders and haven’t risen much beyond a pretty administrative approach on the job. And that’s such a big factor when organizations are trying to change — because you really can’t change the system without changing the mindset of the people.

How has the notion of “corporate culture” evolved over time? Where does it stand today?
It’s a concept that’s been around for a long time, at least 50 to 75 years. Great leaders for thousands of years have been driven by principles and purpose. In management literature what you see is that it’s been pretty prominent since the early 1980s, with American industry struggling to compete, and authors Tom Peters and Bob Waterman [were] probably the best known ones that said it really has a lot to do with the mindset and the systems that we create with the viability of the habits that organizations have developed over time for a future business environment that’s got to be different.

… It’s easier said than done, for sure. But the thing that you’ve seen in the last 10 years is just how mainstream the topics [have] become. It’s a serious component to any leader’s portfolio. Leading with culture as a principle and understanding that the biggest legacy a leader leaves is the organization and the capacity of its people to work together — you see that becoming more and more mainstream.

What is the first step a leader can take to ignite a culture change?
I think the first step is [having] awareness of the gap between the current way of operating and an ideal future. And understanding and articulating that gap in real specific terms and becoming sort of the teacher of why that difference is critically important to the performance of the business.

I’ll give you an example. I worked with a number of companies these last few years that are trying to make the transition from being a product company to being a service company. And that vision of a CEO standing up and saying, ‘Guys, we love the service people, we love the product people, we love the technology, we love the customers. But unless we put all of those pieces of the puzzle together, we’re never really going to win this game.’ That’s a mindset change. It’s not about being either a product guy or a service guy. It’s about people seeing the complex interplay between those. That’s quite difficult to manage, but understanding that complexity — and learning how to do it well — that’s the path of the future.

Frank Kalman is an associate editor at Talent Management magazine. He can be reached at fkalman@Talentmgt.com.