When a toxic or unproductive corporate culture develops, many companies resort to culture change programs and engagement workshops. Culture workshops are designed to imbed a new set of behaviors in leadership and employees, which is intended to reshape the culture.
Suppose several groups of employees, from senior leaders to middle managers, attend a culture change workshop. Over several days new ideas are discussed, new behaviors practiced, teamwork, and values brought to light in interactive, experiential situations. In the end, motivation to change is high, and each member commits to implement the new behaviors and ideas. The workshop gets high scores from the participants. Looks like a roaring success.
Fast forward two months, and the new behaviors are a faded memory, and it's back to the original, toxic culture. Research over several decades by McKinsey&Co. point to the fact that a majority of culture change activities fail to produce sustainable improvements in the culture or business performance.
What’s the problem?
Here's a simple analogy as an explanation. Imagine a rubber band stretched several inches. What happens when the end is released? It springs back to its original shape. The old culture is like that rubber band, and the workshop creates the stretch, also known as temporary motivation and good intentions. However the old culture is strong and goes back to its original shape. Behaviors only change if the entire organizational ecosystem (the rubber band) is permanently altered.
The reality is that habitual employee behaviors, what most people call culture (aka: the way we do things around here), are the outcome of an organizational ecosystem of "cultural influencers." For example, compensation policies influence employee behavior, as does peer pressure, quality of supervision, leadership focus, hiring profiles, on-boarding, work policies, and practices. All these organization elements interact together as an ecosystem to influence and reinforces employee behavior.
What to reshape culture? Reshape the ecosystem of causal factors, and people's behavior will soon follow.
When Alan Mulally became CEO of Ford Motor Company in September 2006, the carmaker suffered a $12.7 billion loss, and was in the midst of a steady decline. Over the previous five years, Ford’s stock price sank from more than $16 a share to less than $7. Internally the culture was one of strong fiefdoms and information silos, with senior executives competing for limited budgets and resources. Everyone was focused on their own division, budgets and objectives, yet no one was working together to rebuild the overall Ford enterprise.
Rather than changing the people and hoping for better teamwork with new players, Mulally understood that the silo focused, internal competition was the result of the Ford internal system of culture causal factors. So, he put all the members of the senior leadership team on a single compensation formula where their bonus and other variable compensation depended not on their division or function’s performance, but on the overall performance of Ford Motor Company. In other words, he changed one of the significant drivers of the culture, compensation.
He also changed another significant culture driver, the business performance review. For years, this consisted of each individual senior leader presenting the results of their division. Mulally’s version was to focus on the overall Ford metrics and how each leader was contributing. Where previously executives focused on their division only, this change fostered more open sharing of information, ideas and offers of assistance across divisions and functions.
Mulally understood that the prime lever for an effective, high-performance culture was an open and collaborative senior leadership team. This change helped transform Ford’s team of rivals into a team of collaborators, resulting in a stunning turnaround.
An example of power cultural causal factors can be evidenced in a subsidiary of Goldman Sachs. This particular entity pleaded guilty and agreed to pay nearly $3 billion in an ethics and corruption probe tied to the Malaysian 1MDB sovereign wealth fund, which was looted of billions of dollars. In addition, several current and former top executives at Goldman will have to return millions of dollars in pay and bonuses.
According to acting U.S. Attorney Seth D. DuCharme, “Goldman Sachs participated in a sweeping international corruption scheme, conspiring to avail itself of more than $1.6 billion in bribes to multiple high-level government officials across several countries so that the company could reap hundreds of millions of dollars in fees, all to the detriment of the people of Malaysia and the reputation of American financial institutions operating abroad."
One of the most significant drivers of behavior in financial services companies like Goldman Sachs is compensation, especially bonus compensation for generating and participating in profitable business deals. Compensation, especially wildly excessive bonus opportunities, can easily drive the wrong kind of behaviors.
What are your culture drivers?
When I work with a senior leadership team, one of the first questions I ask them is: What drives your culture? In most cases, there is total silence. Then usually someone speaks up, saying: “We have a culture assessment that focuses on employee engagement. But it doesn’t connect to our business results.”
And therein lies the problem. Everyone agrees that culture impacts business performance, but few know how, or exactly what organizational drivers create their specific culture, and whether those drivers are enablers or blockers to increased performance. No wonder most executives discount corporate culture and relegate it to the HR department.
Recently, PYXIS Culture Technologies has developed an algorithm and software, using current and historical company operational and people data, that produces a visual ecosystem map of the culture drivers, their interconnections, and whether or not an individual driver is a business strength or risk.
A culture systems map might look like the following, where green is an enabler and red a potential business risk. The drivers are interconnected, forming an ecosystem map which culminates in an overall score for the business effectiveness of the culture.
Rather than mapping the overall corporate culture, this is a business approach to culture. The map defines the culture causal factors that impact such business issues as cybersecurity, safety, risk, innovation, or customer satisfaction. And the drivers link directly to specific business metrics, thus allowing management to track performance over time.
It’s time to make culture work for your business.
For more information or to request a demo on how mapping culture drivers can improve business results, contact us here.