When Business Performance Falters, is Culture Change the Fix?

 
 
SUMMING UP: Culture change is not a cure-all for corporate management problems, but it is an important element to be considered, say James Heskett's readers. What do YOU think?
 
 
by James L. Heskett

How Do We Avoid Linear Thinking, Teaching, and Acting?

Much conversation in management classrooms and business meetings emphasizes the importance of prioritization--what we do first, then second--in effecting change. It’s a way of achieving what we often call focus. It reflects the way most people think, read, converse, and act. Many of us have trouble holding several important thoughts in mind at a time.

Will this kind of thinking suffice in a dynamic, competitive business world? That’s a question implied by many of the comments concerning the issue of appropriate starting points for dealing with an organization’s lagging performance.

There was little support for an approach that first addresses an organization’s culture, “how we do things around here.” But Rick Mayhall commented that “culture is an integral design element that must be designed at the beginning of any initiative … Leaving culture purely as an outcome is an oversight that indicates leadership has not done the necessary work of defining and agreeing on what their integrated performance outcome needs to look like.” Mark Clark added, “The ability to articulate (culture) … well and more important infuse it into an entire leadership team at the front of a change process is what separates great leaders from the pack.”

A larger group sided with the notion that culture is an outcome, not a starting place. As Dan Wallace put it, you have to create culture “in the context of real people doing real work.” Marlis Krichewsky argued “culture probably cannot change exclusively from within … to kindle enthusiasm you need to look beyond yourself and interact with the environment.” Thriveinchange said that, “Culture is an outcome! … there is value in articulating the desired ‘way we intend to operate,’ but even this is best done to explain … ‘why’ we are making process, design and/or strategic changes.”

Others refused to think in terms of one primary starting point. Connie Chen commented that “Changes must be holistic” and Oleg Pohotsky agreed, saying that, “ it is not an either/or but a … coordinated process.” Art Stewart added, “In my view, culture must now be treated as an integrated strategy and viewed as a core asset for contributing to marketplace value and corporate valuation as well as the sustainable viability of the enterprise.”

Judith MacCormick challenged us to think about how we approach management in general. As she put it, “culture cannot be seen nor managed as a linear problem… we need to address what motivates good behaviour and discourages bad behaviour—all within the context of what we define success will look like—shareholder return, licence to operate, etc… There is no linear solution.”

Those of us who agree with her have to then ask ourselves, how do we avoid linear thinking, teaching, and acting? What do you think?

Original Article

A recent article in Harvard Business Review, “Culture Is Not the Culprit,” by Jay Lorsch and Emily McTague noted that “When organizations get into big trouble, fixing the culture is usually the prescription.” The article seeks to refute that notion. Given my interest in organization culture, it prompted several executives and alumni to ask me if I had a comment on the subject. In typical business school fashion, I’m asking for yours.

The article cites four case examples--Ecolab, Delta, Ford, and Novartis--in which current or former CEOs describe how they successfully negotiated business challenges. In three cases, the challenges involved getting everyone on the same page after acquisitions or mergers. They describe the methods they used to counter growing bureaucracies, encourage customer-centricity, and in all but one case foster collaboration across business units.

This involved such things as reorganizing, delegating authority, increasing accountability, building trust among employees, and recognizing and rewarding desired behaviors. The authors conclude from this that “cultural change is what you get after you’ve put new processes or structures in place to tackle tough business challenges like reworking an outdated strategy or business model. The culture evolves as you do that important work.” They then suggest that “it makes intuitive sense to look at culture as an outcome—not a cause or a fix.” In an email to me, Lorsch expanded on this by saying, “You cannot change culture just by making speeches and waving a wand. You need concrete changes in rewards, job assignments, and other measurements.”

A contrasting perspective is that culture—shared views of “how we do things around here”--is an important enabler of changes in strategic direction or business models.

This view is that a culture in which people trust each other and their leadership is one in which change (of a strategy or business model) is easier to achieve. Its advocates cite the primacy of culture in business success. In fact, great places to work are a product of an organization’s mission and culture, and great places to work have been shown statistically to produce higher returns than the norm for an industry. Lou Gerstner, in reflecting on his stint as CEO of IBM, said, “Until I came to IBM, I probably would have told you that culture is just one among several important elements in any organization’s makeup and success—along with vision, strategy, marketing, financials, and the like … I came to see, in my time at IBM, that culture isn’t just one aspect of the game--it is the game.” He set about personally to change it first before later transforming IBM’s strategy.

Yet a third view is that the odds of success in achieving important change are enhanced by coordinated efforts to alter, as Michael Beer puts it, “the organization model” (including culture) and the “economic model” (actions producing economic change, including strategy) at roughly the same time. He argues that it has more promise than one that addresses these matters sequentially. The idea here is that if initial efforts are directed only at fixing the business model, such actions (merging organizations, downsizing, etc.) can so poison the well that subsequent culture change is much more difficult to achieve.

So there you have at least three kinds of responses to the question. Is this an important discussion to be having? When business performance falters, where does the “fix” begin? What do you think?

References:

Michael Beer, High Commitment, High Performance: How to Build a Resilient Organization for Sustained Advantage (San Francisco: Jossey-Bass, 2009), pp. 295-325.

Louis V. Gerstner, Jr., Who Says Elephants Can’t Dance?: Inside IBM’s Historic Turnaround (New York: HarperCollins, 2002), pp. 181-182.

Jay W. Lorsch and Emily McTague, Culture Is Not The Culprit: When Organizations Are In Crisis, It’s Usually Because The Business Is Broken, Harvard Business Review, April, 2016, pp. 96-105.

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