Why Change Culture?

Picture an organization as a living organism, constantly evolving to thrive in its environment. At its core lies its culture, a unique blend of practices, values, and norms established by its founders and solidified over time. This culture is like the organism's DNA, shaping its behavior and responses to external stimuli. As these norms become deeply ingrained, they can be hard to recognize and even harder to change.

How Culture Develops

Cultures develop over time, quietly and unbeknown to the people working in that given environment. Imagine a highly profitable company where a toxic culture has developed. This scenario is not uncommon, as demonstrated by various high-profile cases and research studies. One notable example is Uber during its early years of explosive growth. Uber’s success was driven by a culture of relentless ambition and competitiveness, instilled by its founder, Travis Kalanick. The company's practices emphasized achieving results at any cost, leading to rapid market expansion and financial success. However, this culture also fostered a toxic work environment characterized by harassment, discrimination, and unethical behavior.

At Uber, the relentless focus on growth and market dominance overshadowed the importance of ethical behavior and employee well-being, creating a culture where misconduct was often overlooked if financial targets were met. Despite Uber’s initial financial success, the toxic culture led to high-profile scandals, legal issues, and significant damage to its brand reputation. These issues culminated in the resignation of Kalanick and a comprehensive overhaul of the company’s cultural and ethical standards under new leadership.

Culture is Learned

Schein (2010) highlights the critical role of leaders in shaping and reinforcing organizational culture. Leaders set the tone through their actions and decisions, which employees then emulate. Leaders influence culture by rewarding behaviors that align with their values and penalizing those that do not. Employees internalize these rewarded behaviors as the "right" way to act to ensure job security, pay raises, and promotions. For instance, in a sales-driven company, employees who are creative and willing to take risks may be rewarded more than those who strictly follow protocols. Over time, these rewarded behaviors form the basis of organizational relationships and norms. Paradoxically, in a toxic environment those who get results may even be protected even if they have acted unethically, as was the case in Uber. Similarly, people who have learned to be compliant and unquestioning may be rewarded for their loyalty by authoritative leaders as opposed to those who speak up.

‘Operating Values’ Shape Culture

Organizational culture is pervasive, but individual teams can exhibit different norms based on their leaders. This highlights the strong correlation between leadership and culture. Leaders set expectations for performance and behavior, which determines what is the ‘correct way’ of doing things. For instance, a company might prioritize speed over accuracy, quality over cost, or customer demands over managerial control. The organization's vision, mission, and values, when precisely and realistically articulated, reflect these priorities. Research by Schein (2010) emphasizes that leaders shape culture by embedding their values through policies, practices, and interactions.

Culture Change Requires Work

Kotter and Heskett (1992) found that companies with adaptive cultures that align with external demands tend to perform better. But changing an entrenched culture is challenging because it involves altering deeply ingrained beliefs and practices. This is where you face resistance. Consider a bureaucratic organization trying to become more market oriented. This requires dismantling hierarchical controls, empowering employees, and fostering a performance-oriented mindset—a substantial and complex undertaking. Without a cultural shift, however, market-oriented strategies are likely to fail precisely due to existing barriers like rigid controls and a lack of empowerment. Cameron and Quinn (2011) suggest that effective culture change necessitates a clear understanding of the existing culture and a systematic approach to change it.

Change Requires Process Expertise

Competing Values Framework (CVF), Burke-Litwin OD Model, EFQM (European Federation for Quality Management) Model for Excellence, and Common Assessment Framework (CAF) are some diagnostic, development and change models that I am familiar with and have used. CVF is a culture change tool and CAF is an OD framework specifically for public sector organizations (PSOs). These tools offer integrated approaches for achieving continuous improvement and transformational change. Burke (2017) highlights the importance of diagnostic models in identifying cultural attributes that need to change for effective organizational development. However, in my experience, real-world application requires experienced change agents to navigate the unique challenges of each organization.

‘I’ Must Change First!

Organizational development and culture change are participative processes requiring long-term commitment from top leadership and a shared, consistent purpose. Both top-down and bottom-up approaches can be effective, and experience tells me that the fault isn’t in any specific model but rather with the associated expectations. Leaders want the followers to change. Followers want the same for their leaders. Everyone wants and expects everyone else to change! Success, however, depends on realistic expectations and a willingness to start with oneself. Lewin's change model (1947) underscores the need for unfreezing existing behaviors before new behaviors can be adopted and refrozen into the organizational culture. Once, the organizational members have all committed to change, have diagnosed where they are and ascertained where they want to be, and very importantly have understood and agreed upon their own roles and contributions they are willing to make for this collective vision to come to life, the change process can truly commence.

Culture Change Requires a Shift in Values

Effective culture change requires a shift in leadership values and assumptions. It is a shift in leadership paradigm, it is more than behavioral change. Imagine a company where decorum dictates that a junior employee cannot speak up in the presence of higher ranked managers, figures of authority. To change this environment, leaders must relinquish their "air of superiority" and foster an environment where open communication is encouraged and valued. Courage on the part of the employees also needs to be instilled without the fear of repercussions later on. This cultural shift is essential for enabling participation and solidifying new practices through changes in structures and systems. Argyris and Sch?n (1978) argue that organizational learning involves challenging and changing underlying assumptions to achieve lasting change. It is as simple and as difficult as that.

There is an End Result

Culture change is not an end in itself but a means to enhance organizational capabilities, problem-solving abilities, growth, and sustainability. Effective organizational development addresses transformational aspects like leadership, culture, and strategy, as well as transactional factors such as structures, systems, and individual skills. The goal is to improve both individual and organizational performance, ultimately leading to better customer results and societal impact. A study by Denison (1990) found that organizations with a strong culture aligned with their strategic objectives tend to achieve superior performance.

Microsoft’s transformation under Satya Nadella exemplifies how strategic OD interventions can drive substantial gains. By aligning culture with strategic objectives, emphasizing collaboration and innovation, and empowering employees, Microsoft not only improved its financial performance but also enhanced its impact on customers and society. By emphasizing a growth mindset, aligning the company’s strategic goals with a broader purpose encouraging a customer centric approach, fostering collaboration instead of competitiveness, revamping the performance management system to prioritize teamwork and collective success, and giving employees more opportunities to innovate through projects such as Microsoft Garage, employee satisfaction and engagement scores increased as the company’s culture shifted towards inclusivity, collaboration, and continuous learning. Microsoft’s customer base expanded, and its reputation improved. As a result, Microsoft’s market capitalization grew from around $300 billion in 2014 to over $2 trillion by 2021, making it one of the most valuable companies in the world.