creating the right culture

Creating the Right CultureMaking culture a real source of competitive advantage

SUMMARY OF THINK TANK SESSION #4 | SINGAPORE | NOV 2019

© 2019 The RBL Group, Inc.

All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or using any information storage or retrieval system, for any purpose without the express written permission of The RBL Group, Inc.

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Playbook: Social Citizenship Responsibility 1

TABLE OF CONTENTS

Introduction ........................................................................................................................................................................03

1. What Is the “Right” Culture .........................................................................................................................................05

Evolution of the Study of Organizational Culture ......................................................................................................05

Current Views of Organization Culture .......................................................................................................................06

What Does it Mean to Have the “Right” Culture? .......................................................................................................10

Overall Visual of How Culture Fits with Strategy, Values, and Brand ......................................................................11

2. Why Culture Matters .....................................................................................................................................................14

Culture Matters to All Stakeholders ............................................................................................................................14

Culture Matters in Times of Transformation: Case Study of Mergers and Acquisitions .......................................15

3. How to Create the “Right” Culture ..............................................................................................................................17

An Overall Template for Creating the Right Culture ..................................................................................................17

Creating the Right Culture: Summary .........................................................................................................................24

4. Conclusion: Creating the Right Culture .....................................................................................................................28

References ..........................................................................................................................................................................29

2 TheRBLGroup ©2019

LIST OF FIGURES

Figure 1. Evolution of Culture StudiesFigure 2. Current Culture BooksFigure 3. Current Cultural Messages Figure 4. Showing a Pattern of Culture Figure 5. Culture Turns External Brand into Internal Employee Brand Figure 6. Relationship Among Purpose, Value, Brand, and Culture Figure 7. Culture Impact on Various Stakeholders Figure 8. Creating the Right Culture in M&A Activity Figure 9. A Template for Creating the Right culture Figure 10. Creating a Communication Plan Figure 11. HR Practices Aligned to Desired Culture Figure 12. RBL’s Overall Approach to Leadership Figure 13. Turning Firm Brand (Right Culture) into Leadership Behaviors Figure 14. Worksheet for Creating the Right Culture Figure 15. Disciplines for Making Cultural Transformation Happen Figure 16. Profiling the 7 Culture Transformation Disciplines Figure 17. Common Viruses that Reduce the Likelihood of Sustained Change


INTRODUCTION

The concept of culture is not new. The American anthropologists Alfred Kroeber and Clyde Kluckohn critically reviewed concepts and definitions of culture and compiled a list of 164 different definitions of culture in Cul-ture: A Critical Review of Concepts and Definitions . . . in 1952!

A few years ago in Europe I asked a group of business leaders if they had the right culture. Someone respond-ed that their company had purchased tickets to the opera. Today, the issue of culture is no longer a joke or afterthought; it is central to business success. Peter Drucker brought the concept of culture into the organiza-tion setting and is attributed to have said, “Culture eats strategy for lunch.” Culture was the word of the year for Merriam Webster dictionary in 2014, has been the on the cover and in regular stories in Harvard Business Review, has been the subject of hundreds of corporate off sites, and is a key outcome of HR work.

With varying definitions, culture and culture change within organizations refers to:

• sustained transformation not just a turnaround (e.g., many firms work to transform their culture, not just cut costs or do turnaround);

• a new identity, reputation, or firm brand (e.g., Google has created a firm brand around service, which has become their reputation in the retail industry);

• an articulated set of norms, beliefs, or values (e.g., numerous firms have crafted value statements which define what they stand for);

• an organization’s DNA (e.g., Amazon’s genetic code is to ensure customer service through access and re-sponsiveness);

• a firm’s personality (e.g., Southwest Airlines adopted the personality of its founder and decade-long CEO Herb Kelleher).

Here are some noteworthy samples of CEO statements on culture:

• “For 85 years, we’ve said, ‘Take care of our associates, and they’ll take care of our guests.’ This core value of putting people first underpins our commitment to diversity, but we also believe that it drives our profitabil-ity. Hospitality is by definition a diverse industry.” —Arne Sorenson, Marriott Company

• “An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage. . . . Culture drives great results.” —Jack Welch, General Electric

• “Google is run by its culture and not by me. . . . Google is probably the best example of a network-based organization. Very flat, very non-hierarchical, very much informal in culture and ideas—ideas come from everywhere. . . . Part of the job of being a CEO in a company like Google is to have an environment where people are constantly throwing you their best ideas as opposed to being afraid to talk to you.” —Eric Schmidt, Google

• “Culture is not the most important thing, it’s the only thing.” —Jim Sinegal, Costco

Each metaphor and citation implies that culture is more than random or isolated activities. A firm begins to have a unique identity, formed through an array of management practices, but is able to outlive any one execu-tive and is about more than any single management practice. It is interesting to note that even the Chartered


Institute of Auditors (a group traditionally only focused on “hard” facts and figures”) has prepared recent docu-mentation to help auditors monitor culture.1

Many companies have begun cultural transformation journeys. Unfortunately, many of these culture trans-formation journeys begin with fanfare and promises and end with fizzle and disappointment. They start with declaring that culture matters and may work to define desired values that then shape behavior. But the culture journey is a cul de sac without clearly defining the destination or outcome of the effort. Too often, culture is about the past not future and about generic not tailored values.

We suggest that for culture transformation to be effective and sustained, it is important to evolve the concept of culture, less as a descriptive, generic pattern of events within a company and more as a prescriptive, inten-tional set of activities that help a firm transform in the right direction. We call this creating the “right” culture, one that enables an organization to win in its served market. To evolve the concept of culture, we will address three questions:

1. What is the “right” culture?

2. Why does the “right” culture matter?

3. How do we create the “right” culture?


1. WHAT IS THE “RIGHT” CULTURE

Culture may eat strategy for lunch; but creating the right culture is about preparing the right diet and ensuring that strategy wins in the market. The “right” culture shifts the focus from description and explanation to pre-scription and guidance. Description focuses on what is; prescription focuses on what can or should be. Explana-tion describes a current state; guidance anticipates a desired future state. In the HR space, many practice areas have pivoted from description to prescription:

• The goal is not to hire someone, but to hire the right person who can deliver desired results.

• The goal is not to give leaders 40 hours of training, but to make sure that the training leads to improved skills.

• The goal is not to set standards for performance, but to make sure that the standards are the “right” stan-dards – those that lead to desired behaviors and outcomes.

HR has pivoted in most practice areas from looking at the activity to the outcome of the activity. This is the same evolution that should occur in the study of culture.

Evolution of the study of organizational culture

Figure 1 briefly overviews the evolution of how culture is looked at in organizations.* Culture often was seen as the underlying values in a company. These values are often rooted in the beliefs of the founder and show up in value statements articulated by executive teams, communicated extensively, and translated into employee behaviors. Culture as values offers a foundation of moral authority. Climate studies were popular when orga-nizations would study the impact of their work systems (like hiring, training, communication, compensation) on employee thought and action. Climate studies often examined systems that shaped decision making, informa-tion sharing, treatment of people, and accountability. Culture today has evolved to combine values and climate studies into descriptive patterns of culture. These patterns represent images of how organizations shape employee behavior and thought processes. The patterns are often embedded in a host of HR systems, leader behaviors, and employee expectations.

These approaches to culture show up when we ask RBL Institute participants to answer the question: When you think of culture, what comes to mind? The answers often include:

• Red line of what we do and don’t do.

• Way of working that is implicit and explicit.

• Set of common values and beliefs.

• Unofficial rule book (values and behaviors).

• How people do things when no one is watching.

• Leaders shape and model the culture.

• Way employees feel about the organization and act.

• Smell of the place.

• Leaders and people define the culture – collectively shaped.

• Organizational stories.

*This playbook is not an academic summary of the study of organization culture, but offers a simple typology of how the study of culture has evolved.


These participant answers reaffirm a common view of culture consistent with the first three waves of Figure 1 focused on value, climate, or pattern.

Value, climate, and patterns all describe what culture exists within a company (see next section). We (and others) have argued that description focuses on the past more than the future and on the internal actions rather than on their external value (see HR from the Outside/In). We agree with the previous views of culture, but think they need to continue to evolve. It is not enough to describe a culture; it is more important to prescribe the right cul-ture. This is like going to a doctor who describes and diagnoses an illness (e.g., you have an infection), but then further to prescribe what can be done to overcome the infection (e.g., take these medications). To date, culture has been more about diagnosis and description than action and prescription, or what we call the “right” culture.

For organizations, the “right” culture represents what an organization can and should do to win in the financial and economic marketplace. We often ask participants in our RBL Institute sessions the question, “what is the most important thing business and HR leaders can give an employee?” The answers in a recent think tank ses-sion were: employee experience, empowerment, sense of purpose and meaning, employability, fulfillment and growth, voice, tools to do their job, and so forth and so forth. We also like these employee centered activities, but we believe that the most important thing business and HR leaders give an employee is an organization that wins in the marketplace! Without market success with customers and investors, there is NO organization and NO employee well-being.

The “right” culture follows this logic. Beyond values, climates, and patterns, there can and should be a “right” culture. Instead of culture being the roots of the tree grounded in the past, culture represents the branches of a tree that allow it to grow and evolve for the future.

In brief, cultural evolution moves from inside to outside, from description to prescription, from the past to the future, and from what is to what can and should be.

Figure 1. Evolution of Culture Studies

Current views of organization culture

Current studies of culture are often rooted in the first three waves (values, climate, pattern) of Figure 1. Figure 2 represents 7 of the recent top selling “organization culture” books on Amazon. These books capture current culture approaches and assumptions.


Figure 2. Current Culture Books

The key cultural assumptions and messages of these seven books are highlighted in Figure 3. Their messages reflect current views of culture, and they highlight values, climate, and pattern assumptions. Notice that each book claims the importance of culture, then offers different terms, but they all focus inside not outside, describ-ing culture not prescribing culture, and offer ideas on shaping culture, but not the “right” culture.


Figure 3. Current Cultural Messages

Book Major cultural assumptions and messages

Culture Code

The Culture Code is a thorough analysis of how humans work together and how they might keep each other from doing so. From his research, he sees 3 skills at the heart of great teamwork:• Build safety to make everyone feel comfortable in working together.• Share vulnerability to show no one needs to be perfect.• Establish purpose through a common goal and a clear path to get there.

Culture Wins

Culture is the ultimate competitive advantage. We help you implement our programs inside your organization and team to build better leaders, increase team performance, and create a thriving culture where everyone can bring their best. Focused on communication, relationships, alignment, clarity and capacity, our programs build a sustainable culture that attracts elite talent, develops elite talent, and empowers them to be their best.

Culture Map

The reality is, we all have different cultural heritages which overlay our perceptions that we aren’t fully aware of. Meyer has worked quite a bit internationally and has 8 attributes where the different cultures are put on various continuum. Here are 8 dimensions of global cultures (international patterns fall on each of these scales):

1. Communicating: explicit vs. implicit.

2. Evaluating: direct negative feedback vs. indirect negative feedback.

3. Persuading: deductive vs. inductive.

4. Leading: egalitarian vs. hierarchical.

5. Deciding: consensual vs. top down.

6. Trusting: task vs. relationship.

7. Disagreeing: confrontational vs. avoid confrontation.

8. Scheduling: structured vs. flexible.

Culture Deck

A “culture deck” is a highly effective tool for defining and communicating cultures to current and potential employees. But what is culture, really? We help you understand what culture is and common misconceptions about culture (how it’s not ping pong tables and free food), how culture is the most vital asset to attract and retain A+ talent, how to get the most from your team by building a clearly defined culture that inspires, supports and enhances job satisfaction and people’s ability to get more done and fulfill their potential. Leaders who invest in their culture do so because they understand that it’s the only sustainable competi-tive advantage they have complete control over. Reading this book will give you the pieces you need to create a culture deck that captures and defines your own unique company culture.

The Culture Question

When a workplace culture is purposely created to be respectful and inspiring, employees are happier, more productive, and more engaged. Create a workplace where people like to work by focusing on these six elements of healthy workplace culture:

• Communicating Your Purpose and Values. Employees are inspired when they work in organizations whose purpose and values resonate with them.

• Providing Meaningful Work. Most employees want to work on projects that inspire them, align with what they are good at, and allow them to grow.

• Focusing Your Leadership Team on People. How leaders relate to their employees plays a major role in how everyone feels about their workplace.

• Building Meaningful Relationships. When employees like the people they work with and for, they are more satisfied and more engaged in their work.

• Creating Peak Performing Teams. People are energized when they work together ef-fectively because teams achieve things that no one person could do on their own.

• Practicing Constructive Conflict Management. When leaders don’t handle conflict promptly and well, it quickly sours the workplace.


The Culture Question

Creating an intentional culture requires clear vision, constant vigilance and ongoing coach-ing, counselling and course correction. Here are three things that leaders need to do to make their culture strong:

• Senior leaders need to define a compelling vision along with clear expectations of all leaders, making sure that competencies are in place.

• Senior leaders must share the vision through clear communication, stating their expec-tations and specific standards of behaviour. This sends a message that standards are non-negotiable.

• All leaders in the organisation need to lead in ways that are consistent with the desired culture, and serve as role models for others to emulate—coaching, mentoring, model-ling and managing for the behaviours that have been defined.

These collective ideas often combine to offer an image or pattern of culture. Dan Denison and Bob Quinn/Kim Cameron’s organization culture models are exemplary in this regard. Figure 4 shows two pattern description cultural models: Dan Denison’s four underlying dimensions (adaptability, mission, consistency, involvement) and Bob Quinn and Kim Cameron’s Competing Values framework with four cultural types (clan, adhocracy, market, hierarchy). Each approach profiles an organization unit against the framework. Again, this type of work is more diagnostic and descriptive than action oriented and prescriptive.

Figure 4. Showing a Pattern of Culture

Pattern: Competing Values Frame-work by Bob Quinn and Kim Cameron

Reference: https://www.amazon.com/Leading-Culture-Change-Global-Organiza-tions/dp/047090884x


What does it mean to have the “right” culture?

We propose moving to the fourth wave of cultural evolution in Figure 1 by defining the right culture, or the desired destination. The value of culture is that it shapes the right behavior. We believe that the right culture starts by identifying what leaders want their firm to be “known for” by targeted customers in the future. This means that internal culture starts with external firm brand or identity. There is a right culture that goes beyond noble generic values. The importance of the right culture shows up in many settings.

For example, a number of months ago, The New York Times wrote a scathing piece on the dysfunctions of the Amazon culture. They cited employee abuses, which are obviously wrong in any setting, but they went on to criticize the culture as demanding, rigorous, and driven. When I teach any group and ask “Who has purchased from Amazon?” nearly everyone raises their hand, many committed to Amazon prime. Then, when I probe “Why?” the answers are consistent: easy to work with, accessible from anywhere, predictable delivery within a short time frame, low cost, and so forth. So, I then ask, if these are the reasons you (and millions of other cus-tomers) choose Amazon, what does Amazon have to do inside to realize these customer values? Quickly, par-ticipants realize that to meet their (the customer) expectations, Amazon requires a culture of discipline, rigor, standardization, and precision. Customers want Amazon to be predictable, so they need a culture consistent with those promises. Amazon has the right culture for their customers.

Likewise, Marriott’s commitment to customer service comes from an internal culture of high employee service; Disney’s theme park culture of guest experience requires an internal culture of employee experience. Apple’s public commitment to innovation draws on an internal culture of employee experimentation. Walmart’s “always low prices” identity leads to a culture of cost consciousness in all aspects of work.

Culture matters, but the right culture matters more. Generic values (like integrity, trust, transparency) obviously impact how a firm governs, but the real differentiating value of values is helping organizations turn customer promises into tailored internal cultural norms.

Using the right culture as the agenda, the values that companies articulate can be evolved to focus on the value of values by asking customers three questions:

1. Are these the things (values) you would like us to be known for? In most cases the generic values of trust, service, innovation, collaboration, and so forth are sound principles most would admire.

2. What do we have to do to show that we live them better than competitors? This is a key question be-cause if shifts the behaviors related to values from what employees do to what customers want. For exam-ple, I travel extensively and always use carry on bags to save time. A hotel’s value of “service” often is defined by the employee who quickly grabs my bag from the taxi and walks away. For me, this is not service (often because I may not have local currency for a tip or I don’t want to spend time waiting for the bag to come to my room). I, the customer, define service, not the well-intended bellman.

3. When we do these things you want, will you buy more from us? This question now pivots culture from values to economics. If the customer won’t buy more based on their receiving what the firm currently values and offers, it is useful to revisit what the customer would value that would change their economics.

In this logic, culture is more than a values statement, a set of organization governance practices that create a climate, and more than a pattern of activities. The right culture turns a firm’s external brand into a set of inter-nal thoughts and actions. The general logic is shown in Figure 5 which shows how the right culture connects customers outside and employees inside.


Figure 5. Culture Turns External Brand into Internal Employee Brand

With this alignment, employees are connected to customers and customer promises to employee expectations.

With the right culture as a focus, leaders know when to change a cul-ture … when the customer expectations change! Culture change from the outside-in means crafting a culture for customer value, so when customer values change, so too should culture. A cultural transforma-tion journey (see below in section 3 for a detailed process for doing the right cultural transformation) begins with what the firm wants to be known for by key customers in the future. Articulating the right culture by starting with customer promises and firm brand provides a clear direction for the culture change journey. Culture can then be managed against this desired destination. Culture can be measured not just in how employees behave, but in how customers behave rela-tive to those promises.

Again, culture as values, climate, and pattern matters, but the right culture matters much more. Leaders can work with marketing and ad-vertising groups to articulate the desired firm brand. Leaders can then work with HR professionals to turn this external identity into a set of organization policies and employee actions.

Overall visual of how culture fits with strategy, values, and brand

Satya Nadella, Microsoft’s CEO, recently said, “Last week in my email to you I synthesized our strategic direction as a productivity and platform company. Having a clear focus is the start of the journey, not the end. The more difficult steps are creating the organization and culture to bring our ambitions to life. [sic]”

As companies embark in transformation efforts, they should be clear about four overlapping concepts—pur-pose, values, brand, and culture. When these terms overlap and are muddled, they create conceptual confusion.

• Purpose represents an aspiration for what can be; it can include a vision of an idealized state of what we want to become (often in a tag line—world’s best ________), a mission statement for why we exist, and strat-egies and goals of where and when we invest to get there. The purpose envisions a future, sets an agenda, and offers direction.

• Values represent core beliefs, what we stand for, and how we go about doing our work. Values, using a tree metaphor, are the roots. They are often articulated by the founder, stated in a value statement, and stable over time. They are also often generic and consistent across companies, including noble values such as integrity, empowerment, excellence, accountability, service, passion, and so forth.

• Brand represents what a company is known for in the marketplace, shifting from a specific product (Ben and Jerry’s ice cream) to a firm brand (Unilever’s commitment to sustainability). Brand represents promises made to customers about a specific product and also how the firm will interact with customers in all exchanges.

• Culture is the identity of the firm in the mind of its key customers made real to employees. This definition moves the internal values focus to the value of values because it connects culture to the marketplace. This cultural definition translates the external firm brand with customer promises into internal organization ac-tions for employees.

Customer

Employee

Product Brand

Firm Brand

Organization Culture

Leadership Brand

Employer Brand


As shown in Figure 6, these four concepts come together, starting with purpose and leading to values inside and brand outside. The right culture then bridges internal values and external firm brand.

Figure 6. Relationship Among Purpose, Value, Brand, and Culture

Second, connect key concepts to each other. With these four concepts defined, they can then be connected to ensure that a firm turns purpose into the right action that yields results. Without connecting these concepts as indicated in Figure 6, any change efforts concerning them lack impact.

• Purpose without values lacks heart and passion.

• Values without purpose are aimless.

• Purpose without brand identity results in empty promises.

• Brand identity without culture delivers false hopes.

• Values without culture have no sustainable impact.

• Culture without brand identity is indistinct.

So as leaders try to create their future, they can be deliberate about building purpose statements that articulate what can be, conscious of values that give meaning to employees, aspirational about creating a firm brand with key customers, and disciplined to build the right culture that connects customer promises to employee actions.

Any change in one of the four concepts requires change in the other three. For example, a change in the pur-pose statement may trigger revisiting legacy values and future brand, which might lead to a new culture.

Having the logic in Figure 6 enables more complete and focused leadership and HR agendas. A large telecom firm invited us to “refresh” their culture by focusing on updating their values. Their founder recently retired and the new CEO felt it was time to do a cultural update by focus on values. As we shared with him the logic in Figure 6, this values refresh became a legitimate corporate transformation. He, and his team, revisited their purpose to clarify when and how they would invest to grow. With marketing support, they renewed their brand


and identity in the marketplace with clear customer promises. They then revisited their values and the em-ployee expectations consistent with those values. Finally, they established the right culture that integrated and synthesized their customer brand and employee values. This culture became the template and roadmap for transforming the company.


2. WHY CULTURE MATTERS

Individuals can be champions, but teams win championships. Culture makes the whole greater than the parts. Culture is also more difficult to copy than accessing financial capital, implementing a new technology system, or even crafting a strategic plan. Culture ensures sustainability so that organization actions outlive any single individual or action. And no, culture does not just eat strategy for breakfast (Peter Drucker’s attributed famous quote); it serves strategy as an on-going diet.

Culture is top-of-mind for CEOs who want to transform their organization, future high-potential employees who seek work that has a cultural fit, and even for the Chartered Institute of Auditors who have prepared recent docu-mentation to help auditors monitor culture.2 Culture is center stage for business success and a priority for HR.

Culture matters to all stakeholders

Culture impacts numerous stakeholders (both internal and external) as summarized in Figure 7.

Figure 7. Culture Impact on Various Stakeholders

Stakeholder If we have the right culture, what happens to each stakeholder?

Employee

• Better attraction of key talent (talent magnet)• More employee sentiment (commitment, experience)• Higher productivity/expectations• Improved well-being

Organization

• Increased strategic focus on core competence • Lower cost of governance (management by shared values or mindset)• Better ability to deliver strategy• More cohesiveness and collaborative work in the organization

Customer • Increased firm identity/reputation that affects customer share• Improved customer scores (net promotor score, revenue per customer or

customer share)

Investor• Improved intangible value that affects share price• Upgraded confidence in the quality of the organization as evidenced in the

Leadership Capital Index

Community • Better reputation for present and future

Employees self-select into companies because they “fit” the existing company culture. Employee commitment, productivity, and behaviors both shape and are shaped by the culture of the firm. Employees who choose to work for Nordstrom must realize up front that they will be expected to provide exceptional customer service. Once hired, the management practices reinforce the customer service mantra and employees who don’t fit are likely to leave. Cultures change employee thinking and action.

Customers value cultures through the firm’s identity. When a firm develops a reputation for quality, service, or cost, customers begin to rely on this identity and do business with the firm based on the reputation or identity. This identity of the firm in the mind of the best customers, becomes a firm brand and demonstrates the impact of culture on customer value.

Investors have recently recognized the importance of intangibles, which reflect the market value of a firm above or beyond its expected market value given cash flow or earnings. Culture and its derivatives (employee com-mitment and competence, firm brand) become intangibles when they lead to investor confidence in the firm’s


future growth. Cultures can also become negative intangibles when the investor perception shifts from positive to negative images, e.g., Uber’s perceived culture not only affected the founder’s tenure but also the market value after the public offering.

Culture matters in times of transformation: Case study of mergers and acquisitions

As noted above, any business transformation requires creating the right culture to sustain the transformation. For example, an outside-in, customer-centric view of culture becomes a critical predictor of success of a merger and acquisition (M&A). We have seen three evolutionary phases of culture in M&A activity (see Figure 8).

Phase 1: Pre 1995: Cultural Ignorance

Often in this time period, M&A specialists would look for an economic fit (M&A saves money by reducing redun-dancies) and a strategic fit (product or service complementarity). The M&A would go forward only to run into cultural headwinds when the two firms came together. These M&A efforts had about a 20 to 30 percent success rate, success defined as returning cost of capital for the investment in the five ensuing years.

Phase 2: 1995–2015: Cultural Integration

In this phase, culture was considered before the M&A to make sure that the two cultures fit or to anticipate the price (time and money) to integrate the cultures. Often this cultural integration would occur by finding common values and making the common values in the two separate firms a common value for the newly merged firm (see Figure 8). Note the focus for the newly formed company (C) is to discover common values and to empha-size them.

The good news with this approach is an awareness of culture (considered before the merger), the overlap of the two cultures (before the merger), and the pathway for the culture of the new company (after the merger).

Being aware of and trying to integrate culture as part of a merger improves success to about 45 to 55 percent.

Phase 3: 2015 and Beyond: Right Cultural Innovation

In Phase 2, the culture focus was on common values looking backward. In Phase 3, the outside-in, customer-centric view of culture focuses on the future. While each firm comes to the M&A setting with a set of cultural values based on their past, the newly created firm should use a clean sheet of paper to innovate the right culture for the new firm.

When culture formation starts by being clear about the desired brand identity in the mind of key customers and investors that is then made real inside the organization, the right culture is created (see Figure 8). Note that in this figure, the “new” culture may include some unique cultural elements from either firm A or firm B (value 1), com-mon values from both firms (values 3 and 4), and unique values based on customer brand promises (value 8).

Our experience shows that this outside-in, customer-centric cultural innovation approach will be a dramatic improvement for M&A success, up to 70 to 80 percent of the time.


Figure 8. Creating the Right Culture in M&A Activity


3. HOW TO CREATE THE “RIGHT” CULTURE

By moving to an outside-in, customer-centric view of the right culture, leaders can gain cultural clarity by defining the right culture as one that wins in the marketplace. For example, everyone experiences an organi-zation’s culture when we select our preferred restaurant, shop at our favorite store, or stay in a selected hotel. Our customer choices derive in part because we recognize the culture we desire. More generically, in any busi-ness setting, customers define the right culture. Thus Southwest Airlines succeeds in part by being known for low price with a fun experience, Marriott for exceptional service, Apple for design and simplicity, and Google for innovation.

In the above (and many other) examples, the company’s right culture is defined by its desired external firm brand (or identity for preferred customers) that is then infused throughout the company. For business leaders or HR professionals to fully leverage culture, they ensure that people feel, think, and act consistent with prom-ises they make to customers and other key stakeholders. As cultural stewards, HR professionals need to have an outside-in perspective where they ensure the internal culture and the HR processes through which the ideal culture is created and sustained) directly reflect the external brand promise.

An overall template for creating the right culture

We have advised dozens of firms on how to build the right culture. Inevitably, their leaders want a simple template that guides the process. Figure 9 offers this one page, simple template to determine the right culture. The five steps in this blueprint guide specific actions for creating the right culture. Each of these actions are reviewed below, along with tools for the five action steps.

Figure 9. A Template for Creating the Right culture

Reach clarity on what we want to be known for by our best customers in the future

Building the right culture from the outside-in requires the creation of a unity of identity through five key ac-tions: (1) collect “identity statements” from senior leaders, (2) evaluate the level of shared mindset, (3) revisit


results to reach consensus, (4) test assumptions with customers, and (5) evaluate the shift in current emphasis to new emphasis.

Collect “identity statements” from leadership team. Ask each individual to write a response to the question: “What are the top three things we want to be known for by our target customers in the future?” This question turns attention outward rather than inward by seeing the organization through the eyes of the customers. It highlights target customers, focuses attention by asking for three answers rather than a limited amount, and points to the future.

Evaluate the level of shared mindset. Next, categorize and combine the responses. For example, a team of 12 leaders will result in 36 answers. Sorting them into like categories may result in 9 that address “efficiency,” 7 that address “reliability,” 6 that address “customer focused” and 14 scattered over other categories. Add the total number of responses in the top three categories (22 in this example) and divide by total responses (36) for a rough measure of shared mindset (61% in this case).

Revisit results to reach consensus. Our rule of thumb is that a desired shared mindset is 80 percent agree-ment. As a group, review themes in the results, cluster and redefine themes, and then repeat the exercise until an 80 percent consensus on the top three items can be reached.

Test assumptions with customers. Now, test the internal unity of identity with customers to make sure it’s right. Ask target customers “why do you buy our product rather than buying from the competition,” and invite them to answer by allocating a total of 100 points among the top five or six categories identified in action (b) above. If customers allocate 80% of their points among the three categories chosen internally, then you’re on the right track. If not, revisit steps a, b, and c. Validating with customers is critical and ensures that the culture is built based on customer expectations. If you find inconsistency between customers’ desires on the outside and leaders’ targets on the inside, then two options are available. Change the target identity of the senior leadership or focus the firm on a different set of target customers whose needs are consistent with the company direction.

Evaluate the shift in current emphasis to new emphasis. With a clear unity of identity defined, evaluate the difference between the current emphasis and the new emphasis as validated by customers. For example, when answering the question “what do we want to be known for?”, a large manufacturing company discovered that they had been straddling two competing emphases: “value” (low cost) and “latest technology” (innovation), while dabbling in customer service and quality. After identifying a clear unity of identity based on their customer needs (given their strategy), leaders realized the need to eliminate “value” as an area of primary emphasis, and increase focus on “the latest technology,” “solid customer service,” and “good quality.”

Create an intellectual agenda (top/down): Clear and Shared Cultural Message

Key Question: What is the message we want to share about what we are known for both outside to customers and inside to employees?

Intellectual agendas ensure that managers create a shared culture inside and outside the organization. The intellectual agenda around the ideal culture can be communicated by executives throughout the organization through speeches, town halls, emails and social media. Employees assimilate these messages so that they become conceptually engaged to the right message. For Lexus, the pursuit of perfection is not just an advertis-ing tag line, but also an internal employee mantra. At Walmart the pursuit of low cost is repeatedly shared with employees in speeches and executive presentations.


As such, the right culture statement must have a clear, simple message—not too complex, too transient, or too elegant. Repeated redundantly throughout the organization, it can set the intellectual, top-down agenda for senior management, resonate with employees, and capture the intellectual basis for the new culture. Investors can track some of the characteristics of such a message that help make sure it will have impact:

• Simplicity

• Redundancy

• Openness

• Business relevance

• Clarity

Simplicity. In one firm trying to transform, the senior team worked for many months to create a document that had six elements of a mission, seven strategies, five operating principles, seven superordinate goals, six values, and a vision. They fondly believed that the fact they could put it on one page made it simple. Not so. Few in the firm could remember the twenty-plus items that crowded the page. Simple means memorable.

Another firm working on innovation captured the logic in four terms: think big, act small, fail fast, and learn rapidly. Using this simple manta (in addition to other disciplines), they were able to increase percent of revenue from new products. Investors should ask to see simple, memorable, customer-focused rallying phrases that define a desired culture.

Redundancy. Researchers on communication have found that people don’t fully grasp a message until they have heard it ten times.3 When simple and similar cultural messages are shared through multiple media (video, speeches, forums, town hall meetings, phone calls, and so on), they are both better understood and likelier to have real impact. In particular, it is critical for leaders to share the messages in private, resisting the temptation to back off the implications of a desired culture in face-to-face conversations.

Openness. The desired culture can’t be a secret; you have to go public with it. Going public to employees means sharing the desired culture in written, personal, and verbal communications. To customers, going public means making promises to the customers about how the firm will interact with them in the future. Going public also means sharing ideas with investors and encouraging investors to see beyond the financials to have confi-dence in the processes used to generate the financials.

Business Relevance. Culture deals with how work is accomplished. It becomes an adjective and not a noun. The “nouns” are the outcomes or results of work. Culture as an adjective talks about how that work will be ac-complished. If culture becomes the end or goal (“we want a culture change”), attention is misdirected. By having the goal of culture rooted in investor and customer value, culture is an enabler, not the end game. For example, we want a culture of agility, innovation, or customer service so that customers buy more from us and investors have more confidence in us. Culture as a means should be linked to desired business results, the end.

Clarity. Culture tends to be murky and hard to study because it is rooted in unspoken assumptions that employ-ees don’t consciously recognize. David Foster Wallace offered a wonderful metaphor for surfacing assumptions:4

There are these two young fish swimming along, and they happen to meet an older fish swimming the other way, who nods at them and says, “Morning, boys, how’s the water?” And the two young fish swim on for a bit, and then eventually one of them looks over at the other and goes, “What the hell is water?”


Often long-term employees don’t recognize the water, or culture, they work in. Investors can observe if leaders work to surface implicit assumptions, often called orthodoxies, by listening to new employees who may observe what others live, by purposefully exploring patterns of behavior that get in the way of accomplishing work, or by creating a candid forum for dialogue. (Dave Ulrich picked up the concept of industry or organization orthodox-ies from personal discussions with C.K. Prahalad and Gordon Hewitt.)

Creating simplicity, redundancy, openness, business relevance, and clarity comes from a disciplined communication process. In building a top/down shared communication plan, we have identified four steps, laid out in Figure 10.

1. Timing: when should the message be communicated? The 1 to 6 in Figure 10 could be weeks or months.

2. Targets: who should receive the communication? The A to D represent key groups who might receive the message. The grid of Timing * Targets represents the template to guide the communication.

3. What to share: what messages should be communicated? The messages might include the why, what, and how of the right culture.

4. How to share: how can the messages be shared? As evidenced in Figure 10, there are many ways to share a message. By combining message and method, cells in the communication grid can be filled in so that each Target row receives the right message with the right method.

This communication template and process can be tedious to fill in, but it can be a guideline for having thorough communication on the right culture.

Figure 10. Creating a Communication Plan

TimingTargets 1 2 3 4 5 6

ABCD

Etc.

Possible intellectual agenda indicators:

• Does my firm have a “unity of identity” about its cultural message?

• Does my firm have redundant communications to share the cultural message?

• Do employees and customers recognize and resonate with the cultural message?

Enable a behavioral agenda (bottom/up): Employee actions align with culture

Key Question: How does the desired culture shape daily personal employee behavior?

The right culture needs to be translated into specific behavioral descriptions. A culture transformation occurs if and only if it changes behavior throughout the firm. This is the bottom-up, behavioral agenda for managing

What to share:ABC

1. All hands meetings2. Written memo/policy3. Website4. Email/Twitter5. Social media6. One-on-one meetings7. Teleconferences

8. Videos9. Newscasts10. Speeches11. Newsletters12. Articles inside and out13. Symbols14. Etc.

How to share:


culture. Words, phrases, concepts that resonate without changing behavior create cynicism. Generally, em-ployees who experience day-to-day business problems know what to do to turn cultural concepts into actions. Developing mechanisms to engage employees and to enable them to figure out what behaviors to change cre-ates enduring culture. Investors should look for evidence that the intellectual agenda of culture translates into specific employee behaviors.

It makes a difference if leaders impose behaviors or allow employees to determine which behaviors go with the desired culture. When a top leader demands that the team practice participative management, it keeps them from taking personal ownership for the culture—and the innate hypocrisy will filter out through the organiza-tion. By contrast, when people are involved in an activity, they are more likely to feel ownership. Owners almost always feel far more intensity than agents. In one company, the leadership team articulated the desired culture of speed, simplicity, and self-confidence, then engaged tens of thousands of employees in determining how they could turn these corporate aspirations into their personal actions.5

Investors also monitor the extent to which local managers encourage employee behaviors. An obvious but well-tested experience in union relations is to avoid having corporate leadership attend a local unit meeting to try to convince employees to be non-union. Union relations improve with local, not corporate management. Local managers build long-term relationships and embody the values of the corporate leaders. When local leaders behave differently, employees believe in the new culture.

Finally, small behavioral changes add up to larger culture capability. In tipping-point logic, changing a lot of little things may not have much impact in each instance, but then when a few more little things are added, overall patterns begin to change fast. Crime in New York City began to fall rapidly after a lot of relatively little crimes were attended to (graffiti tagging, windshield washing, panhandling, and the like). A tipping point occurs when the culmination of a lot of small changes adds up to large systematic change.

When employees behave as if they are committed to the desired culture, they will more likely become commit-ted. As investors observe a culture permeate a targeted organization, they can observe employee behaviors that are consistent with the desired culture.

Possible behavioral agenda indicators:

• Do employees personally define how their own behaviors reflect the desired culture?

• Does the desired culture show up in day-to-day employee activities?

• Do employees take personal ownership of the culture (refer to “my culture” as opposed to “management’s culture”)?

Instill a process agenda (side-to-side): Management Processes Align with Culture

Key Question: How does the right culture get embedded throughout the organization so that it is sustained over time?

The right cultural capability is thoroughly embedded in the organization’s systems and processes. My colleagues and I call this the side-to-side or process agenda for culture change. Established ways of doing things endure beyond any one leader or any single event, so a desired cultural identity should be part of decisions that affect all organization practices, including financial processes (budgeting, auditing), strategic processes (segmenting customers, innovating and delivering products and services), operational processes (manufacturing, managing supply chain, sharing information), and human capital processes (managing talent, information, and work).


Sometimes, existing survey questions about the alignment of process and culture ask questions of their own, looking for answers like these:

• People are rewarded (through compensation and promotions) for exhibiting behaviors that are consistent with our values and culture.

• The material we teach in our training programs is consistent with our desired culture.

• My work environment supports me in delivering excellent customer service (or whatever the objective is that the leaders are attempting to achieve through their culture initiatives).

• We work hard to improve the processes that are critical to achieving our key business goals.

Figure 11 shows how HR practices can be used to drive a culture of innovation or customer obsession.

Figure 11. HR Practices Aligned to Desired Culture

Desired culture People Performance Information Work

Innovation

Recruit from places known for creativity and innovation

Make innovation an explicit aspect of performance management

Reinforce innovation by celebrating innovators

Adapt the team structure to support innovation

Customer Obsession

Focus all people activities on serving customers

Reward people for their customer orien-tation and service

Share customer results with all employees

Organize work pro-cesses to increase customer results

Possible process indicators:

• Do management practices in financial allocation, strategic planning, operational performance, and human capital reflect and reinforce the culture?

• Do customers sense that the management practices will meet their needs?

Develop a leadership brand

Key question: How much do our key leaders and leadership through the organization personally model the desired culture?

In our writing on leadership, we have focused on creating a leadership brand by emphasizing both the attri-butes of leadership and the desired results of leadership. A summary of these leadership ideas and the books that capture them are in Figure 12.

In particular, when leadership qualities focus on customers (see book Leadership Brand), then the competencies of leaders inside reflect the promises made to customers outside. For example, a firm wanting to build a culture of innovation of customer service, would create leadership competency models with knowledge and behavior related to each cultural dimension.


Figure 12. RBL’s Overall Approach to Leadership

The specific exercise to turn the right culture into leadership behaviors is in Figure 13. In this figure the firm brand (or right culture) are the three things a firm wants to be known for by its key customers. The leadership differentiators become the behaviors to reflect each of the dimensions of the firm brand or right culture.

Figure 13. Turning Firm Brand (Right Culture) into Leadership Behaviors


Creating the right culture: Summary

We have worked with dozens of firms to create the right culture following the five steps in Figure 14. These rela-tively simple steps are not easy to do, but they show what the culture should be and how to institutionalize it.

Figure 14. Worksheet for Creating the Right Culture

Step Activity Application

1. Define desired culture

Define what we want to be known for by customers

2. Intellectual agenda

Prepare a communication plan; make viruses transparent

3. Behavioral agenda

Give people choices over behaviors and actions (workout)

4. Process agenda

Identify and manage key processes to drive culture

5. Leadership agenda Define and implement your leadership brand

How to sustain the right culture

Often a cultural transformation project starts with fanfare, but is not sustained. Or, the project has a beginning and end date and after the end date, recidivism occurs and old patterns return. By focusing on the right culture, that which creates value for customers, changes are more likely to be sustained. But, we offer two tools to help sustain culture: [1] a template for making the culture agenda happen by using what we call a pilot’s checklist of change and [2] a way to anticipate derailers and overcome them by using a tool called a virus detector.

Create a culture transformation agenda

For many years, we have been involved in helping organizations implement whatever initiative they sponsor. We have discovered that there are some commonly understood and research-based lessons on making change happen that can be documented and applied to the culture transformation agenda.

We have suggested that seven key factors help to ensure that initiatives happen by turning what people know they should do into what they actually do (Figure 15). We can adapt these seven conditions for success to help make any initiative happen, including transformation to the right culture. A cultural transformation agenda that follows these seven factors will be much more likely to succeed. The quality of these seven disciplines can be profiled to diagnose where to focus to make the most progress on cultural transformation (Figure 16).

By applying these seven generic change disciplines to the specific task of transforming culture, the cultural change agenda moves forward. Each of these disciplines has tools and actions that business or cultural change advisors can use to make progress depending on the profile in Figure 16.


Figure 15. Disciplines for Making Cultural Transformation Happen

Key Success Factors for Change

Questions to Assess and Accomplish the Key Success Factors for Change

Leading Change(WHO is responsible?)

Do we have a leader…• who owns and champions the cultural transformation? • who makes a public commitment to making it happen? • who will garner resources to sustain it? • who will put in personal time and attention to follow through (pass the

calendar test)?• who is fluent in the issues, problems, and solutions associated the with “technical” aspects

of the cultural transformation?

Creating a Shared Need(WHY do it?)

Do employees…• see the reason for the cultural transformation?• understand why the cultural transformation is important?• have a sense of urgency for doing the cultural transformation?• see how it will help them and/or the business in the short and long term?

Defining a Direction(WHAT will it look like when we are done?)

Do employees…• see the outcomes of the cultural transformation in behavioral terms (what they will do dif-

ferently as a result of the cultural transformation)?• get excited about the results of accomplishing the cultural transformation?• understand how the cultural transformation will benefit customers and other stakeholders?• see how the cultural transformation will translate into goals, objectives, and behaviors that

all team members can understand?

Engaging Stakeholders(WHO ELSE needs to be involved?)

Do the sponsors of the cultural transformation…• recognize who else needs to be committed to the cultural transformation to make it happen?• know how to build a coalition of support for the cultural transformation?• have the ability to enlist support of key individuals in the organization?• have the ability to build a responsibility matrix to make the cultural transformation hap-

pen?

Making Decisions (HOW will it be institutionalized?)

Do the sponsors of the cultural transformation…• know the key decisions that must be made for this cultural transformation to happen?• have decision deadlines, accountability, and processes to ensure timely and competent

decisions?• demonstrate a clear bias for action in identifying and making key decisions?

Dedicating Resources (HOW will it be measured?)

Do the sponsors of the cultural transformation…• understand and have investment strategy in people (HR) systems to accomplish the cultural

transformation (people, performance, information, work)?• understand and have investment strategy in financial resources to accomplish the cultural

transformation (money, budget allocation process, etc.)?• understand and have investment strategy in technology and data systems to accomplish

the cultural transformation (e.g., data requirements, data sources, data access)?

Learning, Adapting, Monitoring (HOW will it get started and last?)

Do the sponsors of the cultural transformation…• have a plan to learn from others who have done similar cultural transformations inside and

outside the company?• have a plan to adapt other learnings into the business-specific conditions?• have measurement systems in place to monitor progress on the cultural transformation?


Figure 16. Profiling the 7 Culture Transformation Disciplines

Anticipate and identify viruses or risks

When embarking on any change initiative there are forces for and against making the initiative happen. Of-ten the “resistor” forces are embedded in an organization’s orthodoxies, sacred cows, norms, and patterns of thinking and behaving. These resistor beliefs and practices may be conceived as viruses. If you think of them as natural parts of the firm, it’s easy to shrug and accept them as facts of life. But if you recognize the way they can paralyze your operations and block the use of your collective knowledge base, it becomes clear that they’re as dangerous to implementing a new culture as computer viruses are to your corporate IT systems.

They share another feature of computer viruses: they’re at their most deadly when they’re not recognized. You can isolate a computer virus, prevent it from spreading, repair and restore your files once you find an antivirus program able to diagnose and detect viruses. Likewise, once an organization spots a cultural virus that is keep-ing things from happening as fast as they should, it can take steps to eliminate the blockage.

We have identified 19 (add a 20th unique to your firm) common viruses that infect a cultural transformation agenda (see Figure 17). We advise a cultural transformation team to diagnose and surface which 3 to 4 of these implicit viruses are prevalent within their organization, talk about them, and build a plan to eradicate them. When this is done, the cultural transformation becomes more sustainable.


Figure 17. Common Viruses that Reduce the Likelihood of Sustained Change

Cultural Transformation Viruses

______ 1. Have it my way: We don’t learn from each other; not invented here syndrome.

______ 2. False positive: We say we agree when we don’t.

______ 3. Forward to our past: Look for the future in the rearview mirror: We are so afraid of losing our heritage that we don’t change our culture; we are locked into our habits.

______ 4. Caste: value by grade: We judge people by their title and rank rather than performance or competence.

______ 5. Turfism: my business vs. “our” business: We defend our turf sometimes to the detriment of the overall orga-nization.

______ 6. Command and control: We like to make sure that senior managers run the company and delegate up respon-sibility; this keeps us from feeling a personal obligation to change.

______ 7. Activity mania: We like to be busy; our badge of honor is full calendars, even if it excludes thinking and results. We hide behind our “busy-ness.”

______ 8. Narcissistic competitiveness: We like to win as individuals not teams.

______ 9. Show me the results: Results rule: We like results – anyway, anytime, anyhow – process or reaching results according to our principles is nice if we have time or can “afford” it.

______ 10. Crisis jumping: When in a crisis, we act decisively, then we wait for the next crisis to act again

______ 11. All things to all people: We have too many priorities; each good idea gets energy and attention; we don’t say no; we are not focused on the critical few.

______ 12. Flavor of the month: We jump from program to program; we don’t have integrated initiatives; and there is cynicism about “new” programs; we end up with concept clutter.

______ 13. Over-changed (full sponge): We have a capacity problem with too many changes going on at once; we are burned out and stressed out on change; we can not let things go.

______ 14. Process mania: We are so consumed by process that we don’t focus on results and outcomes.

______ 15. Kill the messenger: Don’t be the bearer of bad news.

______ 16. Glacial response: Whose decision is it? We cannot get decisions made quickly.

______ 17. What have you done for me yesterday? After a successful change, we only want more.

______ 18. Going for the big win: We look for the mega change that will solve all problems vs. starting small.

______ 19. The dog and pony show: Style over substance; endless PowerPoint presentations, but little actions.

______ 20. Other?


4. CONCLUSION: CREATING THE RIGHT CULTURE

Based on empirical evidence and personal experience, an organization’s culture matters --- to ensuring employ-ee well-being to delivering business strategies to serving customers to increasing investor confidence and to shaping a community reputation. Managing culture is not a new topic for society in general or for organizations in particular. But, the study of culture needs to move, from a descriptive definition of culture inside the organi-zation to a prescriptive guidance of building the right culture. The right culture starts outside-in and turns cus-tomer promises into sustained employee actions. There is a cultural transformation blueprint of five steps (see Figure 9) that can be followed to pursue a cultural agenda. This roadmap can best be implemented by ensuring that the disciplines of effective change (Figures 15 and 16) are followed and by facing and overcome underlying viruses that may get in the way of success (see Figure 17).

The efforts to create the right culture evolve the legacy cultural agenda in dramatic ways. We hope this play-book offers insights and tools to do so.


REFERENCES

1. Chartered Institute of Internal Auditors. 2014. Culture and the Role of Internal Audit: Looking below the surface. Sourced at: http://www.iia.org.uk/policy/culture-and-the-role-of-internal-audit/

2. Chartered Institute of Internal Auditors. 2014. Culture and the Role of Internal Audit: Looking below the surface. Sourced at: https://www.iia.org.uk/media/598939/0805-iia-culture-report-1-7-14-final.pdf

3. Charles O’Reilly, III. 1982. Variations in decision makers’ use of information sources: The impact of quality and accessibility of information. Academy of Management Journal, 25, 756-771. Charles O’Reilly. 1983. The use of in-formation in organizational decision making: A model and some propositions. In L.L. Cummings and B.M. Staw (Eds.). Research in Organizational Behavior, Vol. 5. Greenwich, CT: JAI Press, 103-139.

4. David Foster Wallace graduation talk to 2005 graduating class at Kenyon College. Sourced at: http://online.wsj.com/news/articles/SB122178211966454607

5. Dave Ulrich, Ron Ashkenas, Todd Jick, Steve Kerr. 2002. The GE Work-Out: How to implement GE’s revolution-ary method for busing bureaucracy and attacking organizational problems. New York: McGraw Hill. ISBN-10: 0071384162

Endnotes

© 2019 The RBL Group, Inc.

All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or using any information storage or retrieval system, for any purpose without the express written permission of The RBL Group, Inc.

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