Maintaining your culturein an era of disruptionAn approach to culture transformation

Disruption is redefining enterprise productivityand influencing strategic investments…. including Culture.

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Evolving landscapeAn OECD Study shows labor productivity trends in manufacturing and services have widened the performance gap between top “frontier” enterprises and the rest.

Source: Frontier Firms, Technology Diffusion and Public Policy, OECD, 2015

Percentage difference in labor productivity levels(Index, 2001 = 0)

0

10

20

30

40

2001 2003 2005 2007 20090

10

20

30

40

2001 2003 2005 2007 2009

MANUFACTURING“Frontier” firms

SERVICES“Frontier” firms

Everyone elseEveryone else

3.5%per annum

1.7%per annum

5%per annum

0.3%per annum

10%Frontierfirms

90%Laggingfirms

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Productivity gap: Frontier vs. followers$4 trillion gap between efficient frontier firms and less efficient followers

Productivity gap

Followers

Frontier

Source: SAE, KPMG Global Enterprise Productivity Study

Time

Prod

uctiv

ity

Revenue growth for 1,500 firms onthe TFP frontier more than twiceas fast as followers

Key findings

Productivity leaders create enormous economic value. If sample follower firmsand frontier firms had the same TFP, they would produce $4 trillion in additional annual global value-add on average.

There are differences between services and manufacturing: From 2008 to 2016, the gap between frontier and follower firms increased 14% in services and 9%in manufacturing.

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These technologies require an enterprise investment shiftIntangibles, including data, make up a growing share of enterprise investment and value creation. Frontier firms leverage the full power of intangibles to drive productivity and growth.

Past: 20th century enterprise Today: 21th century enterprise

Intangibleassets

Tangible assets

Productivity frontier

Intangibleassets

Productivity frontier

Tangible assets

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Productivity gains require major intangibles investmentThe changing investment compositionExamples of intangible business investments include:

Ratio of intangible to tangible investment varies by sector

Software

Databases

R&D

Design

Skill development

Market research

Branding

Business processes

Organizational design

Organizational culture

Management leadership

Data analyticsSource: UK Office for National Statistics, 2018

A distinguishing feature of organization capital is its efficiency is partly firm-specific and is embodied in the firm’skey talent, business processes, and culture. While sectors’ intangible intensity varies, all enterprises rely onintangibles and need to increase their future investments.

0.18

0.19

0.3

0.31

0.8

0.89

1.37

1.81

2.16

2.82

2.86

0 0.5 1 1.5 2 2.5 3

Electricity, gas and water supplyAgriculture, forestry and mining

ConstructionTransport

Administrative serviceAccommodation and food services

Wholesale and retailManufacturing

Information and commmunicationsFinancial services

Professional and scientific activities

Industry

Intangible ratio

Organizational culture

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Enabling new ways of working

Leadershipmust effectively empower, enable and inspire theirpeople more than ever

New skills & capabilities must be supported through learning and development opportunities andcareer experiences that havenever been available before

Connecting workers with needsmust allow for different workforcemodels (e.g.: employees, vendors, workers, bots) that provide Flexibility & connectivity

A Culture must beestablished to enable peopleopportunity and innovationwhile balancing the necessary governance to support ahuman and digital workforce

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A brave new world of skills and capabilities

What’s needed in a world of disruption

StrategicStrategic thinkingInnovation & ideasProgram managementAmbiguity and white-space

Analytics, technology & data

TechnicalBusiness modeling Analysis E2E process design and navigationRobotic management

BehavioralRelationship managementCollaboration, creativityFeedback, communication, negotiation Influencing and inspiring

Analyticsand insightsVisualizationData modeling

Roboticquotient (RQ)1

Programming expertise

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The conversation around culture is intensifying as senior leaders understand the need for culture change to drive business performance

of senior executives agree culture is as important as strategy for business success91%

Culture is seen as a “Top 3” or “Top 5” factor affecting firm value by 78% of CEOs

Top3

of executives agreed a

company without a winning culture

was doomed to mediocrity

81%

CEOs that agree improving culture would improve company value

90%

of employees at companies with strong

cultures feel senior leadership listens to them

86%93% of CEOs says it’s important their organization has a strong corporate purpose that’s reflected in its culture

94% of executives believe a distinct workplace culture is important to business success

Sources: 1) https://www.newyorkfed.org/medialibrary/media/research/conference/2015/econ_culture/Graham_Harvey_Popadak_Rajgopal.pdf 2) https://www8.gsb.columbia.edu/newsroom/newsn/3874/ceos-and-cfos-share-how-corporate-culture-matters 3) https://hbr.org/2008/02/creating-and-sustaining-a-winn-1 4) https://www2.deloitte.com/content/dam/Deloitte/global/Documents/About-Deloitte/gx-core-beliefs-and-culture.pdf 5) https://www.forbes.com/sites/alankohll/2018/08/14/how-to-build-a-positive-company-culture/#743c4b8a49b5 6) https://www.pwc.com/gx/en/services/people-organisation/organisational-culture-and-purpose.html 7) https://hbr.org/2008/02/creating-and-sustaining-a-winn-1

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Getting culture right is critical to achieving business performance, but needs to be specific

Organization’s statement on how they wantto be perceived by customers, clients,

employees, and communities they serve

Organization’s roadmap and tacticson how to achieve purpose

Underlying behaviors and beliefsthat define how work gets done

Organization’s resultsrelated to targets and goalsBusiness performance

Organizational strategy

Culture

Purpose

Culturecan enable or inhibit business performance

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Culture is the underlying behaviors and mindsets that define how work gets done

Behaviors

Culture

MindsetsThe personal beliefs of an organization’s members due to what they actually experience

The formal and informal behaviors the organization’s members manifest due

to their personal and group beliefs

There is no cultural one size fits all. Culture depends on the desired performance to meet organizational goals.

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Creating cultural change takes several steps –but companies struggle most with making it clear

Make it known Make it real Make it happen Make it stickMake it clear

Communicate the culture change to the organization—take the organization on the journey

Determine how the culture change will be done and what it will take—including how it relates to other transformations going on in the company

Execute and continuously evaluate the plan—monitor progress and adjust the plan

Embed the culture in the organization—let the culture take root

Identify and clarify the culture change purpose by understanding the key business performance challenges—including the change scope and extent (“as-is” to “to-be”)

Obj

ectiv

es

Initial Focus

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People’s workplace mindsets are influenced by a variety of factors

Observed behaviorsWhere are the gaps between what the organization says is important and how peopleare actually behaving?

Organizational historyHow does theorganization talk aboutits past and connect itto where it wants to go?

Past work experiencesHow do my experiences at other organizations influence how Ithink about my current workplace?

Feedback loopWhat have been the consequences—good or bad—of my past actions?

Experiences outside the workplaceWhat else in my life influenceshow I think about work?

The right mindset creates a foundationfor the behaviors you want to see in your culture

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2 3

5

Align cultural driversPinpoint momentsthat matter

Identify keyscenarios & roles

Define “culture of”

4

Articulate desired behaviors

Our cultural change approach

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Drivers can work for or against the culture intended

Leadershipand

behaviors

Relationshipswith the

outside world

Thephysical

environment

Storiesand

symbols

Structures,systems, and

processes

Decisionmaking

GovernanceValues

CustomercentricityPurpose

and strategyRegulatory

engagement

WorkingenvironmentWorkplace

design and layoutOffice

locations

Communicationfrom the top

Commonlanguage

Accessibilityof informationOrganizational

history

Risk appetiteTechnology

Performance managementIncentives

Consequence managementPeople development

Skills and competencies

Cultural Drivers

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Key considerations for culture change

Getclear on

outcomesIdentify what culture

of is needed to support business

performance.

Define this culture of and clearly

articulate what it means to the organization.

Align leadership

Leaders mustalign culture change

to strategy, andwork to prioritizeit on agendas atthe c-suite level.

Articulate and modelthe right behaviors.

Planfor other

cultures of Take stock of

co-existing cultures of.

Determine if there are any dilemmas and

reconcile them.

Use complementary cultures of to

accelerate change.

Build accountability

Ensureemployees

Know the core values and expectations

and understand consequences/

ramifications for failingto uphold the desired

behaviors and actions.

Designthe right

experienceKeep people atthe center of allculture activities.

Use the right change management tools to design an employee centric experience to

bring your people along.

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© 2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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