Leading Culture Change
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Leading Culture Change

What Every CEO Needs to Know

Chris Dawson

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eBook - ePub

Leading Culture Change

What Every CEO Needs to Know

Chris Dawson

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About This Book

Leading Culture Change: What Every CEO Needs To Know is a practical guide for top leaders who are faced with the challenge of shaping their culture to create long term, sustainable value. Culture is changeable—but only with CEO sponsorship and a methodical, best practices approach.

Author Christopher S. Dawson draws on 25 years of experience as an organizational consultant in a variety of industries to delineate five critical success factors, without which culture change is unlikely to occur. He offers practical tools and approaches to facilitate culture change, in addition to an overall framework that acts as a yardstick for seasoned and new top leaders. The book provides a "red-yellow-green" level of urgency tool for determining the degree of organizational effort required to address the gap between strategy and culture; a roadmap for culture change; and more.

After describing how to effect change, the text describes frequent scenarios, providing guidelines, an in-depth case example, and lessons for top leaders. Finally, the book outlines four essential leadership competencies—dual-horizon vision; self-awareness; team leadership; and source of inspiration—based on the requirements for leaders of any transformation.

This book is an ideal guide for today and tomorrow's top leaders—as well as a valuable supplement to management consultants' and human resource executives' professional training.

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Year
2010
ISBN
9780804774673
Edition
1

Section II

Implementing Culture Change

In these next four chapters I will outline the four sequential phases of the Culture Change Process. In the interest of creating a practical model that maps to reality, the Culture Change Process is laid out as a sequence of steps. Keep in mind that an actual culture change will never play out exactly as depicted in our “field guide.” Indeed, it is unlikely that the culture change of any two organizations would look the same. The map is not the territory, but how valuable it is to have a good map when you have lost your way!
Not every organization and situation requires the same level of effort to align culture with strategy, so naturally, not all of these tools and methods are required in every circumstance. In the “real world” of organizational life, things are iterative and messy. As every CEO knows, the big secret is that you don’t really control very much—though you may influence a great deal depending on your ability and the circumstance you are in.
Despite these uncontroversial truths about leading in real organizations, there is tremendous value for the CEO in realizing where truly “hard dependencies” exist in the Culture Change Process, in other words, what the first step is that you should always complete before going to step two, unless you want to come back from step three to redo step one.
Of equal value is to appreciate that short list of critical success factors without which a culture change will not occur. For example, given a moderate to high level of urgency for culture change, I can categorically assert that the effort will fail unless the five critical success factors have been met, in sequential order. For example, Critical Success Factor 5, Model Executive Authenticity, is always a good thing. As it relates to culture change, it is a wasteful investment of personal and organizational energy to focus on it before the Vision Culture has been well defined and translated into observable behaviors. Similarly, efforts to define the “new culture” that have not taken into account the Shadow Cultures will always yield a suboptimized culture change initiative, often one that fails due to investment in something that is superficial, unmeasurable, and uninspiring, instead of “true” and “real.”
The real world is complex, messy, and uncontrollable, but there are rules and predictable outcomes for those with eyes to see, and the wisdom to use them. The primary job of effective top leadership is to “define reality” for the organization by communicating organizational goals and the means to achieve these goals, and establishing the “rules of the game.” The Culture Change Process we will now dive into is a map of that territory that includes basic rules you should not ignore, as well as numerous tools, suggestions, and ideas for a variety of situations with which you may find yourself confronted. The Five Critical Success Factors for Culture Change are those rules in the “culture change universe” that you should ignore only at your peril, if you are truly serious about changing your culture. Other suggested tools and methods in these next several chapters are just that: suggestions to draw from depending on your situation and preference.
The next several chapters will each respectively tackle one stage of the culture change process, from Setup to Launch to Propagating the Wave to Celebrating Progress (Figure II.I). A short preview of these chapters is provided here.
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FIGURE II.I. Culture Change Process—master view
  • Setup: Realizing the need for shift in the culture, making the case for the initiative, and establishing those initial structures that will be required to develop the new culture are necessary first steps. The CEO’s decision to define the need for culture change as “Condition Red,” “Condition Yellow,” or “Condition Green” is what will drive Launch. In this chapter I will offer the “CEO’s Level of Urgency Assessment Tool” and several case examples.
  • Launch: Identifying the Shadow Cultures and integrating these into the Vision Culture, which then becomes the target, is at the heart of any culture change regardless of whether it is in “mild yellow” or “severe red” condition. The “Get Real Tool” and baseline measurement of culture are offered as key methods to create tangible, measurable impact. Linkage to value creation and development of the Culture Change Roadmap are the final outputs of the “Launch” step.
  • Propagating the Wave: In Chapter 6 I identify the “big three,” musthave levers of culture change for CEOs. First of these levers is best practices for change acceleration and change communication: a methodology for minimizing the natural resistance that we all have to any change. The second lever comprises key human capital and capability tools such as organizational design, competency definition, rewards and metrics, and talent-management processes—all essential initiatives on the roadmap to help make the Vision Culture real. And the third lever provides ways to model executive authenticity with a variety of tools and methods for the CEO and top team.
  • Celebrating Progress: What has been accomplished? How, when, and where should the CEO and top team call out progress in the culture change? Linkage between value creation and the Culture Change Roadmap is the ideal metric to measure culture change success, but there must also be recognition and encouragement on an ad hoc basis. In Chapter 7 I explore the CEO’s role in celebration and recommend best practices for tangible, intangible, and other means of celebrating success.

Role of the CEO in the Culture Change Process

Before moving on to the first stage of the Culture Change Process, role definition between the CEO and other culture change or human resource experts is worth mention. It is my strongly held view that culture must be owned by the CEO or top leader if it is to have any hope of success. This is a simple and, to anyone with practical experience of organizational change, self-evident truth. The complexity beneath this simple truth lies in the details of how, when, and where the CEO should be involved in which aspects of the Culture Change Process.
There is general agreement at the two extremes of this question. Few would disagree that the CEO must establish culture change as a priority. Few would disagree that the CEO should not be involved in translating behavioral competencies into items on the performance appraisal. Exactly who does what in the Culture Change Process also depends on available expertise and talent within and without the organization. In the delineation of the Culture Change Process that follows I have tried not to dive too deeply into the technical details of various tools, methods, and the extensive body of change management or human capital methodologies that are described by others and appropriately aimed at organizational effectiveness and human resource professionals.
The analogy used in Chapter 1 is worth repeating: the CEO needs to understand as much about the Culture Change Process as he or she would about any other important functional discipline, without being a technical expert. The delineation of the Culture Change Process that follows touches on numerous areas that CEOs need to know enough about to understand why that method or tool is important, what the outcomes look like, and what their direct involvement should be. I am absolutely not suggesting that CEOs should develop the technical expertise required to execute or manage all of these specific culture change steps, but that they open themselves to a different level of responsibility than they have perhaps felt before relative to their leadership of these “soft” areas.

4 Setup

If creating value is the central mission of the CEO, establishing priorities is an essential tool for doing so. The first stage in the Culture Change Process is called “Setup” because the activities of this step are all related to setting up the correct structures and making the appropriate case for culture change. To do this effectively requires that the CEO first evaluate what level of threat and urgency is presented by the culture of the organization. This assessment, in turn, provides a rational foundation for what level of organizational attention and resources should be applied to the culture change effort.
In this chapter I will first provide a decision model to help the CEO establish the correct level of urgency for culture change, then will move on to a “red-yellow-green” catalogue that links a continuum of culture change urgency to appropriate levels of organizational attention.
A “first cause” set of questions facing every CEO is how he or she will “define reality”: “What is expected of me?” “What is my agenda?” “How do I create more value than is already present by the time I move on?” “What is working and not working?” This is a set of questions that every new CEO should be answering. It is absolutely a set of questions that the board of directors should be asking to inform their choice of the CEO, and subsequently evaluate performance.
Given that the pace of change in the external environment has so greatly accelerated in recent years, it is not a stretch to assert that every CEO has a materially “new” set of challenges created by external changes at least every couple of years. At some level, every day, week, and quarter brings new challenges, but for our purposes relative to culture change, the periodicity is more appropriately set at twelve to twenty-four months. Culture simply cannot change in less than a year or two, and the impact of the answers to these questions is set in a similar timescale.

The Four Questions Every CEO Must Answer

There are four basic questions the CEO should be asking when beginning a new job, or on a periodic basis to ensure adaptation to external changes. These four questions are sequentially dependent, meaning that question 4 cannot really be answered without the answer to question 3, and so on. Naturally, in the real world there is iteration in the sense that leaders may have enough data about question 2 to move forward on question 3, but then make further refinements as new information surfaces.
  1. What is expected of me to create value and keep my job? (Hopefully the same thing!)
  2. Is the current company strategy a reasonable way to create that value?
  3. Do I have the right organizational culture to execute that strategy?
  4. Do I have the right team to mostly do all of the preceding?
Questions 1 and 2 are critical precursors that set the stage for question 3, which is central to our focus and the starting place to determine the need for culture change: “Given this strategy, is the existing culture that I see in front of me the best, or depending on other priorities, an acceptable vehicle through which to execute that strategy?”
The reader may be surprised to hear from this author that not every company should make culture change a top priority. Many companies have a culture in place that does not justify or require the kind of organizational attention demanded in the Culture Change Process described here. Without too much work, one can easily imagine some obvious examples:
  • The company has just completed a three-year culture change effort, after which the CEO retired or left for health reasons.
  • The answer to question 3 is, “Yes, the organizational culture is already a good, or good enough, culture to align with and execute the strategy.”
  • The answer to question 2 is, “There is no company strategy, or it has failed and that’s why I, the CEO, am now here—to define the right strategy for value creation. Therefore the question of culture, though important, must follow resolution of the strategy question.”
  • The answer to question 1 is, “To keep my job will require me to substantially divest or downsize half of the company in the next twelve months. After that’s done, we’ll define a strategy and build the culture that can support it. Until then, it is a distraction and stranded investment of organizational time and attention.”

Two Caveats

Having acknowledged that not every organization needs a robust culture change process, I would add two important qualifications to that assertion before going on to discuss in more depth when culture change is critical versus desirable.
The first of these qualifications is an observation based on my many years of culture change experience. In that final “lonely at the top” decision by the CEO about how important is culture at this time and place, it has been my observation that a “fatalistic” filter often colors the answer to this question of whether culture change is a high or low priority. In the language of “decision error,” the probability of a “false negative” decision error (“The culture is strong, healthy, and well-aligned with the strategy, and therefore needs no attention”) is much higher than the probability of the “false positive” decision error in which inappropriate or excessive attention is placed on shaping the culture relative to other priorities.
The reasons for this will vary with the particular CEO and circumstance but among common misconceptions about organizational culture, a tendency toward the “irrelevant,” “fatalist,” and “complexity” view is far more common than a proactive view based on a previous sense of mastery and success in shaping a culture.
The second qualification to the statement that not every organization requires a major culture change focus is that even the perfectly aligned strategy and culture is a delicate and temporary balance that requires some shaping and direction by the CEO and leadership to maintain. In what I will define, just ahead, as the “green” condition, there may indeed not be an urgent need for enterprise-level, public attention to be placed on changing or shaping the culture, but there will always be a need for some continuing attention to the culture, even if only a relatively modest investment.

Where Do You Stand When Trying to “Move the Earth” with Your Lever?

Keeping in mind our two caveats—first, that CEOs err on the side of underestimating the importance and feasibility of shaping culture and second, that there is never a justification for complete inattention to organizational culture—we move now to consider how the CEO or top leader can best determine actions going forward and answer question 3 above: “Do I have the right organizational culture to execute my strategy? If, not, how urgent a priority does that need to be?”
A useful analogy comes to mind in Archimedes’ famous claim: “Give me a lever and a place to stand, and I will move the earth.” If the “earth” is organizational culture, and the “lever” is the culture change process, the question before us is where to “stand.” A key piece of the answer to that question lies in the CEO’s a priori beliefs about organizational culture, that is, what the CEO’s basic assumptions are about what organizational culture is and how or whether it can be influenced. In Chapter 2 I argued that organizational culture is absolutely susceptible to influence by a leader with the right set of understanding and tools. Though somewhat “invisible” in the question of “where to stand,” accepting the malleability of organizational culture is quite important for obvious reasons. If the CEO comes to the question with an unconscious bias that culture is “fatalistic” or “irrele...

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