“Unfortunately, telling people what the right thing to do is does not work. Prescribing the right action does not
change behaviors. What drives behaviors is the context that we think inside of: the assumptions, beliefs and presuppositions
that form the nonphysical setting. To cause any meaningful change, to invent and implement a powerful culture, that
has to get revealed and unhooked.” —SHIDEH SEDGH BINA, INSIGNIAM FOUNDING PARTNER AND
EDITOR IN CHIEF, INSIGNIAM QUARTERLY
Over 30 years ago, Insigniam pioneered the field of organizational transformation. Today, executives in large, complex organizations use Insigniam’s consulting services to generate breakthroughs in their critical business results. Insigniam’s innovation consulting enables enterprises to identify and cross into new strategic frontiers to rapidly generate new income streams. Insigniam provides executives of the world’s largest companies with management consulting services and solutions that are unparalleled in their potency to quickly deliver on strategic imperatives and boost dramatic growth. Insigniam solutions include Enterprise Transformation, Strategy Innovation and Innovation Projects, Breakthrough Projects, Transformational Leadership and Managing Change. Offices are located in Philadelphia, Laguna Beach, London, Paris and Hong Kong. For more information, please visit www.insigniam.com.
No single topic has been more top-of-mind over the past year for CEOs around the world than organizational culture.
Finally, leaders are recognizing corporate culture for what it truly is: an essential and unavoidable determinant of company performance. It influences, shapes and distorts the perceptions, thoughts and actions of the people within the enterprise—and often makes the difference between success and failure.
Yet some organizations still have to learn this the hard way. Just ask Volkswagen, the Fédération Internationale de Football Association (FIFA) and Toshiba. In 2015, each of these enterprises was rocked by high-profile scandals that undermined customers’ goodwill and cost significant sums to repair. At the root of each of these scandals was a broken—or even toxic—corporate culture.
In February, after Moody’s downgraded its assessment of Toshiba in the wake of the company’s major accounting scandal, the Financial Times said, “The scandal exposed not only a corporate culture where employees were afraid to speak out against bosses, but also weaknesses across most of Toshiba’s businesses after the inflated figures were corrected.”
Ultimately, it is the CEO who is responsible for building and driving culture throughout the organization. And when that culture becomes a liability, it is the CEO who is held accountable. For example, in April, Amazon’s Jeff Bezos was still seemingly defending his company after a scathing 2015 New York Times article described a workplace where employees were forced out after suffering from cancer and other personal crises. In his 2016 letter to investors, Mr. Bezos wrote, “A word about corporate cultures: for better or for worse, they are enduring, stable, hard to change. They can be a source of advantage or disadvantage.... We never claim that our approach is the right one—just that it’s ours—and over the last two decades, we’ve collected a large group of like-minded people. Folks who find our approach energizing and meaningful.”
Building a sustainable culture that drives the right results is not easy. In fact, according to Insigniam’s latest Executive Sentiment Survey, two-thirds of CEOs and managing directors report that installing or leveraging the right corporate culture is either not going well or they are still trying to figure out how to make it happen.
When CEOs do get it right, however, culture can lead to unprecedented innovation, growth and performance. As Microsoft CEO Satya Nadella told USA Today, “Ultimately, what any company does when it is successful is merely a lagging indicator of its existing culture.”
So if your company is coming up short, take a careful look at whether the culture is supporting strategy. And do not be afraid to make drastic changes.
CULTURE EATS EVERYTHING FOR BREAKFAST, LUNCH AND DINNER
EXECUTIVE VICE PRESIDENT & CHIEF CONTENT OFFICERKim Caviness
EXECUTIVE VICE PRESIDENT, DESIGNDouglas Kelly
VP, EDITORIAL DIRECTORCyndee Miller
CONTENT DIRECTORJeremy Gantz
EXECUTIVE EDITORKelley Hunsberger
EDITORSBecky MaughanJulie Ortega
SENIOR ART DIRECTORHugo Espinoza
CONTRIBUTING WRITERSDonovan Burba, Sarah Fister Gale, Paul Gillin, Joseph Guinto, Novid Parsi, Rebecca Rolfes, Richard Walker
Insigniam Quarterly is a thought leadership publication committed to transforming the world of business by offering content relevant to the C-suite and their executive teams at large, complex, global enterprises.
Insigniam Quarterly is published by Imagination, 600 W. Fulton St., Suite 600, Chicago, IL 60661, (312) 887-1000, www.imaginepub.com. No part of this publication may be reproduced in any form or by any means without prior written permission of the publisher and Insigniam. Printed in the U.S.A. Magazine patents pending. For subscriptions, please visit quarterly.insigniam.com.
Insigniam and its publisher, Imagination, distribute this edito-rial magazine to share the opinions and insights of companies and their leaders on impactful global business issues. Insig-niam Quarterly’s inclusion of a company or individual does not indicate that they are a client of Insigniam. Remuneration is not provided for editorial coverage. Individuals appearing in Insigniam Quarterly have done so with direct consent, or pro-vided consent by a designated authorized agent in addition to being disclosed on the magazine’s audience and purpose.The INSIGNIAM QUARTERLY mark is a registered trademark in the United States, European Union, and other foreign countries.
COVER STORYA LIFE OF LEADERSHIPFormer U.S. Secretary of Defense Robert M. Gates shares his hard-earned wisdom on organizational performance, culture change and transformational leadership.By Joseph Guinto
Q&A SCALING UP SUSTAINABLE CULTURE CHANGEDramatic culture change is possible. Stericycle Chief Culture Officer Paul Spiegelman describes how he has pushed far-reaching changes at a large, diversified health care organization.By Rebecca Rolfes
FAST TRACK TO PERFORMANCE: CULTURAL TRANSFORMATION Implementing a company-wide culture change is easier said than done.By Paul Gillin
SPECIAL SECTION LEADING FOR A CORPORATE CULTURE OF DESIGN THINKINGTo gain competitive advantage, companies should embed design thinking into their corporate cultures. Three Insigniam partners explain how. By Nathan Owen Rosenberg Sr., Marie-Caroline Chauvet and Jon Kleinman
INSIGNIAM’S ANNUAL EXECUTIVE SENTIMENT SURVEYWhat keeps executives up at night? From corporate culture to customer experience, the answers are in the results of our latest survey.By Shideh Sedgh Bina, Nathan Owen
he discovery last year that Volkswagen had installed “defeat devices” on more than 11 million vehicles to skew emissions results cast a harsh spotlight on the German firm’s corporate culture, where subordinates were reluctant—at best—to admit failure or contradict superiors. In fact, German newsmagazine Der Spiegel famously called Volkswagen “North Korea without the labor camps.”
Questions remain over the extent to which Volkswagen’s top executives were aware of the emission- test cheating, but there is little doubt that the cutthroat culture made gaming the
system seem like the lesser of two evils. Former CEO Martin Winterkorn was known for openly berating employees; his predecessor, Ferdinand Piëch, wrote in his memoir, “My need for harmony is limited.”
To repair the dent in the company’s profit margin post-scandal, Volkswagen is shifting gears to foster a new kind of culture. New CEO Matthias Müller has said he will decentralize decision-making and give regional brands—such as Czech carmaker Škoda—a more prominent voice. A new North American group will oversee operations in the United States, where Volkswagen has seen its market share steadily decline.
Mr. Müller has also demonstrated his commitment to change in the C-suite and the boardroom. So far he has cut three management board positions and replaced more than a dozen top executives, including the CEOs of Volkswagen’s Škoda, SEAT and Lamborghini divisions. New executives are granted more autonomy than their predecessors: They’re encouraged to “follow their instincts, and are not merely guided by the possible consequences of impending failure,” Mr. Müller said in a December 2015 press release.
“The difference is like night and day,” Andreas Renschler, the board member running Volkswagen’s truck business, told The Wall Street Journal. “We all realize that the crisis gives us a huge opportunity to change the company.”
T
THE TICKER
NEW CULTURE WANTED
“The difference is like night and day. We all realize that the crisis gives us a huge opportunity to change the company.” —Andreas Renschler, board member, Volkswagen
11 MILLIONThe estimated number of cars in Europe and the United States that were outfitted with software to cheat emissions tests
¤16.2 BILLION (US$18.2 billion): The amount Volkswagen has agreed to pay for the emissions cheating scandal—more than double the amount the company originally estimated
¤5.5 BILLION (US$6.2 billion): The company’s net loss for 2015
Creating an organizational culture that drives results is not just about making people feel good. Leadership consultancy KRW International found that CEOs who got high marks for character from their employees outperformed their low-scoring counterparts by nearly five times on return on assets.
The KRW survey identified four characteristics that separate
high-performing “virtuoso” CEOs from the less popular and lower-performing “self-focused” CEOs. Employees graded their executives on a scale of 1 to 100 (see sidebar, “4 Dimensions of Leadership”).
According to Harvard Business Review, employees reported that virtuoso leaders “frequently engaged in behaviors that reveal strong character—for instance,
standing up for what’s right, expressing concern for the common good, letting go of mistakes (their own and others’) and showing empathy.” Self-focused CEOs, in turn, were described as “warping the truth for personal gain and caring mostly about themselves and their own financial security, no matter the cost to others.”
CLEANING UP THE GAMELast year will likely go down as the worst in the 112-year history of the Fédération Internationale de Football Association (FIFA), the sport’s global governing body.
Not surprisingly, the 2015 scandal has many—including employees, players and fans—calling for change. A reform committee put forth a number of new principles aimed at transforming the organization’s culture, including humility, candor and responsibility. In February, 179 of the 207 FIFA member associations present and eligible at the organization’s Extraordinary Congress in Zurich approved them.
“We stand united in our determination to put things right, so that the focus can return to football once again,” said Issa Hayatou, acting FIFA president. “The hard work of restoring trust and improving how we work begins now. This will create a system of stronger governance and greater diversity that will give football a strong foundation on which to thrive. It will help to restore trust in our organization. And it will deter future wrongdoing.”
FIFA also elected Gianni Infantino as its new president at the Extraordinary Congress. Mr. Infantino spent seven years as general
secretary at the Union of European Football Associations, European soccer’s governing body. “We will restore the image of FIFA and the respect of FIFA. And everyone in the world will applaud us,” he said.
Australian Moya Dodd, a former player and current member of the Asian Football Confederation executive committee, led the charge to increase the number of women on FIFA’s top decision-making committee as part of the reform package. It currently has just one female voting member on its 25-person board. Now the association has committed to the “promotion of women as an explicit statutory objective of FIFA to create a more diverse decision-making environment and culture,” per the official language of the reforms.
Additional guidelines in FIFA’s new reform plan include term limits for the FIFA president as well as the members of the FIFA Council and judicial bodies, a shakeup of the governing board and other structural changes.
“It will be a very big step forward, but not the last,” Ms. Dodd told The Huffington Post. “What you’re talking about here is culture change. That takes time.”
TIME TO CHANGE“We are now one Time Inc.”
That is the message Joe Ripp, CEO of the global media company, delivered at the 2016 American Magazine Media Conference. Mr. Ripp is leading a push to reinvent the com-pany’s culture to better compete in the 21st century digital world, according to Ad Age.
One way it is doing that is decidedly old school: giving all employees “culture cards” de-tailing the company’s mission, vision, strategy and brand manifesto. The back of the card lists “expected behaviors” at the new One Time Inc., which fall into four categories to spell out TIME: teamwork, innovate, motivate and execute.
Among the expected behaviors, the card encourages employees to foster new ideas, creativity and optimism; empower others through delegation; and take ownership and accountability.
It remains to be seen whether the culture card and its declarative aspirations can power success in the brave new media world—Time
Inc.’s stock has continued a downward trend that began before the cards were distributed to employees in September.
“Unfortunately, telling people what the right thing to do is does not work,” says Shideh Sedgh Bina, Insigniam founding partner and editor in chief of Insigniam Quarterly. “Prescribing the right action does not
change behaviors. What drives behaviors is the context that we think inside of: the assumptions, beliefs and presuppositions that form the nonphysical setting. To cause any meaningful change, to invent and implement a powerful culture, that has to get revealed and unhooked.”
“The hard work of restoring trust and improving how we work begins now. This will create a system of stronger governance and greater diversity that will give football a strong foundation on which to thrive.” —Issa Hayatou, acting FIFA president
INVISIBLE AND INDISPENSABLEA recent survey of 1,400 U.S. and Canadian CEOs and CFOs reveals the importance of culture—and the challenge of building it.
CULTURE CHECK A snapshot of the influencers and effects of organizational culture.
50 of executives said culture directly influences productivity, creativity, profitability, the value of a firm and growth rates.
92 believe improving their firm's corporate culture would improve the value of the company.
78 said culture is among the top five things that make their company valuable.
But only 15%said their company’s culture is exactly where it needs to be.
0
20
40
60
80
100
READY FOR THE DIGITAL AGEA global survey of nearly 1,000 executives reveals what kind of culture a digital strategy thrives within.
46% of executives believe that in less than five years digital will have an impact on more than half their sales.
But only 21%say they already have a culture in which their digital strategy will thrive.
What are the cultural characteristics of a corporation where digital strategy is set to thrive? According to the survey, an organization must:
1. Be an open, innovative and collaborative
environment
2. Be risk-tolerant instead of risk-averse
3. Use customers to help reduce risk by involving
them in the design stages of new products
and experiences
4. Continuously consider customer
feedback when making plans
$
THE CULTURE OF BRANDINGMore and more, consumers are making buying decisions based on their perceptions of a company’s culture. That has gotten the attention of senior marketing executives. They increasingly have to create a culture that positively reflects on their brand, according to a survey of 80 senior leaders.
Sources: Forrester Research Inc., The State of Digital Business, 2015 to 2020, 2015; Duke University's Fuqua School of Business; Egon Zehnder, The Intersection of Brand and Culture, 2015
60 of marketing leaders said they claim direct responsibility for corporate culture. 21
believe their organization's culture supports their brand.
0 00 0
0 0
0 0
0 0
0 0
0 0
0 0
Note: To appear on the list of the World’s Best Multinational Workplaces, a company must first appear on a Great Place to Work national Best Workplaces list, which are compiled using the results of the Trust Index Employee Survey and the Culture Audit Management Questionnaire. Two-thirds of a company’s workplace culture assessment is based on employee comments and feedback, and the remaining third is based on the company’s policies and practices, as measured in the culture audit.
DOING SOMETHING RIGHTThese are the 25 best multinational companies to work for in the world, according to Great Place to Work's annual rankings.
Rank Company Industry Country
1 Google IT USA
2 SAS IT USA
3 W.L. Gore & Associates Manufacturing & Production USA
4 NetApp IT USA
5 Telefónica Telecommunications Spain
6 EMC IT USA
7 Microsoft IT USA
8 BBVA Financial Services & Insurance Spain
9 Monsanto Manufacturing & Production USA
10 American Express Financial Services & Insurance USA
17 Diageo Manufacturing & Production United Kingdom
18 AccorHotels Hospitality France
19 Hyatt Hotels Hospitality USA
20 Mars Manufacturing & Production USA
21 Cadence IT USA
22 Hilti Manufacturing & Production Liechtenstein
23 EY Professional Services United Kingdom
24 H&M Retail Sweden
25 Novo Nordisk Biotechnology & Pharmaceuticals Denmark
A MISSTEP AT ZAPPOS? Once celebrated as one of the best places to work, Zappos may now be experiencing some growing pains. In 2013, CEO Tony Hsieh announced the online shoe and clothing seller would build its corporate culture around the concept of holacracy: “a manager-free operating structure that is composed, in theory, of equally privileged employees working in task-specific circles, often overlapping,” according to Business Insider.
For the first time in 8 years, in 2016 Zappos did not make Fortune’s 100 Best Companies to Work For list.
18 of employees chose to leave.
But the shift has not gone so smoothly. When Zappos announced the new holacracy structure, employees were given two options: embrace it, or leave with a generous severance package.
0 0 30The company’s 2015 attrition rate—10 percentage points higher than its typical annual turnover rate
0 0
0
5
10
15
20
25
30
FINDING THE BALANCEAccording to a report by Kelly Services, 31 percent of employees worldwide are considered “free agents”: workers who choose flexible work styles over traditional employment arrangements. More than half of those free agents choose that path because of the freedom and flexibility it allows.
In order to keep top talent, organizations must make work-life balance a valued part of their culture. According to Kelly Services, the “most wanted” elements of work-life balance include:
Sources: Great Place to Work, World’s Best Multinational Workplaces 2015; Kelly Services, Work Life Design: The New Balance; Fortune and The Atlantic.
54% Flexible schedules/hours and remote work options
44% Exposure to latest technologies and top-notch equipment
37% Limitations or restrictions for working beyond designated business hours
32% Rapid pace with constant change; always something new
37% Virtual teams
17% Restrictions for email commu-nications during nights, weekends and vacations
INVISIBLE AND INDISPENSABLEA recent survey of 1,400 U.S. and Canadian CEOs and CFOs reveals the importance of culture—and the challenge of building it.
CULTURE CHECK A snapshot of the influencers and effects of organizational culture.
50 of executives said culture directly influences productivity, creativity, profitability, the value of a firm and growth rates.
92 believe improving their firm's corporate culture would improve the value of the company.
78 said culture is among the top five things that make their company valuable.
But only 15%said their company’s culture is exactly where it needs to be.
0
20
40
60
80
100
READY FOR THE DIGITAL AGEA global survey of nearly 1,000 executives reveals what kind of culture a digital strategy thrives within.
46% of executives believe that in less than five years digital will have an impact on more than half their sales.
But only 21%say they already have a culture in which their digital strategy will thrive.
What are the cultural characteristics of a corporation where digital strategy is set to thrive? According to the survey, an organization must:
1. Be an open, innovative and collaborative
environment
2. Be risk-tolerant instead of risk-averse
3. Use customers to help reduce risk by involving
them in the design stages of new products
and experiences
4. Continuously consider customer
feedback when making plans
$
THE CULTURE OF BRANDINGMore and more, consumers are making buying decisions based on their perceptions of a company’s culture. That has gotten the attention of senior marketing executives. They increasingly have to create a culture that positively reflects on their brand, according to a survey of 80 senior leaders.
Sources: Forrester Research Inc., The State of Digital Business, 2015 to 2020, 2015; Duke University's Fuqua School of Business; Egon Zehnder, The Intersection of Brand and Culture, 2015
60 of marketing leaders said they claim direct responsibility for corporate culture. 21
believe their organization's culture supports their brand.
0 00 0
0 0
0 0
0 0
0 0
0 0
0 0
Note: To appear on the list of the World’s Best Multinational Workplaces, a company must first appear on a Great Place to Work national Best Workplaces list, which are compiled using the results of the Trust Index Employee Survey and the Culture Audit Management Questionnaire. Two-thirds of a company’s workplace culture assessment is based on employee comments and feedback, and the remaining third is based on the company’s policies and practices, as measured in the culture audit.
DOING SOMETHING RIGHTThese are the 25 best multinational companies to work for in the world, according to Great Place to Work's annual rankings.
Rank Company Industry Country
1 Google IT USA
2 SAS IT USA
3 W.L. Gore & Associates Manufacturing & Production USA
4 NetApp IT USA
5 Telefónica Telecommunications Spain
6 EMC IT USA
7 Microsoft IT USA
8 BBVA Financial Services & Insurance Spain
9 Monsanto Manufacturing & Production USA
10 American Express Financial Services & Insurance USA
17 Diageo Manufacturing & Production United Kingdom
18 AccorHotels Hospitality France
19 Hyatt Hotels Hospitality USA
20 Mars Manufacturing & Production USA
21 Cadence IT USA
22 Hilti Manufacturing & Production Liechtenstein
23 EY Professional Services United Kingdom
24 H&M Retail Sweden
25 Novo Nordisk Biotechnology & Pharmaceuticals Denmark
A MISSTEP AT ZAPPOS? Once celebrated as one of the best places to work, Zappos may now be experiencing some growing pains. In 2013, CEO Tony Hsieh announced the online shoe and clothing seller would build its corporate culture around the concept of holacracy: “a manager-free operating structure that is composed, in theory, of equally privileged employees working in task-specific circles, often overlapping,” according to Business Insider.
For the first time in 8 years, in 2016 Zappos did not make Fortune’s 100 Best Companies to Work For list.
18 of employees chose to leave.
But the shift has not gone so smoothly. When Zappos announced the new holacracy structure, employees were given two options: embrace it, or leave with a generous severance package.
0 0 30The company’s 2015 attrition rate—10 percentage points higher than its typical annual turnover rate
0 0
0
5
10
15
20
25
30
FINDING THE BALANCEAccording to a report by Kelly Services, 31 percent of employees worldwide are considered “free agents”: workers who choose flexible work styles over traditional employment arrangements. More than half of those free agents choose that path because of the freedom and flexibility it allows.
In order to keep top talent, organizations must make work-life balance a valued part of their culture. According to Kelly Services, the “most wanted” elements of work-life balance include:
Sources: Great Place to Work, World’s Best Multinational Workplaces 2015; Kelly Services, Work Life Design: The New Balance; Fortune and The Atlantic.
54% Flexible schedules/hours and remote work options
44% Exposure to latest technologies and top-notch equipment
37% Limitations or restrictions for working beyond designated business hours
32% Rapid pace with constant change; always something new
37% Virtual teams
17% Restrictions for email commu-nications during nights, weekends and vacations
INVISIBLE AND INDISPENSABLEA recent survey of 1,400 U.S. and Canadian CEOs and CFOs reveals the importance of culture—and the challenge of building it.
CULTURE CHECK A snapshot of the influencers and effects of organizational culture.
50 of executives said culture directly influences productivity, creativity, profitability, the value of a firm and growth rates.
92 believe improving their firm's corporate culture would improve the value of the company.
78 said culture is among the top five things that make their company valuable.
But only 15%said their company’s culture is exactly where it needs to be.
0
20
40
60
80
100
READY FOR THE DIGITAL AGEA global survey of nearly 1,000 executives reveals what kind of culture a digital strategy thrives within.
46% of executives believe that in less than five years digital will have an impact on more than half their sales.
But only 21%say they already have a culture in which their digital strategy will thrive.
What are the cultural characteristics of a corporation where digital strategy is set to thrive? According to the survey, an organization must:
1. Be an open, innovative and collaborative
environment
2. Be risk-tolerant instead of risk-averse
3. Use customers to help reduce risk by involving
them in the design stages of new products
and experiences
4. Continuously consider customer
feedback when making plans
$
THE CULTURE OF BRANDINGMore and more, consumers are making buying decisions based on their perceptions of a company’s culture. That has gotten the attention of senior marketing executives. They increasingly have to create a culture that positively reflects on their brand, according to a survey of 80 senior leaders.
Sources: Forrester Research Inc., The State of Digital Business, 2015 to 2020, 2015; Duke University's Fuqua School of Business; Egon Zehnder, The Intersection of Brand and Culture, 2015
60 of marketing leaders said they claim direct responsibility for corporate culture. 21
believe their organization's culture supports their brand.
0 00 0
0 0
0 0
0 0
0 0
0 0
0 0
Note: To appear on the list of the World’s Best Multinational Workplaces, a company must first appear on a Great Place to Work national Best Workplaces list, which are compiled using the results of the Trust Index Employee Survey and the Culture Audit Management Questionnaire. Two-thirds of a company’s workplace culture assessment is based on employee comments and feedback, and the remaining third is based on the company’s policies and practices, as measured in the culture audit.
DOING SOMETHING RIGHTThese are the 25 best multinational companies to work for in the world, according to Great Place to Work's annual rankings.
Rank Company Industry Country
1 Google IT USA
2 SAS IT USA
3 W.L. Gore & Associates Manufacturing & Production USA
4 NetApp IT USA
5 Telefónica Telecommunications Spain
6 EMC IT USA
7 Microsoft IT USA
8 BBVA Financial Services & Insurance Spain
9 Monsanto Manufacturing & Production USA
10 American Express Financial Services & Insurance USA
17 Diageo Manufacturing & Production United Kingdom
18 AccorHotels Hospitality France
19 Hyatt Hotels Hospitality USA
20 Mars Manufacturing & Production USA
21 Cadence IT USA
22 Hilti Manufacturing & Production Liechtenstein
23 EY Professional Services United Kingdom
24 H&M Retail Sweden
25 Novo Nordisk Biotechnology & Pharmaceuticals Denmark
A MISSTEP AT ZAPPOS? Once celebrated as one of the best places to work, Zappos may now be experiencing some growing pains. In 2013, CEO Tony Hsieh announced the online shoe and clothing seller would build its corporate culture around the concept of holacracy: “a manager-free operating structure that is composed, in theory, of equally privileged employees working in task-specific circles, often overlapping,” according to Business Insider.
For the first time in 8 years, in 2016 Zappos did not make Fortune’s 100 Best Companies to Work For list.
18 of employees chose to leave.
But the shift has not gone so smoothly. When Zappos announced the new holacracy structure, employees were given two options: embrace it, or leave with a generous severance package.
0 0 30The company’s 2015 attrition rate—10 percentage points higher than its typical annual turnover rate
0 0
0
5
10
15
20
25
30
FINDING THE BALANCEAccording to a report by Kelly Services, 31 percent of employees worldwide are considered “free agents”: workers who choose flexible work styles over traditional employment arrangements. More than half of those free agents choose that path because of the freedom and flexibility it allows.
In order to keep top talent, organizations must make work-life balance a valued part of their culture. According to Kelly Services, the “most wanted” elements of work-life balance include:
Sources: Great Place to Work, World’s Best Multinational Workplaces 2015; Kelly Services, Work Life Design: The New Balance; Fortune and The Atlantic.
54% Flexible schedules/hours and remote work options
44% Exposure to latest technologies and top-notch equipment
37% Limitations or restrictions for working beyond designated business hours
32% Rapid pace with constant change; always something new
37% Virtual teams
17% Restrictions for email commu-nications during nights, weekends and vacations
INVISIBLE AND INDISPENSABLEA recent survey of 1,400 U.S. and Canadian CEOs and CFOs reveals the importance of culture—and the challenge of building it.
CULTURE CHECK A snapshot of the influencers and effects of organizational culture.
50 of executives said culture directly influences productivity, creativity, profitability, the value of a firm and growth rates.
92 believe improving their firm's corporate culture would improve the value of the company.
78 said culture is among the top five things that make their company valuable.
But only 15%said their company’s culture is exactly where it needs to be.
0
20
40
60
80
100
READY FOR THE DIGITAL AGEA global survey of nearly 1,000 executives reveals what kind of culture a digital strategy thrives within.
46% of executives believe that in less than five years digital will have an impact on more than half their sales.
But only 21%say they already have a culture in which their digital strategy will thrive.
What are the cultural characteristics of a corporation where digital strategy is set to thrive? According to the survey, an organization must:
1. Be an open, innovative and collaborative
environment
2. Be risk-tolerant instead of risk-averse
3. Use customers to help reduce risk by involving
them in the design stages of new products
and experiences
4. Continuously consider customer
feedback when making plans
$
THE CULTURE OF BRANDINGMore and more, consumers are making buying decisions based on their perceptions of a company’s culture. That has gotten the attention of senior marketing executives. They increasingly have to create a culture that positively reflects on their brand, according to a survey of 80 senior leaders.
Sources: Forrester Research Inc., The State of Digital Business, 2015 to 2020, 2015; Duke University's Fuqua School of Business; Egon Zehnder, The Intersection of Brand and Culture, 2015
60 of marketing leaders said they claim direct responsibility for corporate culture. 21
believe their organization's culture supports their brand.
0 00 0
0 0
0 0
0 0
0 0
0 0
0 0
Note: To appear on the list of the World’s Best Multinational Workplaces, a company must first appear on a Great Place to Work national Best Workplaces list, which are compiled using the results of the Trust Index Employee Survey and the Culture Audit Management Questionnaire. Two-thirds of a company’s workplace culture assessment is based on employee comments and feedback, and the remaining third is based on the company’s policies and practices, as measured in the culture audit.
DOING SOMETHING RIGHTThese are the 25 best multinational companies to work for in the world, according to Great Place to Work's annual rankings.
Rank Company Industry Country
1 Google IT USA
2 SAS IT USA
3 W.L. Gore & Associates Manufacturing & Production USA
4 NetApp IT USA
5 Telefónica Telecommunications Spain
6 EMC IT USA
7 Microsoft IT USA
8 BBVA Financial Services & Insurance Spain
9 Monsanto Manufacturing & Production USA
10 American Express Financial Services & Insurance USA
17 Diageo Manufacturing & Production United Kingdom
18 AccorHotels Hospitality France
19 Hyatt Hotels Hospitality USA
20 Mars Manufacturing & Production USA
21 Cadence IT USA
22 Hilti Manufacturing & Production Liechtenstein
23 EY Professional Services United Kingdom
24 H&M Retail Sweden
25 Novo Nordisk Biotechnology & Pharmaceuticals Denmark
A MISSTEP AT ZAPPOS? Once celebrated as one of the best places to work, Zappos may now be experiencing some growing pains. In 2013, CEO Tony Hsieh announced the online shoe and clothing seller would build its corporate culture around the concept of holacracy: “a manager-free operating structure that is composed, in theory, of equally privileged employees working in task-specific circles, often overlapping,” according to Business Insider.
For the first time in 8 years, in 2016 Zappos did not make Fortune’s 100 Best Companies to Work For list.
18 of employees chose to leave.
But the shift has not gone so smoothly. When Zappos announced the new holacracy structure, employees were given two options: embrace it, or leave with a generous severance package.
0 0 30The company’s 2015 attrition rate—10 percentage points higher than its typical annual turnover rate
0 0
0
5
10
15
20
25
30
FINDING THE BALANCEAccording to a report by Kelly Services, 31 percent of employees worldwide are considered “free agents”: workers who choose flexible work styles over traditional employment arrangements. More than half of those free agents choose that path because of the freedom and flexibility it allows.
In order to keep top talent, organizations must make work-life balance a valued part of their culture. According to Kelly Services, the “most wanted” elements of work-life balance include:
Sources: Great Place to Work, World’s Best Multinational Workplaces 2015; Kelly Services, Work Life Design: The New Balance; Fortune and The Atlantic.
54% Flexible schedules/hours and remote work options
44% Exposure to latest technologies and top-notch equipment
37% Limitations or restrictions for working beyond designated business hours
32% Rapid pace with constant change; always something new
37% Virtual teams
17% Restrictions for email commu-nications during nights, weekends and vacations
CREATING CULTUREA roundup of books, websites, videos and other resources from and for the C-suite.
Joy, Inc.: How We Built a Workplace People Love by Richard Sheridan. The Penguin Group, 2013.This is a book about falling in love. Richard Sheridan, CEO of software design firm Menlo Innovations, fell in love with software as “the ultimate sculpting material” at age 13, and the love affair continued throughout his computer science and engineering classes at the University of Michigan. But after moving up the ranks in the workforce, his passion for software became strained.
The way things were done in the workplace was so soul-destroying that he decided he either had to change it or divorce his one true love. “The software industry, after all, defined the term ‘death march’ in a business context: programmers pulling all-nighters, bringing sleeping bags to work, jettisoning time with loved ones, canceling vacations,” Mr. Sheridan recalls in his book. “These death marches often lead to the saddest story of all: projects cancelled before they ever see the light of day.”
That is when Mr. Sheridan decided to start his personal and professional “journey to joy.” At Menlo Innovations, he has built an organizational culture that creates trust, accountability and results through key tactics like removing “manufactured fear” from the workplace and implementing structure without bureaucracy.
“[T]hese get you to joy,” he writes. The love affair can live on.
At Menlo Innovations, Richard Sheridan has built an organizational culture that creates trust, accountability and results.
Uncontainable: How Passion, Commitment, and Conscious Capitalism Built a Business Where Everyone Thrives by Kip Tindell. Grand Central Publishing, 2014. If you have ever shopped at U.S.-based retailer The Container Store, you may have asked yourself: Why is everyone who works here so darned happy to be selling organization materials and empty boxes? Kip Tindell, the retailer’s CEO, explains that the store’s contagiously positive culture starts with hiring.
He believes that when it comes to employee acquisition, 1=3: One great person equals the
productivity of three good ones at a minimum. So, if the company can find those great people, it can afford to pay them 50 to 100 times the industry average.
The approach seems to be working: The Container Store has made Fortune’s list of top 100 companies to work for during the past 16 years, including 2015.
Mr. Tindell helps ensure the positive culture feeds into customer service by training employees on three principles—and you do not have to be in sales to use them:
1. I believe this customer needs and wants my help.2. I know I am capable of helping them.3. I want to do everything I can to help them today.
The Circle by Dave Eggers. Knopf, 2013.
The fictional company in Dave Eggers’ novel would make a perfect profile in a business magazine about building an outstanding corporate culture. If you work for the Circle—a tech company that has subsumed Facebook, Twitter and all the other big tech companies around today, according to Mr. Eggers—you get fantastic benefits and perks far beyond a fully funded 401(k) and a parking spot. There is free education, creativity on steroids and the chance to be one of the
coolest of cool kids. Best of all, as far as the company is concerned, the employees work all the time. Literally, all the time.
The Circle’s goal is to know everything, and its corporate culture allows it to creep insidiously into every aspect of its employees’ and customers’ lives. The book proves that culture is not about perks, but about how people think and act. This company is creating the future and we are helping them do it. You OK with that?
HOW TO RUN A COMPANY WITH (ALMOST) NO RULESIn this TED talk, Ricardo Semler, CEO of Brazil-based Semco Partners, describes how his organization’s culture is based on complete transparency, autonomy and a democratic structure. The goal is to organize for what he calls “an age of wisdom.” It is a structure that encourages employees to cut their workweek short if they meet their goals early in the week, does not track where or when they are working and allows the cleaning crew to vote on the board.
Mr. Semler’s approach to culture does not end with where he works, however. He also discusses how he extends these ideas to his personal life and even to some of the schools in Brazil.
Ricardo Semler, CEO, Semco Partners
The book proves that culture is not about perks, but about how people think and act.
staff turnover is] under about 8 percent, you have a very good company culture. If you’re in the 8 to 12 percent range, you’ve got a good culture. If you’re in the 15 to 20 percent turnover range, you’ve got something wrong.... [G]enerally something is not right if the turnover is that high.”
—David Ossip, CEO of Ceridian
“Too many Asian CEOs lock themselves in their offices. I would rather have 17,000 brains working for me than 10 guys telling me what is going on.”
—Tony Fernandes, CEO of AirAsia
“A company that retains the loyalty of its employees solely because of compensation is a company that gambles with its institutional culture.”
—Jes Staley, CEO of Barclays
“The way I think about culture is that modern humans have radically changed the way that they work and the way that they live. Companies need to change the way they manage and lead to match the way that modern humans actually work and live.”
—Brian Halligan, CEO of HubSpot
“One of my fears is being this big, slow, constipated, bureaucratic company that’s happy with its success.”
Chipotle predicts it will open between 220 and 235 new restaurants in 2016.
The last quarter of 2015 was the most challenging in Mexican restaurant chain Chipotle’s history, according to the com-pany’s founder, chair and co-CEO, Steve Ells. And who would argue with him? The company suffered several hits after two E. coli breakouts were discovered in its restaurants, including a federal crim-inal probe into its food safety practices launched earlier this year.
To reverse course, Chipotle has announced a cultural transformation around food safety. Among its proposed new practices: high-resolution DNA-
based testing of ingredients before they are shipped to Chipotle locations, changes to how some items are washed and new internal training.
“[B]y staying true to our food culture and unique people culture, and layering on our rigorous food safety program, we are confident that we are now in a position to aggressively welcome customers into our restaurants and restore customer confidence in the things that make Chipotle great,” co-CEO Monty Moran said in a February press release.
PRESCRIPTION FOR SUCCESSTo bring a major new drug to market as quickly as possible, biotech firm Ardea Biosciences relied on its entrepreneurial culture as much as its expertise. By Novid Parsi
hen James Mackay became president and COO of biotech firm Ardea Biosciences in 2013, he immediately recognized the potential lying within the company’s culture.
“I saw an energized environment that allowed things to move more rapidly
than in a big company,” he says. Dr. Mackay also saw the opportunity to
secure a big win for San Diego-based Ardea by capitalizing on its subject matter expertise—specifically its focus on drugs that treat gout, an inflammatory arthritis affecting more than 16 million people worldwide. A new approach to treating gout had not come to market in over half a century, creating a significant market gap with an underserved patient group. So Dr. Mackay issued a companywide challenge: Submit a new gout drug to the U.S. and European regulatory agencies in far less time than large pharma companies typically take.
The period between the last clinical visit of a patient during a drug trial and the
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Quick HitsThe Challenge: Address an underserved and neglected medical need by enhancing Ardea Biosciences’ company culture and significantly shortening drug development timelines.
The Plan: Empower the entire company to feel responsible and accountable for the success of the drug development, submission and approval process.
The Execution: Maintain Ardea’s structure and culture while continually challenging staff to question how long a given task should take. Create an open environment in which anyone can safely flag potential delays.
The Result: The Ardea team submitted its gout drug to U.S. and European regulatory agencies in roughly half the time the process typically takes.
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BLOOD, SWEAT & TEARS
submission of the drug to regulatory bodies normally ranges from 250 days to a year. Dr. Mackay challenged the team to cut that time down as much as possible, even though it would be the company’s first time conducting a regulatory submission.
A SHARED SENSE OF PURPOSEDr. Mackay was confident the Ardea team could meet the bold challenge for two rea-sons: The company’s culture would support it, and the staff was united in a mission to improve the treatment of gout. “Gout is prob-ably one of the most misunderstood and ne-glected diseases we have,” he says. “It has this stigma of being a disease that is the fault of the patient, a disease of excess.” Yet while diet does contribute to the disease, a genetic defect leads to the kidneys’ inability to excrete uric acid, causing buildup of uric acid crystals and painful inflammation of the joints. Whereas traditional gout medication inhibits the pro-duction of uric acid, Ardea’s new drug would increase the kidneys’ excretion of uric acid.
Dr. Mackay knew that Ardea’s shared sense of purpose led to a high job-satisfaction rate.
That was something he wanted to hold onto even as he increased employee count by 70 percent. “They really enjoy working here, and they are really passionate about helping patients,” Dr. Mackay says. “That passion gives them a focus to drive the project forward as rapidly as possible, because they know that every day they take developing the drug is another day the patients don’t have access to it.”
To support the effort, Dr. Mackay worked to retain Ardea’s entrepreneurial culture, while making some tweaks to boost ROI. This meant introducing two key changes. First, he continually asked the staff to question how long a given task would take. Second, he created an open environment in which staff members felt they could raise any issue without getting blamed for it.
“I challenge hard, but I’m also very understanding if the staff comes back to me and says, ‘We can’t do it in that time frame, but we can do it in this time frame,’” Dr. Mackay says. “That’s very important in ensuring you have a project plan that’s challenging yet achievable.”
While Ardea had previously operated under a top-down leadership style in which the CEO made the decisions and the rest of the organization carried them out, Dr. Mackay knew Ardea could only get the drug submitted as speedily as possible if he empowered everyone to feel responsible and accountable. They could not wait on him to call all the shots.
“I set out to create an environment where the people who work with me can excel in what they do and have accountability for the areas they’re responsible for,” Dr. Mackay says. He knew that sense of empowerment would allow his team members to achieve more than they ever thought possible. “The culture prior to James taking the helm was a ‘sit and wait’ mentality. The majority of the
Building a PartnershipWhen global biopharmaceutical company AstraZeneca acquired biotech firm Ardea Biosciences in 2012, it could have been a simple matter of the big guy taking over—and imposing its will upon—the little guy. But James Mackay, who led the acquisition, envisioned a different path, one where the two organizations could work together to the benefit of both.
First, however, Dr. Mackay had to assure the Ardea team that acquisition did not mean a new staff. “When we arrived, everyone thought they’d get fired and we’d close the company,” says Dr. Mackay, now president and COO of Ardea. So he made a few important decisions to quell the staff’s fears. Ardea Biosciences would keep its name and its entire senior executive team, and every employee’s title would stay the same.
As he assured everyone of the company’s continuity, Dr. Mackay also introduced the idea of AstraZeneca as a friend, not a foe. “I wanted to retain Ardea’s biotech culture but also tap into the significant expertise that exists within a large pharmaceutical with a global reach, and then meld the two togeth-er to get the best of both worlds,” he says.
While Ardea was accountable for the development of the gout drug, it was free to tap AstraZeneca’s resources when it needed them. That could mean a consul-tation with an AstraZeneca expert, once or over many months. It also meant that Ardea, which did not have manufacturing capabilities, could use AstraZeneca’s manufacturing plant in Sweden.
“Large-scale manufacturing requires a significant investment, and AstraZeneca had significant capacity available in its Swedish manufacturing plant,” Dr. Mackay says. This available resource eased some of Ardea’s logistical needs, as well as some of the financial burden.
James Mackay
“What you have to do as a leader—and I’ve seen so many leaders fail to do this—is that when you lay out your vision, every single action you take and every single word you say has to be aligned with that vision.” —James Mackay, president and COO, Ardea Biosciences
employees had little or no experience with this type of submission and therefore they were ‘waiting’ to be taught or instructed,” says Jen Zimmer, a partner at Insigniam.
Dr. Mackay challenged his team to reduce project timelines by reimagining them entirely. “The team asked, ‘How much time do we need to shave off the plan?’” he recalls. “And I said to them, ‘What you need to do is tell me why we can’t submit the day after we close the trials.’”
While Dr. Mackay recognized that would be impossible, he wanted his team to stop assuming that certain tasks required specific lengths of time and instead think critically and creatively about how long any one task should take. He knew there was no magic bullet to save a big chunk of time, but small amounts of time saved from many steps would have a cumulative impact. “James constantly provided bold, inspirational leadership. He created an environment where committed action trumped experience, and innovation about how the work was done was respected. This in turn catalyzed the team focus and infused ownership of the timeline, which led to the breakthrough result,” Ms. Zimmer says.
For example, at one point the team had to check and analyze a large portion of data from the clinical trials—a process they estimated would take two weeks. “We said, ‘We’ve got a building full of scientists. Why don’t we get everybody to work on this?’” Dr. Mackay says. So for one weekend, the entire organization spent 14 hours quality-controlling the trials’ data. “We called it 14 days of work in 14 hours.”
ENCOURAGING ESCALATION That can-do, all-hands-on-deck work ethic stems partly from the no-blame environment Dr. Mackay established. “Normally the issues that cause delays to projects are issues that have been known for a long time but haven’t been made visible. And when they are made
INSIGHT
BLOOD, SWEAT & TEARS
250-365 DAYS
Standard period between the last clinical visit of a patient during a
drug trial and the submission of the drug
to regulatory bodies
159 DAYSPeriod between the last clinical visit of
the drug patient trials for Ardea’s gout
drug Zurampic and when the company
submitted it to U.S. and European
regulatory agencies
Division of LaborTo streamline the submission process for the development of Ardea Biosciences’ new gout drug—and ensure potential problems were flagged early on—Ardea President and COO James Mackay created a dual-team structure.
LEADERSHIP TEAM RESPONSIBILITIESn Take accountability for the delivery and quality of the regulatory board submissions and supporting deliverables.n Provide leadership, guidance and direction to the delivery team in the context of project objectives and critical success factors.n Support the delivery team by providing rapid issue resolution for all things related to regulatory submission, including timelines, content, approach and resources.n Own the risk and opportunity management for the submissions.
DELIVERY TEAM RESPONSIBILITIESn Take accountability for the ownership and maintenance of the submission plan, including components such as activity duration, dependencies, start and completion dates, key decisions and milestones.n Drive delivery to plan, and report progress to stakeholders.n Identify cross-functional and interdependent issues, shifts in activities, resource constraints and risks that may impact target dates and resolve conflicts.n Define actions and points of escalation as needed to leadership team for exceptions to plan.
visible, it’s too late to do anything about them,” he says.
Dr. Mackay encouraged all of his team members to come forward as soon as they detected an issue that might delay the project—even if they did not need anyone else to do anything about it. That way, team members who raised a concern did not feel immediately disempowered—or blamed—for doing so. But if they needed help, they got it.
“In many organizations, when something’s escalated, people feel like they’ll just get in trouble, and often leaders act in a way that reinforces that,” Dr. Mackay says. “I encourage people to use escalation as a positive behavior, not a negative behavior.”
This attitude came in handy when, during Ardea’s statistical analysis of the clinical trials, staffers identified an error in a contractor’s programming that threatened to throw off a large amount of the data. “My guys were throwing their hands in the air, saying we’ll miss the submission date,” Dr. Mackay says. “This could’ve completely derailed the project.”
Rather than mirror his team members’ anxiety, Dr. Mackay calmly took action, bringing his team to meet with the contractor’s team. “If the leader doesn’t stay calm, all that does is increase the tension,” he says. “It became a very collaborative win-win, when it could’ve been a real finger-pointing situation.”
In the end, the analyses were corrected and the team stayed on track.
THE FINAL VERDICTAlong with the cultural adjustments, Dr. Mackay also implemented a structural change. Traditionally, a single team works to submit a drug. Ardea created two teams: a submission leadership team, which consisted primarily of senior executives, and a submission delivery team. The latter included members from every department of the organization, such as regulatory and clinical, and reported directly to the leadership
team (see “Division of Labor,” page 18). This integrated structure allowed each department to identify an issue in another department that could have a knock-on effect—and to take action sooner rather than later. “A problem in one area then becomes everybody’s problem to solve,” Dr. Mackay says.
The delivery and leadership teams each met weekly and, as the project progressed, daily. The leadership’s standing meetings could last from five minutes to five hours, depending on the problems at hand, but nothing was ever left to the next day. “The innovative team structure was a key piece in the project’s success. At Ardea, many of the worker bees are also the key leaders of work groups, so maximizing people’s time was critical,” Ms. Zimmer adds.
In December 2014, Ardea submitted its gout drug, Zurampic, to the U.S. and European regulatory agencies just 159 days after the last clinical visit of a patient—about half the length of time the process typically takes. A year later, the U.S. Food and Drug Administration approved the drug, followed just two months later by approval from the European Commission. The product is now being manufactured in Sweden with technical guidance from the Ardea team.
The benefits of the success spread beyond one individual drug—it was a confidence builder for the entire organization.
“This organization now believes it can take a drug to market and patients,” Dr. Mackay says. “People here got to experience something most hadn’t experienced before: getting approval for a drug and then seeing it on pharmacy shelves.”
Ardea could not have realized that success without strategic alignment—starting from its leadership. Dr. Mackay says, “What you have to do as a leader—and I’ve seen so many leaders fail to do this—is that when you lay out your vision, every single action you take and every single word you say has to be aligned with that vision.” IQ
“In many organizations, when something’s escalated, people feel like they’ll just get in trouble, and often leaders act in a way that reinforces that. I encourage people to use escalation as a positive behavior, not a negative behavior.” —James Mackay
A look at the changing roles, mindsets and makeups of boards around the world.
By Donovan Burba
ow more than at any other time in modern business history, the culture of the boardroom is evolving. Increased scrutiny in the form of stakeholder activism and government regulation is forcing shifts in three key areas: whom the board serves, its role in execution and its structure. And while it is hard to predict
exactly where these changes will lead, one thing is clear: In the end, the mindset and makeup of boards will not look the same.
WHOM DO BOARDS SERVE?Stakeholders or shareholders? For years, business leaders, academics, economists and even governments have debated which should be the primary concern of a corporation’s board of directors. But in practice, a board’s focus is often determined by where the company is located.
In the United Kingdom, Australia and the United States, for instance, companies have a long-standing tradition of adopting the shareholder model of corporate governance. The board’s primary job is straightforward: Represent shareholders’ interests by maximizing profits and setting direction. Companies in the rest of Western
Europe and many in Latin America, on the other hand, tend to build their corporate governance approaches around the stakeholder model. Boards are typically more concerned with the interests of many parties—customers, employees, creditors and the community at large, as well as shareholders.
“European boards spend a lot of time looking at the accounts in detail and looking at stakeholders as well as shareholders,” says Michel de Fabiani, vice president of the Franco-British Chamber of Commerce and Industry. Also former chairman and CEO of BP France, he serves on the boards of Valeo, Ebtrans Luxembourg, Valco and BP France.
“The personality and culture of the board to me is more important than how many independent directors it has. If there’s trust, there’s likely to be good collaboration and open communications.” —Michel de Fabiani, vice president of the Franco-British Chamber of Commerce and Industry, director at Valeo, Ebtrans Luxembourg, Valco and BP France
“Their time is more split between strategy and ongoing [operational matters] that in the United States are more in the hands of the executives.”
The pendulum seems to be swinging away from the shareholder-centric modus operandi, though—especially in the United States. Writing on The Huffington Post last year, Salesforce CEO Marc Benioff signaled why: “The business of business isn’t just about creating profits for shareholders—it’s also about improving the state of the world and driving stakeholder value.”
THROW OUT THE RUBBER STAMPIn KPMG’s September 2015 Global Boardroom
Insights, 80 percent of the 1,000 responding directors and senior leaders from around the world said that over the past two to three years their board had deepened its involvement in not just the creation of strategy, but also the monitoring of its execution, the consideration of strategic alternatives and the recalibration of strategy as needed.
Examples abound for why this change is occurring.
Take Australia-based supermarket giant Woolworths. Facing increased competition from rivals Aldi and Wesfarmers-owned Coles, then-CEO Michael Luscombe pushed Woolworths into the hardware business. Starting a hardware chain (which the company ultimately named Masters) would boost the bottom line, Mr. Luscombe said, while simultaneously striking a blow to Bunnings Warehouse, a leading hardware store chain also owned by Wesfarmers.
But the plan backfired. Instead of seeing a drop in market share, Bunnings continued to expand. In January, the company announced it would purchase U.K. home improvement chain Homebase. The same month, Woolworths announced it would close all 63 of its Masters stores. The failed chain has seen combined losses of more than AUD600 million, according to The Australian Financial Review. That includes a loss of AUD245.6 million in fiscal year 2015, according to Woolworths’ financial reports.
What went wrong? Critics say Masters suffered from poor product choices, inconvenient locations, high prices and a marketing campaign that alienated instead of attracted the tradesmen who comprise Bunnings’ core customer base. But ultimately, critics point to the Woolworths board of directors’ insufficient engagement with monitoring execution and its inability or unwillingness
France Germany Italy South Spain Switzerland United United Africa Kingdom States
Number of boards in sample 40 30 100 79 95 20 150 486
Supervisory or two-tier board/ Unitary board of directors 4/36 30/0 3/97 0/79 0/95 20/0 1/149 0/486
Combined chairman and CEO 62.5% 0% 22% 5.1% 57% 0% 1.3% 52%
Average number of members on a board 14.3 16.2 11.9 12.5 10.9 10.3 10.3 10.8
Percentage of independent board members 58% 60% 49.2% 58.1% 39% 88.3% 60.5% 84%
to change course when the initiative showed signs of failing. “When you look at who’s accountable, the board has ultimate responsibility for the management, direction and performance of a business,” Alex Malley, CEO of CPA Australia, wrote in The Australian Financial Review.
With the board’s backing, for nearly five years the company poured money into a strategic error. “At what stage was there enough light shone on the strategy by the board when there were doubts about it?” fund manager John Sevior asked in another Financial Review article. “... [A]t what point do you put your hand up and say we’ve got this wrong?”
In the end, both the CEO and board chairman who oversaw the failed Masters gambit resigned. Several other board members who served during that time followed
suit, making way for the new chairman to reinvigorate the board with fresh blood.
Major missteps are not the only factor driving boards’ increased role in strategy and execution, however. Greater shareholder engagement is also playing a part, says Walt Rakowich, former CEO of Prologis, current lead independent director of Host Hotels & Resorts and chairman of the audit committee at Iron Mountain. “It’s nothing for an investor to call a board member today. That never happened in the past,” he says. “I see a lot more involvement. The world is an open book. That’s the power of the Internet and social media. Boards have faced far more scrutiny over the last couple of decades. They’re not there to rubber stamp. They’re truly there to govern and provide advice to the company.”
It is a change that is also reflected in how
INSIGHT
FROM THE BOARDROOM
Source: Spencer Stuart, 2015 International Comparison Chart. All data is taken from individual country board indexes published by Spencer Stuart in 2015.
“Boards have faced far more scrutiny over the last couple of decades. They’re not there to rubber stamp. They’re truly there to govern and provide advice to the company.” —Walt Rakowich, lead independent director of Host Hotels & Resorts and chairman of the audit committee at Iron Mountain
board members, at least in the United States, prepare for meetings. “Seventeen years ago, when I was in my first board meeting as CFO of a large public company, I would say maybe half the board members didn’t really read the materials before the meeting,” Mr. Rakowich says. “Now I prepare at least eight to 10 hours before all board sessions.”
Mr. Rakowich notes that board meeting books when he started were maybe 30 pages long; now they are the size of a major-metropolitan-area phone book. That indicates both management and the board are putting a lot more time into preparing for each meeting.
That preparation, along with committee meetings, has increased collaboration between board members and management, particularly around strategy, capital allocation, risk and talent management, and communications, he says. “I think there is a lot more collaborative discussion between management and the board surrounding these objectives than there has been in the past. That change is certainly better for everyone.”
INDEPENDENCE WANTEDBoard independence is continuing to garner more and more attention around the globe as shareholders call for boards to fight for their interests above the CEO’s, and as governments look for more corporate transparency and accountability.
One response to this pressure has been the addition of more independent directors to boards. According to a report from EY, as of 2014 more than 90 percent of Fortune 100 boards had some form of independent board leadership. In many countries, the push for more independence is being led by government regulation. Last year, for example, Japan’s government established a Corporate Governance Code for all companies listed on the Tokyo Stock
Exchange, mandating that they add at least one independent director to their boards.
But the prevalence of such independent board members varies by country. Public boards in the United States differ from those in Europe or Asia in that the U.S. boards have almost all independent directors, with only one or two insiders, according to Robert Pozen, senior lecturer at MIT Sloan School of Management, independent director of Medtronic and Nielsen, and chairman emeritus of MFS Investment Management.
That said, boards in some European countries are far more likely to be headed by an independent chairman, Dr. Pozen says. In the United States, the CEO is frequently also chair of the board. The trend is starting to shift slightly, with EY reporting that 41 percent of Fortune 100 companies have separated the roles of chair and CEO. But even in those cases, only 27 percent of the chairs are independent.
At the same time, independence in theory does not mean independence in practice, Dr. Pozen says. “Some people would argue that having an independent chairman lets the board hold the CEO more accountable,” he says. “Other people would argue that the lead independent director could play the same role. I think it’s a functional matter. It depends on what roles they actually play and the personality of the people.”
In the end, there is no ultimate right or wrong for how boards should be built. “The personality and culture of the board to me is more important than how many independent directors it has,” Mr. de Fabiani says. “If there’s trust, there’s likely to be good collaboration and open communications. That’s not to say they have to be collegial. There can be a lot of harsh decisions, but if they trust each other to make the right decisions, a lot can get done.” IQ
before he led a massive reform of Texas A&M University and before he became what some have called a “revolutionary leader” of the U.S. Department of Defense (DoD), Robert Gates was a leader in Boy Scout Troop 522 in his hometown of Wichita, Kansas.
That was in 1957, when Dr. Gates was just 13. His challenge: Find a way to get other kids to follow him when they faced no real conse-quences if they chose not to. “I’ve never for-gotten it,” says Dr. Gates, now 72. “Nothing develops or tests leadership skills like trying to get people to do what you ask when they don’t have to.”
This early lesson in leadership foreshad-owed a central theme of Dr. Gates’ long and celebrated career in public service. Whether he was helming the Pentagon when the United States was fighting two wars or becoming an unlikely advocate for gay rights, Dr. Gates has never been afraid to take uncharted paths—and persuade others to join him. Insigniam founding partner Nathan Owen Rosenberg Sr., who serves on the executive board of the Boy Scouts of America with Dr. Gates, observed, “Bob has a strong moral compass and sense of what will work. Once he sees the right direc-tion, he has an uncanny ability to have others see that direction as the right one and to want to take the journey with him.”
For Dr. Gates, leadership and enterprise transformation go hand in hand. When inter-viewing to become president of Texas A&M University, he told the school’s board of re-gents: “I am an agent of change. If you don’t want change, you don’t want me.”
In his new book, A Passion for Leadership: Lessons on Change and Reform from Fifty Years of Public Service, Dr. Gates contends true leaders must engage in a continuous battle for reform and transformation of their orga-nizations. And that is true whether they are in the public sector, where Dr. Gates spent most of his career, or in the private sector, where he has served on 10 corporate boards, including Starbucks.
“The leadership challenges are very similar in the public and private sectors when you’re aiming at transformational change,” Dr. Gates says. “People, for the most part, are comfort-able with the status quo. That affects every organization. And any time you have a leader who believes change is necessary, that leader is going to have to deal with tremendous inertia, with tremendous resistance to change.”
Few leaders know about overcoming insti-tutional inertia better than Dr. Gates. But, de-spite the headwinds he often faced, Dr. Gates prevailed—winning rave reviews in the pro-cess. The New Yorker dubbed him “one of the shrewdest public servants of his generation.” And staffers in President Barack Obama’s White House, impressed by Dr. Gates’ pre-scient thinking and adroit leadership skills, nicknamed him “Yoda.”
Building Support Change does not happen in a bubble. To build support for massive transformation, Dr. Gates says leaders must show respect for subordi-nates by making them part of the process.
For Dr. Gates, lasting change only occurs after everyone’s voice has been heard. “You have to open the process of change to input,” he says. “Let people have a part. Give them a chance to air their views and opinions. Lead-ers have to step up and make tough decisions about change, and some people are going to
be unhappy. But that’s why the process is so important. Even people who are unhappy will at least feel they were respected enough to be consulted. They will have had a chance to make their case. That mitigates resistance to change.” No matter the role, Dr. Gates made a concerted effort to reach out to all employees.
When he was heading the CIA’s analysis division in the 1980s, for instance, Dr. Gates visited with the analysts themselves at weekly brown-bag lunches. As secretary of defense, he would make trips to the Pentagon’s mail-rooms and loading docks. The visits came as a surprise to staffers of these often-overlooked areas; he was told no previous defense secre-tary had ever visited them. And, of course, he went out to the battlefields.
“The people on the front lines probably have a better idea of what’s working and what’s not than anyone else,” Dr. Gates says. “They’re face to face with the customer or with the citizen or with the enemy.”
“When I would visit the front lines in Af-ghanistan, I would have breakfast or lunch with young enlisted troops or junior officers,” he continued. “I always learned a lot from those sessions because they knew what was and wasn’t working, down to the specific de-tails. That was unlike some of the more se-nior officers who would paint a rosier picture. And I think nothing matters more in an orga-nization than for people on the front lines to know the people at the top have their back.”
Dr. Gates’ meals with soldiers were not about idle chitchat. He would often assign a lieutenant colonel from his office to take notes during meetings with soldiers and follow up on issues raised. “That way they
would know this wasn’t just for show,” he says. “It’s important for leaders, when they do get a suggestion or concern from somebody, to not leave the person wondering whether anybody took it seriously.”
Just as leaders must be accountable for en-suring the changes they have promised will be carried out, engaging employees in a change process means making them accountable for their role in that process. “Leaders have to rec-ognize people who share their agenda and will carry it on,” he says.
“I worked on a project for Bob last year,” Mr. Rosenberg says. “He specified the outcome that he wanted with great detail including by when he wanted it. He then described how he was going to use the work product, painting a picture in words so that I fully understood his intent. That was the end of the conversation, until months later when Insigniam delivered the report. Then Bob was generous in his ap-preciation for what was delivered. His manner and ways of working inspire—not demand—excellence, having us want to fulfill his intent.”
Power of the PeopleAlong with face-to-face meetings, Dr. Gates often relied on task forces, councils and re-view groups to empower employees to be part of a change. “Basically, you need an ad hoc structure that breaks down the walls in-side an organization and allows people from one part of the organization to criticize another or to express ideas as to how to fix the organizational structure as a whole,” he says. “In every organization I’ve worked at, there were always individuals who had great ideas of how things could work better. But
“People, for the most part, are comfortable with the status quo. That affects every organization. And any time you have a leader who believes change is necessary, that leader is going to have to deal with tremendous inertia, with tremendous resistance to change.” —Robert Gates
Then-Defense Secretary Robert Gates and U.S. Vice President Joseph Biden at the National Defense University in 2010, in Washington, D.C.
there was almost never a vehicle through which they could express those ideas.”
Virtually every task force he appointed throughout his career “improved on and en-riched my ideas and often expanded the scope of the change,” Dr. Gates writes in A Passion for Leadership. It was an ad hoc review group that prompted a watershed moment in U.S. history: the repeal of the U.S. military’s “don’t ask, don’t tell” policy, which barred openly gay, lesbian and bisexual citizens from serving.
Dr. Gates, who testified before Congress in favor of the repeal and ultimately oversaw its demise as secretary of defense, convened a re-view group that gathered information crucial for effectively implementing a repeal and that helped win support for overturning the law.
“A leader has to understand why people feel a certain way if they’re going to make changes,” Dr. Gates says. “But you can’t rely on old assumptions. On ‘don’t ask, don’t tell,’ nobody had ever asked the people in uniform what they thought about the issue. Everything we had was anecdotal. And yet, it was thought that not allowing gays was a fundamental part of the [military] culture. Lo and behold, when [the review group] surveyed 400,000 ac-tive duty troops and 150,000 military spouses, much to everybody’s surprise two-thirds said [allowing gays to serve openly in the military] wouldn’t make any difference or that we’d be better for doing so.”
In 2010 the U.S. Congress voted to repeal the policy, and Dr. Gates believes the review group’s work helped change many minds. The alterna-tive was a presidential executive order, which Dr. Gates writes, “would have had a much more di-visive and disruptive result, harming those with the most at stake, including military command-
ers dealing with readiness and discipline issues and gay and lesbian troops seeking to come out in a more tolerant environment.”
As president of the Boy Scouts of America (BSA), Dr. Gates again found himself in the position of leading change for the rights of gays in the United States. In July 2015, fearing potential legal issues, according to The Atlan-tic, he led BSA’s 80-member board to repeal the ban on gay scoutmasters and volunteers. “I truly fear that any other alternative will be the end of us as a national movement,” he said at the time.
From Hard-liner to StatesmanForging these connections went a long way in winning over the skeptics.
“I know there were people who disagreed with some of my decisions,” Dr. Gates says, “particularly cutting some of the big weapons programs [at the DoD]. But because they were included, because I listened and gave them a lot of time to talk about their concerns, because I
Fight the Reorganization Instinct When Robert Gates arrived at the Pentagon for his first day of work in December 2006, he walked in alone. No team of former U.S. Central Intelligence Agency leaders came with him. He did not bring his own personal assistant. It was just Dr. Gates and his briefcase.
Dr. Gates wanted to avoid engendering bad feelings on his first day. But he also had another objective in arriving alone: speed. “We were in the middle of two wars, neither of which was going well,” he says. “So we couldn’t afford to lose a lot of time. It was important for me to communicate that I had confidence in the people who were there and that I was going to take for granted they were all able to do their jobs well—that the problem to date had been one of leadership.”
This was partly a practical decision. “It takes time to replace people, particularly at the senior level,” Dr. Gates says. “And if you’re too draconian in the changes you want to make, you can quickly deprive yourself of people who have the background and perspective you need.”
Dr. Gates thinks that too often organizations going through a transformational change process do not provide the opportunity for employees to prove themselves. He says they often assume reorganization (the process of changing titles and reporting structures) will, in and of itself, produce different results. “For a long time,” Dr. Gates says, “I’ve felt that leaders whose first instinct is to reorganize everything—to get out the organizational chart and move the boxes around before they do anything else—don’t really understand what’s wrong with the organization or how to fix it.”
“Reorganization has an immediate, negative impact on morale. If you’re going to change how people do their work, and get them doing the kind of work you want them to be focused on, it’s best not to add on to that worries about where they’ll be. If their organization is going to stay the same and their desk is going to stay the same, then they can focus on how best to change the organization.”
told them where I thought we were headed, and so on, I think—almost uniquely among de-fense secretaries—I really didn’t have anybody going around me to create problems with the media or Congress or the White House. That was very important to my success.”
But Dr. Gates learned that lesson the hard way.In 1981, at the age of 38, Dr. Gates was pro-
moted to his first senior position in the CIA. He was put in charge of the analytical side of the agency, a division with several thousand people. Within days of his appointment, Dr. Gates assembled most of those people in an auditorium to announce the changes he in-tended to make in how foreign-threat analyses would be conducted under his leadership.
“I then proceeded to tell them all what they had done wrong, where they had fallen short and how we were going to do things differently in the future,” Dr. Gates says. “I immediately antagonized everybody who worked for me, even the people who agreed with the changes I’d proposed.”
Despite the fact that many of Dr. Gates’ dic-tates were eventually implemented (and even deemed necessary), he says resentment smol-dered for a long while. “I learned a powerful lesson from that meeting, and never repeated that mistake. You can’t just parachute into the
A Man for All SectorsDr. Robert M. Gates has had a long and distinguished career in public service: He served under eight U.S. presidents, receiving numerous awards for his service. But he has taken on leadership roles in the private sector, too. He holds a doctorate in Russian and Soviet history from Georgetown University and has lectured at universities including Harvard and Yale. He has served on 10 corporate boards, including Starbucks, as well as boards of nonprofits such as the American Council on Education and the Association of Public and Land-grant Universities. A snapshot of Dr. Gates’ key roles includes: n 1966: Joins the U.S. Central Intelligence Agency (CIA).n 1967: Commissioned as a second lieutenant in the U.S. Air Force and serves as an intelligence officer at Whiteman Air Force Base in Missouri.n 1986: Named CIA deputy director under President Ronald Reagan. n 1989: Named assistant to the president and deputy national security adviser at the White House to President George H.W. Bush.n 1991: Named director of the CIA. n 2002: Becomes the 22nd president of Texas A&M University (then the seventh-largest university in the United States). n 2006: Appointed U.S. secretary of defense by President George W. Bush. Dr. Gates serves as defense secretary under President Barack Obama until mid-2011. n 2012: Assumes office as the 24th chancellor of the College of William & Mary.n 2013: Elected to the national executive board of the Boy Scouts of America (BSA) and named president-elect.n 2014: Begins his two-year term as BSA national president.
top job and say, ‘I’ll fix this, follow me.’ That’s going about it with a ‘ready, fire, aim’ attitude.”
So Dr. Gates reinvented himself over time as a leader, morphing from a “brash and some-times obnoxious young hard-liner” into a “cool- headed elder statesman,” as the New Republic once reported. But he was never a pushover.
After President-elect Obama asked Dr. Gates to remain on as secretary of defense, Dr. Gates assembled teams of analysts to conduct an extensive review of the $500 billion defense budget. The results of that analysis were laid out in Dr. Gates’ 2009 budget address. It included eliminating, scaling down or capping nearly three-dozen major programs, such as the highly touted F-22 Raptor fighter jet and the Future Com-bat Systems program. At the same time, Dr. Gates requested more money for drones and designated more funding for helicop-ters and maintenance crews, cyberdefense training and theater missile defense. These changes represented a fundamental shift in focus from preparation for the large-scale conflicts expected in the Cold War era to the “asymmetrical conflicts” against ter-rorists and insurgent groups that define the contemporary era.
Some of the changes—especially to pro-
grams like the F-22, a favorite among some Air Force leaders—sparked anger among a few members of the top brass. But that did not faze Dr. Gates. “I believe trying to achieve con-sensus on the path forward should be a very low priority,” he says. “If consensus is what you’re after, you’re never going to get signif-icant change. You’re going to get the lowest common denominator.”
Beyond the Status QuoAsk Dr. Gates what he is most proud of in all of his years of public service, and he does not hes-itate: “working to save the lives of our troops.” But even while pushing for such a worthy goal at the DoD, Dr. Gates discovered how many people are biased toward the status quo.
For instance, when he worked to halve the average time it took to fly wounded soldiers by helicopter from combat areas to field hospi-tals from two hours to one, top military advis-ers said the time reduction was not necessary because the additional costs associated with the project (more field hospitals, helicopters, crews and hospital staff ) would not necessarily save more lives. But according to Dr. Gates, all the information and numbers presented by his opponents failed to account for morale, which is why he overruled them.
Dr. Gates says this is proof that “even if the issue at hand is literally a matter of life and death, the answer is almost always that ‘things are just fine as they are.’”
Most leaders do not face issues of life and death, of course. But in a rapidly changing business environment, a growing number will have to deal with challenges that could ulti-mately prove the downfall of—or lifeline for—their company. Dr. Gates’ remarkably long and varied career is testament to the fact that no matter the organization or sector, “it is the job of a leader to push for change.” IQ
“It’s important for leaders, when they do get a suggestion or concern from somebody, to not leave the person wondering whether anybody took it seriously.” —Robert Gates
Clockwise from top left: Dr. Gates meets with graduates of Texas
A&M University at Camp Fallujah, Iraq; with President-elect Barack
Obama as he introduces members of his National Security Team in
2008; with President George W. Bush in 2009; and with members of
The pivot comes on the heels of declin-ing smartphone profits at Samsung, which is now under pressure to foster innovation and growth in new areas. So, according to The Korea Times, beginning midyear the nearly 80-year-old company is planning to move away from a top-down culture in favor of a less hierarchical, more dialogue-driven work environment that offers more training and learning opportunities.
If history is any indication, however, the Samsung executives spearheading culture change may soon encounter turbulence de-spite their best intentions. “It has been esti-mated that only about 1 in 4 efforts to change an organization’s culture are successful,” says James L. Heskett, UPS Foundation professor emeritus at Harvard Business School and au-thor of The Culture Cycle: How to Shape the Un-seen Force That Transforms Performance. Insig-niam’s latest executive sentiment survey (see page 38) similarly found that two-thirds of CEOs and managing directors either believe that installing and leveraging the right corpo-rate culture is not going well or are still trying to figure out how to do it.
So chances are that Samsung is in for a bumpy ride. According to Shideh Sedgh Bina, Insigniam founding partner and Insigniam Quarterly editor in chief, far-reaching, long-last-ing corporate culture change is possible—if managed intentionally and collaboratively. That means there must be a commitment from executives to drive change, a willingness to bat-tle the status quo, a channel for employee en-gagement and an ability to maintain that cul-ture so it stays strong and effective long after the initial transformation has taken place.
Leading ChangeFor proof that culture change is possible, look at Lenovo. A little over a decade ago, the
company was a blip on the industry’s radar, a Chinese company serving a mostly Chinese market. But all that started to change in 2005 when Lenovo acquired IBM’s personal com-puter division and began a meteoric rise.
The acquisition fast-tracked the organiza-tion to become a global player—Lenovo in-stantly moved to the No. 3 spot on the list of the world’s largest PC manufacturers. But it also created a major challenge: How does a pri-marily regional organization that spent its first 20 years operating within a culture based on Chinese values and hierarchy go global?
The answer: slowly and intentionally. For the first couple of years after the acqui-
sition, Lenovo operated as one company with two systems, according to Yolanda Conyers, vice president of global human resources and chief diversity officer for Lenovo. (Ms. Co-nyers co-authored The Lenovo Way, a book that delves deep into the organization’s massive culture change, with Gina Qiao, the compa-ny’s senior vice president of human resourc-es.) But the company was losing some of the cohesion that made it successful in China, and the usual way of doing things was not tenable.
“In the early days of the integration, it was very tough for both sides—East and West—to align,” Ms. Conyers says. “We had to have the difficult conversations about trust and inten-tions, and our leadership team had to help the company figure out a way for the very differ-ent perspectives to coexist and then eventually blend. It was a confusing, frustrating time for our leaders and our organization, and it reflect-ed in our morale and our bottom line. But quite frankly, we had no choice. We had to succeed at this integration or fail as a company. ”
To turn the tide, Ms. Conyers and the rest of the senior leadership had to build a new corporate culture that bridged Eastern and Western mores—and executives had to lead
The world’s biggest manufacturer of smartphones and memory chips is on the verge of major change. In March,
Samsung executives announced the company will transform its culture to embrace a startup mentality,
according to Reuters. It is an interesting declaration from a company whose culture has long had a reputation of being
the way. The biggest mistake in putting to-gether two firms is to assume you will some-how just add the best of each culture together.
In reality, you have to invest in deliberately constituting a new culture, Ms. Sedgh Bina says.
To set the new tone, CEO Yang Yuanqing moved his family from Beijing to North Car-olina, which became the co-headquarters for Lenovo. “The intention was to create a world-class global enterprise,” Ms. Conyers says. “Our leaders wanted nothing less than to re-construct Lenovo’s entire cultural DNA. They wanted to create a new way of thinking inside one unified Lenovo company.”
Leadership also worked to break down tradi-tional hierarchies that existed within the organi-zation. As Ms. Conyers describes in The Lenovo Way, for instance, Mr. Yang wanted to change the way long-standing employees addressed him. Previously, they would call him “Chief Executive Officer Yang,” or Yang Zong in Mandarin, but he felt this would not work for a company looking to build a culture that embraced the norms of a global workforce. So he and his senior leader-ship team spent a week meeting and greeting employees in the office lobby, introducing them-selves with their given names, not their titles.
Today Lenovo employs some 60,000 people and is the largest PC manufacturer in the world. In 2015, it jumped 55 spots on the Fortune Global 500 list to reach 231. Its now- established position as a global organization with a global culture has also helped it transition in major new lines of business, including its 2014 acquisitions of Google’s Motorola Mobility and IBM’s x86 server division. “One of the things we did with the x86 and Motorola phone business was perform a cultural survey and understand the strengths of both cultures—what we do and don’t have in common,” Ms. Conyers says. “It takes time, but we’ve done this so much that we have a
process where we sit down and talk about it and create interventions where we need to.”
“It’s necessary to have corporate culture that’s clear about what it is,” she continues. “We’ve created a culture that respects differ-ences. In some cases we may compromise or adopt a practice that we think will work best. We’re global-local.”
Banking on ChangeFaced with major disruption and evolution, companies in some industries look to cul-ture as the lever that can differentiate them in the marketplace. And hardly any industry has seen as much disruption over the past few years as banking.
Executives at the Bank of Nova Scotia (com-monly known as Scotiabank) took a hard look at this disruption and responded by re-center-ing the organization’s culture to become more customer- and performance-oriented, rather than centered on transactional efficiency.
Under the leadership of CEO Brian Porter, it was identified that all bank employees (not just those on the front lines) needed to recognize how they could put the customer first—and that meant evolving the way they do business. His goal: Simplify
Lenovo’s Steps to Cultural TransformationAmid multiple major acquisitions, Lenovo has found a way to successfully merge East and West to create a global culture that touts its diversity as a primary feature. According to Yolanda Conyers, who literally wrote the book on Lenovo’s cultural transformation, these were some of the key factors of success that the organization’s leadership still abides by today:n Adopt a “zero-mindset” mentality. Employees were asked to let go of the ways things were done in the past, even if they were successful, and realize that they may have to do things differently moving forward. “We never start from the place of being a Chinese company and we’re going to do things the Chinese way. We continue to merge the best practices and thinking of all those countries and business cultures,” Ms. Conyers says. n Start with an understanding of how each organization and culture operates. Rather than garnering this understanding secondhand, Lenovo’s executives experienced it for themselves. CEO Yang Yuanqing moved his family from Beijing to North Carolina, which became the co-headquarters for Lenovo. And Ms. Conyers spent time working out of the company’s Beijing office.
Today, the organization remains committed to building a workforce of employees who understand each other by providing training across cultures and mentors who work with key individuals. n Identify early adopters. Ms. Conyers says that early adopters really self-select by displaying a willingness to go above and beyond. Some of Lenovo’s early adopters vol-unteered to swap offices to advocate for the culture changes coming, and they became go-to trusted advisers. n Be transparent about the differences and expectations the culture change will bring. It will not only ease employee tension about where the organization is going but also open leadership’s eyes to employees who will not be a good fit.
the organizational model to be closer to customers and more agile.
“Bank employees needed to recognize how they could put the customer first,” says John Doig, the bank’s chief marketing officer. “One way that we recognized we could do this was by evolving the way we do business. We want cus-tomers to be able to do their business with us, how they want—branch, phone, tablet, com-puter—where they want and when they want.”
Ms. Sedgh Bina is clear that “the most high-performing corporate cultures put the cus-tomer at the center and invest in the employees as the most powerful access to the customer.”
Scotiabank is seeking to recast traditional bank branches as inviting and comfortable places to meet with staff members who can advise customers on big issues like saving for retirement or paying for college. It is also retraining many front-line employees in financial advisory skills. One major bank initiative, a tech foundry called the Digital Factory, is meant to help make digital innovation part of the bank’s culture. The initiative was launched in late 2015 and will eventually employ more than 350 programmers, user-experience designers and data scientists. Its purpose is to provide a space where teams can be empowered and challenged to design and deliver a game-changing customer experience,
Michael Zerbs, the bank’s co-head of IT, said in a statement.
A big focus of the Digital Factory will be delivering a distinctive mobile experience. When the bank analyzed which customers were downloading its mobile app, it found that half of them never took the next step and signed up for an online account. “Scotiabank should be in their pocket,” Mr. Doig says. “We need to make that mobile experience as easy as possible so they want to use it.”
In order to make these shifts in culture stick, it was imperative that all employees see this top-level support. As Mr. Doig sums it up, “If the CEO’s tone doesn’t support the change, there will be no change.” But it was also important to give Scotiabank employ-ees a voice, because it was their culture too.
Harvard’s Dr. Heskett agrees: “Compa-nies that handle culture change well are those in which leadership is trusted, usual-ly because of a ‘no surprises’ approach to decision-making and a willingness to share information across the organization.”
To do so, the bank has engaged in exten-sive conversations with its employees, asking for ideas, curating suggestions and creating action plans in response. One such conver-sation was the Scotiabank Jam, a three-day online discussion held earlier this year among the company’s 88,000 global employees in which they vetted values, beliefs and ideas for improving the customer experience. “People were free to comment, criticize or just view,”
Mr. Doig says. “We had more than 1 million page views over three days.”
The feedback session was more than just an open forum—bank
leadership is also working to implement some of the sug-
gestions. The input helped management hone the
“One of the key features of [our] culture is that we believe innovation is everybody’s business.”—Kris Halvorsen, chief innovation officer, Intuit
values (including integrity and accountabil-ity) that now define the bank’s new culture. And management curated employee feed-back into a set of action plans with time frames assigned for each. Mr. Doig notes that putting some of the employee sugges-tions into action was a critical part of the change process. Asking for feedback with-out using it will only set your efforts back.
The Long GameTransforming a culture is not a one-time ef-fort. It has to be constantly nurtured and en-couraged. Financial software company Intuit, for example, has long established its culture of innovation, which has helped it produce pop-ular applications such as TurboTax. Despite that success, however, it is not one to rest on its laurels. Instead, according to Kris Halvors-en, the company’s chief innovation officer, Intuit keeps its culture fluid and responsive by maintaining a relentless focus on customer experience (all employees are encouraged to visit customers in their offices to watch how they work) and offering breaks from routine for pure ideation. By cultivating new ideas, the organization promotes receptivity to change. “One of the key features of Intuit’s culture is that we believe innovation is everybody’s busi-ness,” Mr. Halvorsen says.
Employees are encouraged to take unstruc-tured time each week to brainstorm and try out new ideas. Selling the concept of a break in routine to line managers was no picnic when it was instituted in 2006, but the innovation team remained persistent, using successful examples of this time of experimentation to win over the skeptics. Importantly, the time does not mean goofing off. Intuit puts guardrails in place to channel ideas toward useful results, and em-ployees are asked to apply their efforts to a defined set of strategic goals. There is even a
framework—called “Design for Delight”—that sets out a methodology for innovation.
Intuit’s commitment to driving that innova-tive culture has been especially key as the orga-nization strives to transition away from pack-aged software to a cloud model. “Our CEO Brad Smith set a grand challenge to the com-pany: Transform from a North American desk-top software company to a global, cloud-based software-as-a-service leader,” Mr. Halvorsen says. “And just as important as what we would change is what we didn’t change: our mission and values.” Embracing this change means encouraging experimentation, risk-taking and receptivity to new ways of doing things, Mr. Halvorsen says.
Intuit leadership also nurtures its culture of innovation by making it a key topic of the in-terview process. This allows leadership to en-sure new employees will be supportive of—and assets to—the environment Intuit has worked hard to create. “We have a craft demonstration as part of the interview process,” Mr. Halvors-en says. “You’re asked to solve a problem and present the results. Then we see people explain how they’re thinking, show how they went about solving this problem, and you get a dif-ferent view of their ability to be intellectually flexible. These kinds of things don’t come up if you’re just asking questions in an interview.”
Intuit’s methods seem to be working. Ac-cording to Mr. Halvorsen, the company now has about three-fourths of its 37 million cus-tomers using its cloud-based products, and its connected-services customers are driving more than 70 percent of Intuit’s revenue.
Because culture change is no quick and easy process, Dr. Heskett says leaders need to cele-brate forward progress. “Improvement should be measured and rewarded one step at a time, with every effort made to recognize small wins along the way.” IQ
“It’s necessary to have corporate culture that’s clear about what it is.” —Yolanda Conyers, vice president of global human resources and chief diversity officer, Lenovo
sk CEOs where they can find a competitive edge today, and many will tell you the same things: Build and leverage a unique corporate culture, and elevate the customer experience. These two objectives—which are more directly connected than many people realize—matter more in the marketplace now than ever before.
Yet many executives do not feel their organi-zations are making much progress developing culture and the customer experience. There is a lot of consternation around the world: Two-thirds of CEOs and managing directors either believe that installing and leveraging the right corporate culture is not going well or are still in the process of trying to figure out how to do it. At the same time, half of executives say they are either not doing enough to elevate their current customer experience or are not doing well in their current efforts.
These are just two of the major themes that emerged from the latest Insigniam Executive Sentiment Survey conducted in late 2015. The annual survey asks executives from a variety of industries to rank major concerns in several key areas of operations and report how well they think their companies are performing in those areas. The survey, which taps into Insig-niam’s global network of large-cap companies, also polls executives for their outlook on the key challenges they face both internally and from competitors.
Leveraging Culture to Drive SuccessThe new survey results show a perception we
have seen building for years becoming even more widespread: Culture is a key driver of performance. More and more, executives are realizing that culture is about much more than fun office perks. Engraining the right cul-ture means getting people to think and act in a manner that will lead them to take actions in support of the overall organizational strategy that produce the desired results.
As such, culture is woven into nearly ev-erything executives told us they were most concerned about. For instance, CEOs and managing directors said having the right people on staff and recruiting, training and retaining talent are key competitive advan-tages. These points all come back to a com-pany’s culture.
Likewise when it comes to elevating the customer experience: That is also primarily done through culture. Customers are more likely to have a positive experience with com-panies that have engaging cultures.
Unfortunately, our survey suggests that while executives are increasingly recognizing that their organizational culture plays an in-tegral role in the performance of their busi-ness, many are still unsure how to cultivate,
implement and leverage culture. Thirty-three percent of CEOs and managing directors say installing and leveraging the right corporate culture is not going very well, according to the survey.
Elevate Culture to Elevate Customers The customer experience today is all about interaction. It is easy to think that interaction happens only between a customer and some piece of technology. A consumer interacts with a mobile app to make a purchase, for instance. A client places an order on an en-crypted website. But the technology is just the interface that companies and customers use to interact. No matter the method, the inter-
Culture CompetitionFor CEOs and managing directors, installing and leveraging the right corporate culture is the most important area to pursue to elevate the competitive advantage of their business.
HOW WELL IS YOUR BUSINESS PURSUING THIS COMPETITIVE ADVANTAGE?*
33%It is not going very well
33%Trying to figure it out
33%It is going OK or very well
action is still happening between your culture and that customer.
That is why elevating the customer experi-ence begins with developing an organization that has a shared way of thinking and acting—a shared culture. And that is also why it makes sense to us that, in our survey, almost the same percentage of CEOs and managing directors gave negative nods to their progress on culture as the percentage who felt pessimistic about their progress on elevating the customer experi-ence. But, while CEOs may feel negatively about their progress, those tasked with managing the elevati on of the customer experience do not seem to share that sentiment. Only 22 percent of senior vice presidents and vice presidents felt
*Due to rounding, numbers do not add up to 100%
Customers are more likely to have a positive experience with companies that have engaging cultures.
negatively about the progress their organization is making in this respect, versus 50 percent of CEOs and managing directors . If unaddressed, this gap can create a black hole where strategic initiatives fail.
The findings seem to dovetail with the find-ings from a recent study by The Economist In-telligence Unit (EIU) that found few multina-tional firms “have created roles such as a chief customer officer to take charge of the overall customer journey; many have basic work to do on integrating content between different platforms; and less than one-third track cus-tomer behavior across channels.”
The EIU study also found that executives believe boosting the customer experience is, ultimately, an organizational issue. In other words, the right culture connects with cus-tomers in the right way.
Innovation vs. ExecutionAmong all executives in our survey (taken in aggregate), the second most important thing they said they could do to create a competi-tive advantage was to improve their product launches. And yet one-third of CEOs and managing directors said they are not doing enough in this area at the moment.
With this in mind, it is important to note how product launches differ from product
22.3%We are not doing enough/It is not going very well
77.7%It is going OK or very well
Customers Above AllAmong all executives, elevating the customer experience is the most important area to pursue to elevate the competitive advantage of their business.
HOW WELL IS YOUR BUSINESS PURSUING THIS COMPETITIVE ADVANTAGE?
development. Whereas product development relies on innovation, launching new products successfully is all about execution.
Unquestionably, there is a payoff in prop-er execution of new product launches. One example: At Estée Lauder Companies, new products make up an astonishing 20 percent of annual sales every year. But to create new products for store shelves, Estée Lauder in-vests heavily in R&D and innovation.
Yet our survey found that most executives do not value heavy R&D investment as a meth-od for creating competitive advantage. In fact, “Investing heavily in R&D” ranked near the bottom of the ways our respondents said they could stand apart from competitors. It seems that even as large-cap companies are pushing to deliver new products, they are relying on prov-en product bets rather than potential break-throughs from internal investment in R&D.
Innovation is undoubtedly still import-ant to executives, but in spite of the proven returns in the market for successfully imple-menting wide-scale innovation, executives seem unsure of how to go about it. Fifty-sev-en percent of all executives said that in their efforts to spread innovation through their en-terprise, they were not doing well, not doing enough or still trying to figure it out. And the other 43 percent said they are only doing OK.
50%We are not doing enough/ It is not going very well
12.5%Trying to figure it out
37.5%It is going OK or very well
CEOs and managing directors Senior vice and vice presidents
Delivering on AccountabilitiesWhen we asked executives what they worry about with regard to successfully delivering on their accountabilities, many responses related to culture. They expressed concerns about having the right talent to achieve re-
sults and preparing and developing the next generation of leadership. “Talent” was the most used word in responses to the question, followed by “resources.”
Whether respondents were CEOs, man-aging directors, senior vice presidents or vice presidents, their top three accountability con-cerns remained the same: People-related is-sues, execution issues and a lack of resources are things all executives worry about.
What does not seem to be worrying execu-tives? In spite of a flurry of mergers and acqui-sitions activity in the global economy, only 2 percent of executives said they view M&A as a way to create a competitive advantage in their organizations. This suggests that the increase in M&A activity is more out of necessity for
survival rather than a tool to create competi-tive advantage.
Moving Ahead, Managing ChangeAs we look back on Executive Sentiment Sur-vey results from recent years and compare
them to the latest survey, we are struck by the growing con-sensus on the importance of creating the right culture. We also notice how this connects to executive concerns about the need for change initiatives and organizational agility—the ability to innovate and execute quickly in reaction to a chang-ing business environment.
In 2012, the majority of executives said operational excellence—primarily mean-ing the ability to get more and better products to glob-al markets faster and more efficiently than ever—was the biggest single factor that
would define the success of their companies. The next year, 85 percent of executives told
us they were worried that their organizations were not prepared to deliver on innovation. More than a third told us their culture was in need of a transformation.
In 2014, executives said they were concerned about cultural issues and execution. No sur-prise, perhaps, given that 97 percent of survey respondents also told us they had undergone a major change initiative in the past two years.
The ability to adequately manage change continues to be a strong theme in this year’s results. As one executive told us, “We are con-tinuously transforming ourselves based on our values and continually adapting our orga-nization to a changing world.” IQ
Obstacles to SuccessWhat do all executives (taken in aggregate) worry about when it comes to successfully delivering on their accountabilities?
21.7 % People-related concerns/culture
13.3% Execution concerns
8.4% Resource scarcity/allocation
5.9% Time use/lack of time
5.4% Strategy formulation
4.9% Profitability
Rest Other/miscellaneous
Whether respondents were CEOs, managing directors, senior vice presidents or vice presidents, their top three accountability concerns remained the same: People-related issues, execution issues and a lack of resources are things all executives worry about.
When Paul Spiegelman created the job of chief culture officer at Stericycle three years ago, he was beginning a multiyear exper-
iment. Could the corporate culture he had cre-ated and nurtured at his own company scale to fit a publicly traded company with a $12.5 billion market cap?
Mr. Spiegelman ran BerylHealth, a health care call-center company he founded, for 27 years. When he sold it in 2012 to Stericycle, a highly diversified health care services company, the more straightforward job of growing his call-center business within the larger parent did not interest him. But Stericycle’s culture was a blank slate, perfect for Mr. Spiegelman’s culture-building ambitions.
IQ interviewed Mr. Spiegelman—the au-thor of three books about corporate culture—to find out what he has done, how he has done it and the results he has seen at Stericycle.
IQ: First off, define corporate culture.Paul Spiegelman: My definition would be two things: It’s the vibe you feel when walk-ing into the building, and second, it’s the extent to which employees are willing to do discretionary work above and beyond the job that they’re assigned. They’re so engaged in their work that they feel the company be-lieves in them. They believe in the company vision such that they’re going to put their best efforts forward even if it’s not part of their job description.
“It’s OK to say, ‘We haven’t always run the business this way, but I want to change and do it right.’”—Paul Spiegelman
Scaling Up Sustainable Culture Change Paul Spiegelman, chief culture officer at Stericycle, reveals how he is driving employee engagement and results at a large, diversified health care organization. BY REBECCA ROLFES
IQ: Is culture more than perks—what you can wear, what hours you work, whether parking is free, that sort of thing?PS: Yes. There’s a misconception that cor-porate culture is about fun or events or the cafeteria. Culture gets a bad name when it’s limited to those sorts of things. It goes much deeper, into showing that we care about the people in the business and the totality of their lives. We’re focused on employee engagement toward business success.
IQ: Why did Stericycle feel that a chief cul-ture officer was necessary? PS: It goes back to the fact that our culture at BerylHealth was a big part of why they bought us. Through a combination of living out our core values and a commitment to en-hancing the lives of the people who worked there (through reward and recognition, and learning and development), the company became known for its culture more than the services it provided. Stericycle was interested because though it was a successful company, it hadn’t focused on the employee as a key stake-holder in the business. It wanted to change that by applying BerylHealth’s culture practic-es at the company.
So I suggested to Charlie Alutto, who had just recently become CEO, that I become chief culture officer. I wanted to see whether the way we did things at BerylHealth would scale. Would it work in a company that had hundreds of locations, a much bigger footprint?
IQ: What was your mandate as chief culture officer?PS: I had no mandate. My biggest challenge was that the company was already financially very successful. They’d had something like 70 quarters of meeting or exceeding finan-cial targets. So why change? Charlie was very
honest. He said, “We have a great financial track record, but we’ve not put enough em-phasis on employee engagement. I want that to be my legacy.”
Culture starts with the leader and the lead-er’s buy-in. Without Charlie’s support, I would have been long gone.
So this wasn’t a turnaround situation, but company leadership realized that what had worked for them to date would not continue to work indefinitely. For the first 20 years, Ste-ricycle did one thing: It was a medical waste disposal company. Then, like so many compa-nies, as it diversified, it resulted in an identity question. Who are we? Are we still a medical waste company?
IQ: What did you find when you got there?PS: I found that there was a general sense of loyalty to the company. The culture was above average in engagement, but not by much. There was so much opportunity to focus in a few different areas. One was the communica-tion methods in a company that is so spread out. Half our employees don’t even have a company email. There was a perception that there were no internal growth opportunities, which wasn’t true—people just weren’t aware of them. There were very few of the typical tools in place that you would need to have an engaged company.
I knew it would be a multiyear strategy. I start-ed from scratch. It was very much a blue-collar, no-frills company. There was no formal training program, no consistent reward and recognition program, no mission, vision or values statement that people could recite. Stericycle makes 30 to 40 acquisitions a year. Imagine bringing on that many new employees every year with no clear statement about who you are.
We worked with 40 global leaders to rede-fine the core purpose, core values and future
“Building the culture helps us identify those managers who, after mentoring and coaching, don’t accept the new way of doing things. We
aren’t shy about telling them it’s just not going to work. The process helps us decide whether a
person is right for the job and the company.”—Paul Spiegelman
position of the company (see “Getting to the Core,” page 48). This vision was rolled out to all team members and then institutionalized. Values are used in the hiring and firing process. People are measured on adherence to core values, and we tell stories that allow people to connect to the vision. Our reward and recog-nition programs are tied to the values, and we make decisions every day based on them. They are the guideposts that lead our everyday work.
IQ: How are you getting the work done to transform the culture?PS: We have a full-time team of seven. We have 500 culture ambassadors throughout the company. Many of them are front-line workers, all volunteers. They work with the corporate culture team to implement and ex-ecute our various culture programs and give us feedback that allows us to course-correct. They work with local managers via month-ly conference calls with ambassadors at each business unit to make sure the culture is being applied consistently.
All the initiatives we’ve put in place are hav-ing an impact. Now we have to work to make that consistent over the entire business. Our biggest challenge is the middle management group. We have buy-in from the top. The front line loves it because we’re doing stuff for them. The middle management reaction, however, is that some feel like culture-building is just something else for them to do. We have 1,200 middle managers in the company. We’ve spent a lot of time to help them be successful with this over time.
Building the culture helps us identify those managers who, after mentoring and coaching, don’t accept the new way of doing things. We aren’t shy about telling them it’s just not going to work. The process helps us decide whether a person is right for the job and the compa-
Spiegelman SnapshotIn addition to serv-ing as chief culture officer for Stericycle, Paul Spiegelman is the New York Times best-selling author of Patients Come Second: Leading Change by Changing the Way You Lead. His fourth book on corporate culture, Scaling Culture: A Small Company Ap-proach to Big Com-pany Engagement, will be published later this year.
Mr. Spiegelman is also the founder and CEO of the Small Gi-ants Community, an international group of business leaders committed to iden-tifying, connecting and developing values-driven lead-ers. The community is based on the six principles laid out by Bo Burlingham in his book Small Giants: Companies That Choose to Be Great Instead of Big.
ny. Of course, in the public company world you can’t just let people go. There are other legal considerations, for instance. I’ve tried to promote the idea that if we have employee en-gagement, we’re going to be sued less when we terminate someone. There is much less chance they’ll come back at you.
IQ: What is the purpose of corporate culture? Does it exist to make employees happy? To improve the customer experience? PS: It’s both of those, but you have to con-sider the ROI. Every company has a culture. It can be good or bad. The question becomes whether leadership believes that investing in culture is not only the right thing to do, but is good for business. Efforts should be measured and tied directly to business metrics, like em-ployee turnover, productivity, client retention and profitability.
When I called my [last] book Patients Come Second, I used that title to shock people a lit-tle. If we don’t fix ourselves, we can’t fix the patients. The health care industry has some of the worst corporate cultures out there. People come into the industry with a heart for service and then are treated very badly by organizations. The most dissatisfied group in the industry is nurses. Those who touch pa-tients the most seem to be treated the worst. But if you treat people well, they will treat the customers well.
IQ: How does culture drive performance and financial results?PS: We talk about the Circle of Growth. We have choices in how we prioritize our busi-ness, and we use many things to measure suc-cess. But we should let people be the leading indicator. We exist in part to help employees achieve their personal ambitions. Allowing them to do that will engender their loyalty,
which will in turn engender customers’ loyal-ty. That will then drive financial results that we can invest back into our people.
IQ: How do you measure culture? It seems a very intangible thing, difficult to quantify.PS: Quite the opposite—it’s not intangible. It’s difficult to measure, but it can be done. If you don’t measure it, it won’t be taken seriously. When I came to this company, I had to con-vince many leaders there was a reason to do this, that it wasn’t just something I thought was a good idea. Board members had to be convinced that investment in engagement would bring returns to the bottom line.
We do an annual intensive survey of our employees to see if we’re moving the nee-dle on engagement, but the results may just mean they’re happy, not necessarily engaged. So we stack that metric against a host of other things. Attrition and the cost of attrition, for instance, are big indicators. Voluntary attrition has gone down 5 percent, resulting in savings of $2 million. That’s real money. We look at customer loyalty scores. We look at profitabil-ity by location. Fifty percent of our most prof-itable locations have the highest level of em-ployee engagement. This was the first time we ever measured it, which was a big step in itself.
[These results] help convince other local lead-
Getting to the CoreCulture does not exist in a vacuum—it grows out of a mission and shared values. Here is how Stericycle describes its purpose and val-ues, which drive the culture now at the center of how the company operates.
CORE PURPOSE To help our customers fulfill their promise by providing solutions that protect people and brands, promote health and safeguard the environment.
CORE VALUESIntegrity: We are honest and open in our interactions with others. When making decisions, we always do the right thing.
Accountability: We take ownership of our own actions and focus on solutions. We deliver on our promises.
One Team. One Goal: We work as a team, no matter the goal. We share successes and failures together and work to make things better.
Customer First: We provide service that is valuable for our customers and exceeds their expectations. We respect the value of both our internal and external customers.
Enjoying Our Work: We have a culture that fosters team-member engagement and loy-alty. We do so with a spirit of camaraderie.
Continuous Improvement: We provide the most value while consuming the fewest resources. We embrace the talents of the people who do the work.
CULTURE FORMULAOur philosophy is what we call the Circle of Growth. It starts with our team members. If we can create an environment where team members enjoy and excel in what they do, it leads to customer loyalty. When customers are loyal, it sustains and grows our profit-able business. When our business prospers, we can reinvest that profit back into our company and our people to provide better resources to do their jobs. This results in team member loyalty, and the cycle repeats.
“Culture is not a project. It has no end. It’s who we are, and who we are changes over time.”—Paul Spiegelman
“Beyond leadership buy-in and support, the biggest challenge over time is maintaining a consistent commitment.” —Paul Spiegelman
ers that if they focus on people first, the money will come. Culture pays. Teaching our manag-ers to focus on this pays off for the business.
This year we’re measuring other things. For instance, our training and development programs: Are those impacting our business measures, things like productivity and safety? One big measure is manager effectiveness. In locations where we have high levels of man-ager effectiveness, do they have better results?
We’ll share the results with all our stake-holders, from board members and managers to front-line employees. Everyone needs to see the results of the efforts because everyone owns the culture.
IQ: Is the job of culture ever done? Can you ever say “mission accomplished?”PS: No. Culture is not a project. It has no end. It’s who we are, and who we are changes over time. If you believe that this is a project with an end, it won’t sustain over time. If your fo-cus is on events, holiday parties, that sort of thing, at some point it will go away.
You have to institutionalize culture like any other process. Doing that starts with a commitment at the top and a memorializ-ing of the mission, vision and values of the company. Then it requires recruiting volun-teers to execute on initiatives and keep it alive.
Culture is like every other business process—it should be documented and shared so that it stands the test of time.
IQ: A recent Insigniam survey showed a high percentage of executives are unhappy with their corporate culture. Is it possible executives are the problem? PS: We are all a reflection of the leader of our company. That leader has it under his or her control to make change. They need to have some self-awareness around that.
IQ: What is the most common obstacle to making change, and how can executives avoid it or surmount it?PS: Beyond leadership buy-in and sup-port, the biggest challenge over time is maintaining a consistent commitment. Culture-building has to become institution-alized within the business. There’s much more to be lost if you stop doing something that’s working. When I joined the compa-ny, they hadn’t done an employee survey in years. When they did, they did nothing with the data. Trust builds over time. Now we get good data because [employees] know it will be acted on.
My current challenge is, when I’m gone, how will the culture sustain itself ?
IQ: What would you say to executives who say, “I get it. But how do I get started?”PS: First, be genuine and vulnerable. It’s OK to say, “We haven’t always run the business this way, but I want to change and do it right.” There’s tremendous opportunity to win trust out of the gate.
Second, show commitment for the long term.Third, if you find people who are passion-
Quick HitsThe Challenge: Reinforce the importance of innovation within the culture of aerospace giant Airbus.
The Plan: Open the floor to new ideas outside the usual teams and improve the company’s ability to incorporate these ideas while maintaining the same level of safety and quality.
The Execution: Create partnerships with outside organizations to gain access to the latest industry technological advancements, exposing Airbus employees to the entrepreneurial startup mindset.
The Result: Airbus has created a more user-centric culture where everyone plays a role in innovation, and is seeing a renewed sense of competitive spirit throughout all levels of the organization.
“Innovation is about agility and speed and creating new processes that move us in the right direction,” he says.
But change can be difficult and slow at a company with 55,000 employees and a lega-cy spanning nearly five decades—especially while operating in a highly regulated industry where every new idea must be vetted, tested and proven safe and effective. “It’s a challenge to find ways to be more agile while still bring-ing the same level of safety and quality to ev-erything you do.”
To make it happen, Mr. Barbaux has relied on the full support of the executive team, in-cluding the company’s CEO, since taking his post. “Culture change goes much faster when all the executives say we need to work togeth-er to move in this new direction,” he says.
Outside CollaboratorsOne of the ways Mr. Barbaux aimed to revamp Airbus’ culture to better drive innovation was by creating completely new avenues for sourc-ing ideas. He discovered that most new ideas came from within the long-standing corporate structure, where independent teams adhered to established decision-making processes and did not always collaborate with outside experts to find different solutions. “I wanted to open Airbus up to the outside,” he says.
It isone of the biggest global rivalries in business: Airbus versus Boeing, duking it out to claim the title of world’s largest aircraft manufac-turer. It has long been a close race. Last year, Toulouse, France-based Airbus outsold Chi-cago-based Boeing by hundreds of aircraft orders. But Airbus took second in terms of the number of planes actually delivered to customers, missing the top spot by 127 planes. It was not the first time. For 16 of the past 25 years, Airbus has trailed on deliveries.
But the $67 billion company is out to ramp up its production cycle, with executives identi-fying strategies to improve agility and drive a more innovative culture throughout the busi-ness. “Airbus has been innovating forever. It is part of our story as a company,” says Yann Bar-baux, Airbus’ chief innovation officer (CIO). “We have been the challenger for many years, so it is necessary to be more innovative.”
For Mr. Barbaux, who was appointed CIO in 2013, that means identifying opportunities to encourage new ideas from all areas of the company, along with its customer base, its supply chain and the market at large. But an idea is worthless if it dies on the vine. So to ensure the best projects are identified and nur-tured to fruition, Mr. Barbaux is also working to facilitate more rapid and systematic deci-sion-making processes relative to innovation.
So Mr. Barbaux decided to bring more small companies into the Airbus supply chain as a way to add value to existing processes and designs. For example, Airbus is testing a film designed by a small Canadian manufacturer that uses nanocomposites to reflect laser light and protect pilots against laser strikes.
It will take a couple of years to fully test whether the film can be used on Airbus air-crafts, but it is an example of how the com-pany can find innovative solutions to real problems by working outside the traditional supply chain environment.
“We aren’t expecting these companies to bring major aircraft components to us,” Mr. Barbaux says. “But in domains outside our core competencies, these subject matter ex-perts have good ideas that we can potentially integrate into our aircrafts.”
Bringing in these small companies intro-duces a more entrepreneurial thought process into the business, Mr. Barbaux says. And there is a nice bonus to finding an innovative solu-tion this way: It is typically more cost-effective than working strictly in-house.
Accelerating Innovation Part of Mr. Barbaux’s cultural transformation was opening up new opportunities for com-pany leaders to work with entrepreneurs who
take a more agile approach to product devel-opment. He also wanted to open up access to the latest technologies in the aerospace sector and beyond.
So Mr. Barbaux’s team launched Airbus BizLab, a global aerospace business accelera-tor where startups and Airbus “intrapreneurs” work together to speed the transformation of innovative ideas into functioning businesses. The first BizLab launched in France in March 2015, and eventually five startups from 150 applicants were selected to participate. Cho-sen companies include a Hong Kong orga-nization developing a flexible business-class flatbed suite that could be transformed into a premium economy-class seat (see “BizLab’s Inaugural Class” on page 54 for the full list of chosen startups).
BizLab provides each startup with six months of support that includes access to office and testing facilities, technology and other resources. They also get to work with Airbus experts from a number of different do-mains, including IT, legal, finance and market-ing, and will be assigned a dedicated coach to help them throughout the six-month process.
At the end of the program, each team will participate in a “demo day” with Airbus deci-sion-makers and customers to demonstrate its product and potentially win venture capital
Airbus’ Flight Log*
*Represents all current and historical counts from May 1974 through February 2016
16,362 Total number of Airbus plane orders (including the A300,
A310, A320, A330, A340, A350XWB and A380)
9,588 Total number of planes delivered
6,774Backlog of
Airbus planes on order
8,730 Total number of Airbus planes currently in operation
“Airbus has been innovating forever. It is part of our story as a company. We have been the challenger for many years, so it is necessary to be more innovative.” —Yann Barbaux, CIO, Airbus
for its business. Airbus has since launched sim-ilar BizLab incubators in Germany and India.
“The labs create an environment where entrepreneurs can bring their ideas to life, while giving Airbus access to groundbreak-ing solutions,” Mr. Barbaux says. “It’s anoth-er way we can source ideas from the outside while bringing an entrepreneurship mindset to the Airbus culture.”
Getting Customers and Employees Into the GameMr. Barbaux’s team is also testing new ways to work directly with customers on co-inno-
vation projects. An example is its recent part-nership with European airline easyJet to study an enhanced fault prognosis tool that uses real-time information from the jet to trouble-shoot technical faults and predict when an air-craft part is due to fail.
The tool would benefit airlines by further enabling engineering departments to plan for component replacements before issues arise, and to identify actions that could improve fleet performance and reduce cost, Mr. Barbaux says. “It’s an example of how Airbus is work-ing jointly with customers on projects that add real value to both parties.”
Whenever Airbus is testing a new idea in-house, it invites customers to offer feedback, from the planning stages throughout iterative development steps, to ensure the company is channeling investments toward the best solu-tions to meet customer needs. “It’s a way for us to beta-test lots of ideas to understand how value is created for customers,” Mr. Barbaux says. “In this way, we can be more accurate in the products we ultimately develop.”
The final phase of his outside-in approach to innovation includes letting employees partici-pate in the idea-generation process. Mr. Barbaux created a team of 140 leaders across the compa-ny to act as “innovation catalysts,” encouraging employees to share ideas and offer feedback on the company’s new IdeaSpace platform, an online peer-to-peer collaboration tool.
“IdeaSpace is helping us create an open innovation culture in the company,” he says. Anyone can post an idea or suggestion, and rate other ideas. They can also connect with people who have similar passions to create teams in support of new projects. Currently 18,000 Airbus employees regular-ly use the platform.
“One of the most exciting elements of Idea-Space is that it is a totally flat infrastructure,”
Airbus welcomed the first group of startups into its BizLab business accelerator program last September. The early-stage project teams will work closely with Airbus experts throughout the six-month program in hopes of transforming their ideas into real-world applications. The first group of startups includes:
n 3dTrust: A German company offering an innovative way of securing the streaming of printing data to remote 3-D printers.
n OBUU: A Spanish company with a project for ground system equipment that includes a specific tool-provision-ing method that could
lead to cost savings on aircraft maintenance and improved fleet availability.
n Paperclip Design: A company from Hong Kong developing a flexible business-class flatbed suite that could be easily transformed into a premium economy-class seat.
n SimSoft3D: A French firm that has designed an intelligent console for voice- guided operations that allows an interactive dia-logue between the operator and the machine at work.
n Uwinloc: A French firm developing a low- cost, high-accuracy passive indoor/outdoor tracking system.
Mr. Barbaux says. “Everyone who participates is equally important.” His team hosts regu-lar competitions to vote for the best ideas on IdeaSpace, and their sponsors receive resourc-es to develop them. Last year the company showcased 14 innovations that emerged from the IdeaSpace platform. They included using a 3-D printer to manufacture missing replace-ment parts on the factory floor, and an idea to replace nylon cable ties with paper ties to minimize removal time and cutting risks.
Both of these projects are on their way to becoming embedded in the core processes at Airbus. Mr. Barbaux notes that many nontech-nical ideas also come through IdeaSpace, like changes to contracts, new services for custom-ers and innovations in the way the company commercializes products. “Innovation isn’t limited to technology,” he says. “IdeaSpace is about introducing ideas that solve problems across the business.”
“This contributes to our culture change by transforming the mindset of the workforce,” he says. It encourages employees to take a de-
sign-thinking and business-thinking approach to their jobs, and provides them with a plat-form to share new solutions with the team. That makes them think more like entrepre-neurs. “It’s pushing a more user-centric culture where everyone plays a role in innovation.”
All of these programs have had far-reaching effects at Airbus. While they tap the expertise of different groups, they all serve the same goal: to bring innovative solutions into the company while fostering a culture that embraces new ways of thinking and problem solving.
The ROI of these programs is difficult to measure, but Mr. Barbaux is optimistic they are having a positive effect. “We are already seeing a more competitive spirit across the company,” he says.
That is enabling Airbus to source innovative ideas faster and supporting a culture where everyone feels they can contribute to making Airbus a stronger, more agile company. “It’s never been about me developing new ideas,” he says. “It’s about creating a culture where everyone can contribute to what we do.” IQ
An Unexpected AllyIn early 2016, Airbus an-nounced a surprising new partnership with Uber. The goal: make helicopters an on-demand transportation option.
The partnership is part of the newly formed Airbus Ventures system, which works to “identify and invest in the most visionary entrepreneurs in the global aerospace ecosystem,” the company said in a release.
Part of Yann Barbaux’s cultural transformation was
opening up new opportunities for company leaders to work with entrepreneurs who take
TALENT POOLTo win in China, companies need to leverage
local talent. But first executives must understand what top performers are looking for.
By Richard Walker
cards when it comes to great workplaces and career development has lost its dominance.
“In the past, the assumption was always that what was West was best, by definition,” says Christine Raynaud, CEO of Morgan Philips Greater China (formerly MRIC), a headhunting company that fills some of the most challenging executive and managerial jobs in mainland China, Hong
o economy has changed as rapidly and fundamentally as China’s during the last three decades. Once entirely state-controlled, the business landscape of the world’s most populous country now features hundreds of private domestic companies that account for an ever-larger share of corporate employment.
And these corporations are competing with companies based in the West.
As China’s economy has become more dynamic and mixed, Chinese employee attitudes about the ideal employer and organizational culture have also evolved. These changes have major talent implications for executives at organizations jockeying for position in one of the world’s fastest-growing economies.
Pulling ahead starts with some basic questions: What do Chinese managers value in an employer? What types of corporate cultures do they prefer? And how can companies, whether based in China or elsewhere, attract and retain the best Chinese talent?
IS “WEST STILL BEST?”The bad news for foreign companies operating in China: Many senior managers now prefer to work at Chinese companies. The idea that foreign companies hold all the
Kong, Singapore and Taiwan. “Today, young Chinese managers are less certain that they have everything to learn from the West. That is certainly a big change.”
This change may be in part because many foreign companies have scaled back their China strategies as the country’s economy has slowed. But there is also a sense that Chinese companies are now more ambitious
in outlook than foreign competitors, and are more able to adapt to the realities of the local market. “Chinese businesspeople are very entrepreneurial, and the rate of change in China can be very difficult for a global company to adapt to,” Ms. Raynaud says.
There is no shortage of examples of large Western companies floundering while trying to find their footing in the Chinese market, according to Ms. Raynaud. Take eBay: When the e-commerce company, with revenues near $8.6 billion, tried to expand into China, several key mistakes made the effort essentially a bust. In her book The Chinese Dream: The Rise of the World’s Largest Middle Class and What It Means to You, Helen H. Wang notes how eBay “failed to recognize that the Chinese market and the business environment are very different from that of the West.”
The company’s first and biggest mistake, according to Ms. Wang, was to send a German manager and American chief technology officer to lead the operations in China. “Neither one spoke Chinese or understood the local market,” she writes.
Groupon offers another cautionary tale about the importance of tapping Chinese talent when expanding into the region. After entering the Chinese market in 2011 under the name GaoPeng, the company failed to make the top-10 list of e-commerce sites offering group-buying deals. It ended up laying off nearly 400 employees in China less than a year later.
CULTURE MATTERSIt seems clear that to avoid striking out in China, Western companies would be wise to hire local talent. But to attract the right talent, organizations must understand how prospective Chinese employees tend to relate to a domestic employer and their particular position.
“The Western company mindset tends to be that we offer a role, and that’s all we need to offer. Chinese companies are more likely to say, ‘This is the role today, but this is where you might be in two to three years’ time.’” —Christine Raynaud, CEO of Morgan Philips Greater China
Generalizations about such a vast and dynamic country are, of course, dangerous. For one thing, Chinese companies differ according to whether they are state-owned, a hybrid state/private enterprise or entirely private and autonomous. Still, there is a considerable area of commonality in Chinese approaches to corporate culture.
While Western companies tend to prioritize fixed roles, strong branding, and detailed planning and targets, Chinese companies are often less prescriptive and more adaptive. This translates into very different attitudes toward employment.
“For example, when we’re looking for people to fill jobs in Chinese companies, we often have to work with no job description at all,” Ms. Raynaud says. “Hirings are made based on personal chemistry. In China, management is often much more about people than it is about precise track record.”
The focus on people in Chinese employment is often at odds with Western assumptions that work and personal life are very different spheres that should not overlap. In Chinese companies, managers typically know a lot about the personal lives of their team members, and it is an interest they are expected to demonstrate.
“In a Western firm, you don’t intrude yourself on the private life of your team members. But that’s not what Chinese managers expect,” Ms. Raynaud says. “In China, a senior manager would automatically know what is happening at home when it comes to his team members, would know their children, whether everything is OK with their parents. So giving a little cue that you have a team member’s interests at heart is often very important—and whatever you do in some small corner of the company will be instantly communicated throughout the organization. People will know.”
Cultural differences notwithstanding,
Western-based companies can still attract top managerial talent in China. The predictability and range of work offered by long-established, stable global organizations remains valuable. There is a reason so many senior managers in Chinese companies have substantial experience working at foreign companies.
“These companies are still attractive because of their international scope, while Chinese companies are just at the beginning of their international expansion,” Ms. Raynaud says. Foreign companies can attract talent with their track records in high-tech innovation and centers of excellence, she adds. They are also seen as having more inclusive corporate cultures, “where employees are less subject to unilateral decision-making, where you know what is going to happen and where your work-life balance is more respected. And that is always going to be attractive to employees.”
WHAT CHINESE EMPLOYEES WANTLet us assume a company is able to get the right talent in the door. How does it ensure top performers do not walk back out? Morgan Philips Greater China’s 2016 Talent Report provides a snapshot of expectations and values of Chinese corporate talent. The organization has been surveying a few thousand mid- to senior-level managers in the Greater China region (mainland China, Hong Kong and Taiwan) for each of the last five years, asking about attitudes toward employment and the corporate cultures they work in.
This year’s survey results reveal differences between motivations for managers from the region and Western managers working there (see “What Defines a Good Employer?” on page 60). Understanding those differences can help companies tailor their corporate cultures to better compete in China and beyond for the most effective managers.
The survey’s most striking finding? Senior managers in Greater China are likely to change jobs quickly if they do not find what they are looking for in an employer. Twenty-eight percent of respondents age 46 and older who had switched jobs in the past year said they were in their previous position for one to three years. Twenty percent of the same group only stayed at their prior job for a year or less. Employees in other age ranges reported similar rates of job change.
“If a company doesn’t offer the opportunities that employees expect, the talent will leave,” Ms. Raynaud says. “And if you ask what will keep them in a job, the answer is compensation, career development and work-life balance—in that order.”
PRIORITIES IN LEADERSHIP AND CAREER DEVELOPMENTThe new talent report’s findings flag a few areas where companies operating in
China could tailor their culture to attract and retain the best talent. They also reveal how managers from an Asian background have different priorities than their Western-background colleagues.
First, there were attitudinal differences between Asian and non-Asian survey respondents when it came to perceptions of corporate leadership. Whereas managers from a Western background were equally likely to cite leadership capability as a critical corporate culture measurement, Asian managers are mainly interested in the humanity of leadership in the company.
“In China, employees rate higher on what they perceive as integrity in corporate leaders,” Ms. Raynaud says. There is a loyalty component related to this: It is not unusual that if a company loses a strong and admired manager, the manager’s entire team will leave as well, she adds.
According to a report in The World
Job HoppersEmployees in mainland China are not afraid to shop around for new work.
AGE TENURE AT PREVIOUS JOB 1 YEAR OR LESS 1-3 YEARS
35 and younger 18% 40%36 to 45 17% 33%46 and older 20% 28%
Source: 2016 Talent Report, Morgan Philips Greater China
Financial Review, the most common area of misunderstanding between Chinese managers and foreign companies when it comes to culture is the role of leadership and group loyalty. While Western corporate leadership is geared toward empowering managers to achieve, Chinese leadership is about maintaining group identity bound by strong ties of trust, the Review reports.
When Western companies ask their Chinese managers to foster relationships across groups or functions, and perhaps with other companies, that can be uncomfortable for the managers or even seen as dangerous—an attitude summed up neatly in the Chinese proverb “brave birds get shot.”
Second, managers from China and elsewhere in the region increasingly want to work at companies offering clear career development opportunities. “We find
candidates are always asking, ‘Where am I going to go in this job?’” Ms. Raynaud says. Western companies may be missing out on local talent because of long-standing but out-of-place recruiting habits.
“The Western company mindset tends to be that we offer a role, and that’s all we need to offer. Chinese companies are more likely to say, ‘This is the role today, but this is where you might be in two to three years’ time.’”
In other words, competition is heating up. And if the tales of eBay and Groupon are any indication, it will be imperative for Western companies in China to persuade skeptics and make sure career opportunities are abundant once Chinese talent is on board. The alternative—a Western company in China run by Westerners—does not bode well. IQ
MAINLAND-BORN EMPLOYEES WESTERN-BORN EMPLOYEES
Capable leadership 6 3
Clear ethics, corporate governance 5 5
Clear organization and management structure 7 6
Clear vision and business direction 2 1
Commitment to community 14 15*
Commitment to environment 15 14
Culture of innovation and recognition for new ideas 11 7
Culture of trust and respect for employees 3 4
Fair promotion process 8 13
Good benefits 10 11
Good company values 4 8
Good public image, brand reputation 9 10
Good work environment 13 9
Great social activities 16 15*
High-integrity leadership 1 2
Transparent communication 12 12
What qualities do professionals from mainland China and the West value most in potential employers? According to Morgan Philips Greater China’s 2016 Talent Report, there are some similari-ties—including the desire to work for leaders with high integrity and for companies with a clear vision and business direction. But there are also key differences organiza-tions should keep in mind when defining their corporate cultures.
For instance, Westerners tend to be slightly more focused on the organization itself, while employees from mainland China more greatly value the human dimensions of an organization. Western respondents also rated a culture of innovation and recogni-tion of new ideas higher than their mainland China counterparts.
Values were ranked from 1 to 16, with 1 representing the most important and 16 representing the least important. *Values were tied.
China vs. West: What Defines a Good Employer?
Source: 2016 Talent Report, Morgan Philips Greater China
By Nathan Owen Rosenberg Sr., Marie-Caroline Chauvet
and Jon Kleinman
SPECIAL SECTIONThis special section is adapted from a chapter of Design Thinking: New Product Development Essentials from the PDMA, Wiley-Blackwell, 2015. www.wiley.com
THE CRITICAL IMPACT OF CORPORATE CULTURE ON DESIGN THINKING
E mpathy. Ideation. Collaboration. Iteration. These are not the typical terms in the everyday conversations of executives at a large corporation. Instead, top executives are likely to be focused on the top and bottom lines, market share, return on investment, share price and employee
retention. But empathy? Not in most big companies.Yet empathy, ideation, collaboration and iteration are critical aspects
of design thinking. For executives who want to install design thinking as a source for their companies’ successes, knowing and understanding terms like this, and the practices and processes behind them, are important for achieving those other key measures of success.
Roger Martin, the former dean of the Rotman School of Management at the University of Toronto and one of the founding fathers of design thinking (along with the Institute of Design’s Patrick Whitney and Stanford d.school’s David Kelley and Bernie Roth), once wrote that incorporating design thinking into a large company “… is not as simple as hiring a chief design officer and declaring that design is your top corporate priority. To generate meaningful benefits from design, firms will have to change in fundamental ways to operate more like the design shops whose creative output they covet. To get the full benefits of design, firms must embed design into—not append it onto—their business.”1
Embedding design thinking into a business means embedding it into the company’s strategy, corporate culture, processes and practices, systems and structures. For too many large companies, their corporate cultures are obstructive to design thinking at best, and at worst are destructive of this important new business and management method. However, we believe that an enterprise that embeds design thinking in its corporate culture—in its everyday ways of working, its shared practices, beliefs and values—can gain a competitive advantage over those that do not adopt design thinking.
To gain this edge, however, organizations will need to re-evaluate the organizational context in which they currently operate. And here is the Gordian knot: A company’s context is transparent to the people who work in the company.
Culture as ContextThe context in which people are working in an organization is primarily the corporate culture. The organizational context influences, shapes, emphasizes, diminishes or distorts everything that happens in an organization. It reinforces the choices executives make to pursue some strategies and discard others. It virtually chooses the tactics by which managers execute. It encourages employees to behave in specific ways and rewards them for it and often can discourage them from, or even punish them for, acting in different or new ways.
“Until I came to IBM, I probably would have
told you that culture was just one among several
important elements in any organization’s makeup and success with vision, strategy, marketing, financials
and the like. …I came to see, in my time at IBM,
that culture isn’t just one aspect of the game, it is
the game. In the end, an organization is nothing
more than the collective capacity of its people to
create value.” —Louis Gerstner Jr.,
former chairman & CEO of IBM [from Who Says El-ephants Can’t Dance? Louis
V. Gerstner Jr., Harper Business, 2002]
1) Martin, Roger. “Incorporating Design Thinking into Firms,” Rotman: The Magazine of the Rotman School of Management, Fall 2005, Toronto.
Context can be a potent force for change—pushing organizations to continually look for new opportunities—or for stagnation—encouraging organizations to stick to the status quo, failing to recognize changes in the market. Corporate culture can drive innovation to significant value in the market or kill a great idea. Indeed, corporate culture can have one company see an opportunity and another miss or dismiss the same one. In this way, corporate culture is a singular determinant of organizational effectiveness.
When a company chooses to implement a radical or fundamentally new initiative, like embedding design thinking, the success of that initiative is not simply going to be a product of training and education, nor of management telling people what to do and following up, nor even a product of some new compensation or reward system. Implementing a discipline like design thinking will be successful only if it fits in with the corporate culture, even when that means supplanting some elements of the current culture with elements drawn from design thinking.
But transforming a corporate culture is complex, difficult and fraught with risk of failure. Arguably, organizational transformation is one of the most difficult initiatives that a company can undertake, the equivalent of an experienced mountain climber scaling Mount Everest: a long, complicated, challenging journey that is not to be undertaken lightly.
Default CultureIn most companies, culture is not intentional or purposeful. Typically, culture has evolved organically from the company’s founding days, from the personality and likes and dislikes of the founder(s). Like Topsy, it “…just growed.”
Corporate culture is likely to default to reinforcing what has worked in the past and avoiding what has not worked, especially avoiding significant failures. It is a relic from the past that powerfully shapes both perceptions and actions and limits possibilities. It often occurs as a given; corporate culture is the way it is around here. That can be true even when culture had been an intentional creation.
At Ford Motor Co., Henry Ford shaped the culture from the firm’s earliest days to avoid a previous traumatic failure and to cause the company’s success. So important was his influence on the firm’s culture that in the early 1980s—more than three decades after the founder’s death—Mr. Ford’s ghost was said to be walking the halls of the company. Although the auto industry and the methods of manufacturing had changed drastically, Mr. Ford’s culture had not.
By way of example, in 1985, an Insigniam colleague was conducting a training session with both older and younger employees of the Body and Assembly Division of Ford. Each participant was asked to write down something very significant that had happened in their tenure at Ford, something that they had put away in their “silver box of memories.”
An older participant shared that in his first year at Ford, he was in the lunchroom eating the ham sandwich that his wife had made, when Henry Ford sat beside him. The employee said, “Mr. Ford was somewhat of a health nut. He had special bread baked every day, and when he traveled, he had his bread flown to his location. In this instance, Mr. Ford said to me, ‘John, you know that stuff you’re eating is bad for your health.
You shouldn’t be eating it,’ and then he rose and walked away.”Our colleague asked, “What happened next?” Looking a bit
surprised at the question, the gentleman said, “I’ve never eaten ham since that day.”
A culture that made Henry Ford a quotable and inspirational industrialist and gave his company a huge competitive advantage had become a barrier to Ford Motor Co.’s success in a much-changed marketplace. Fortunately, his successors, Donald Petersen and Harold “Red” Poling, led the cultural transformation to recover Ford’s competitiveness—the first-known intentional transformation of the culture of a large corporation.
In too many large organizations, corporate culture is a barrier to design thinking and potent innovation. And transforming corporate culture is a particular challenge for executives hoping to move their organizations toward design thinking.
Why do we say this? Design thinking is human-centric—focused on the customer, the consumer or whoever the end users may be. Design thinking requires a high degree of empathy for the end user, as well as big doses of risk taking,
prototyping and failing. Therefore, the practice of design thinking is likely to be antithetical to the corporate culture of most large companies, where data-driven decisions, rigid organizational hierarchies, well-established rates of return on investment and a high cost of failure are often the preferred business-as-usual ways of operating.
Impact of Corporate Culture on an Organization’s Ability to Innovate Through Design ThinkingCompanies that want to embed design thinking would do well to evaluate their current culture first. They should identify which of the company’s shared patterns of perception, thinking and acting may be at odds with design thinking and which ones are in harmony with design thinking’s key principles of empathizing, defining, ideating, prototyping and refining. The “Distinctive Elements of Corporate Culture” (see figure on the right) can be used as structure for making this critical assessment.
Said another way, design thinking cannot simply be wedged into an organization whose values are at odds with design thinking’s values. As Jeremy Utley, the director of executive education at Stanford’s d.school, a leader in design thinking, has said, “It’s a fool’s errand to try and go against the culture. You have to find the elements of your business culture that support [design thinking’s] kind of working and thinking mindset.”
If an organization is to embed design thinking, it must reveal, confront and take responsibility for all aspects of its current culture. Then it must design a culture that leverages design thinking for success in the marketplace
Distinctive Elements of Corporate CultureIt is important to assess each of these nine distinctive elements from three dimensions:
WHAT ARE THE STATED/FORMALPRINCIPLES?
WHAT ARE THE ACTUAL PRACTICES WITH EACH ELEMENT?
WHAT ARE THE UNSPOKEN BACKGROUNDDRIVERS?
LANGUAGEVocabulary, content and key phrases create a network of conversations that constitute the enterprise.01CUSTOMER ORIENTATIONHow is the customer viewed, served and interacted with?02VALUESWhat are the qualitative objectives? What is held in high regard?03ACCOUNTABILITYAre people organized for results, processes or tasks? What are the incentives?04TRADITIONS, RITUALS AND ARTIFACTSWhat are status symbols? What gives a sense of belonging and pride?05LEADERSHIP DYNAMICSHow does the workforce view leaders, and what is the leadership style?06UNWRITTEN RULES FOR SUCCESSWhat are the taboos, status symbols, pathways to success?07DECISION RIGHTS AND PROCESSWho makes what decisions, at what pace and by consulting whom?08LEGACYHave there been any close calls or major successes? What were the founders’ values and philosophy?09
1 2 3
of the future. (Not coincidentally, the application of design thinking can enable this step.) Finally, the firm must rapidly make the needed changes. Any other process risks simply dressing up the old culture without changing it. And that can result in the new culture unwittingly inheriting aspects of the old culture—aspects that undermine the advantages of design thinking.
WHAT IS CORPORATE CULTURE?
Every organization of any significant size—whether a commercial enterprise, a nonprofit charity or a governmental agency—operates within its own distinctive culture. Because it influences, shapes and distorts the actions, perceptions and thoughts of the people within the company, corporate
culture is a singular determinant of an organization’s effectiveness and can be an arbiter, or at least a critical factor, in long-term success or failure.
Distinguishing Corporate CultureCorporate culture is the particular condition in which people perceive, think, act, interact and work in a particular organization; it acts like a force field or an invisible hand. It shapes, distorts and reinforces the perceptions, thinking and actions of the people within the company, whether realized or not. Corporate culture is the unwritten rules for success inside the corporation, creating unseen walls and boundaries. It is the corporate paradigm. In short, it is whatever is reinforced within the organization. Analogously, it is like a company’s personality.
In many cases, that invisible hand offers a company a huge competitive advantage in markets, where the differences between competitors are limited. Southwest Airlines, long lauded for its unique culture and for being the most consistently profitable U.S. airline over the past three decades, is a good example. The company’s co-founder and former CEO, Herb Kelleher, once said that Southwest’s culture is the hardest thing for competitors to copy. Competitors “… can get all the hardware,” Mr. Kelleher said. “I mean, Boeing will sell them the [same] planes. But it’s the software, so to speak, that’s hard to imitate.”
It is important to note that Southwest’s culture is dynamic. It has kept up with the company’s incredible growth over the decades, helping keep Southwest near the top of the airline industry.
That is often not the case for established companies. Often, a corporate culture becomes fixed and unquestioned, the absolute view of reality, how things are (and ought to be), rather than simply a way to work—the right way rather than a way. In those cases, the organization loses flexibility, waste increases and execution slows.
Remember, we said that corporate culture is the unwritten rules for success inside the company. In healthy companies, the arbiter of behavior and success is the marketplace, and the corporate culture adapts to market forces.
When past ways of working culture take precedence over leading or responding to market change, success becomes pleasing the boss and fitting in.
In order to avoid this trap, organizations must empower and enable their people to continually invent new ways of competing and allow them to try to change the rules within the marketplace, as well as inside the corporation itself. This can happen either through a conscious and methodical cultural reinvention process or by building a spirit of renewal and reinvention into the culture itself.
Design thinking promises to do just this. It challenges existing assumptions about what customers want and need. It constantly pushes the organization to reconsider its marketplace offerings and how work gets done. And it asks people in the organization to work collaboratively to build something new.
CORPORATE FORCES THAT UNDERMINE DESIGN THINKINGIn most enterprises—especially in large and successful enterprises—
Corporate culture is the particular
condition in which people perceive, think,
act, interact and work in a particular organization; it acts
there are usually aspects of the culture that inhibit design thinking and innovation. These aspects show up in the practices, structures and systems of the organization, as well as in patterns of perception, thought and action. In their groundbreaking book The Power of Strategy Innovation, our Insigniam colleagues Bob Johnston and Doug Bate contemplated three forces that block innovation.2
More accurately, those can be seen as ways of perceiving, thinking and working—not actual forces—that can be neutralized through a designed corporate culture and attendant practices, systems and structures. But an analogy of forces is useful.
Corporate GravitySpeaking analogously, corporate gravity is a hidden force that pulls your employees back to familiar ground—what is proven and known—rather than freely launching them toward innovation. The pull of the corporation is greater than the pull of the consumer and the marketplace. Corporate gravity is a product of the worldview and concomitant processes, systems and structures that protect the legacy business model and core products or services. Corporate gravity pulls resources to maintaining and improving what is perceived as the source of corporate success.
To achieve success, ultimately, any organizational transformation must be led by the chief executive. Having said that, an antidote for corporate gravity is to appoint a chief change officer or a chief innovation officer (CIO). This executive is seen as the hand and brain of the CEO, has a budget and a department under her or him, and has the accountability and commitment to embed design thinking in the corporate culture. This CIO has the power and authority to initiate, lead and manage change. For companies moving toward a design thinking model, the change
2) Johnston, Jr., Robert E. and Bate, J. Douglas. The Power of Strategy Innovation: A New Way of Linking Creativity and Strategic Planning to Discover Great Business Opportunities, 2003, American Management Association, New York.
can be facilitated by an executive who can bridge the gap between top management and the design and innovation teams—someone who can bring their two worlds closer together.
Corporate Immune SystemYour body’s immune system rejects and fights foreign substances. It is an involuntary response. In an analogous way, organizations can seemingly reject and fight changes to their culture, even when the leaders are actively leading change.
There is no such thing as inherent resistance to change. People will not make changes if they are threatened by those changes. People will rapidly adapt to and/or cause change when they can see an opportunity for themselves.
All successful employees possess a key item of knowledge: how to make their managers happy. Do bosses demand that the current product development process be executed exactly as laid out in the corporate product development manual? Well then, how likely are employees to apply design thinking to that process, potentially disrupting it or completely reinventing it? How will they know how to make the bosses happy then?
This is one of leadership’s toughest challenges. Effective corporate change demands conversations—lots of them. Managers must tailor their message to individuals or, in a large-scale change process, tailor it division by division. What will inspire the scientists and engineers? What will move the marketers? Managers and executives need to interview and observe people in those divisions. They must then design a conversation that will open up opportunities for their people. In other words, executives and managers need to bring the designer’s tools and methods to their own work. That way, not only are employees engaged in the change, but they also see design thinking in action.
Corporate MyopiaThere is a joke:Question: How many designers does it take to change a light bulb?The designer’s answer: Does it have to be a light bulb?
The power of design thinking is that it asks those engaged to think in different ways—about the product itself, the way the consumer will use it, the way it will be made. Everything is up for contemplation and a shift in perspective. That can be a problem for companies that are undergoing a transformation to design thinking while also operating an ongoing business.
Corporate myopia keeps executives from seeing value in innovations, including new methods like design thinking. Successful executives think that they know what the consumer wants and what will succeed in the marketplace. A breakthrough innovation in a product or a process may threaten an executive’s sense of his worth or not fit her understanding of what is valuable or not conform to the corporate strategy. In some companies, anything that does not hit financial hurdle rates or show well on forecast sales volume evaluations never makes it to market.
On several occasions, Nestlé executives tried to kill the now-successful Nespresso coffee system. Nestlé was in the food business, not the kitchen
68 INSIGNIAM QUARTERLY | Summer 2016
In healthy companies, the
arbiter of behavior and success is
the marketplace, and the corporate culture adapts to
gadget business. Executives were skeptical of a technology developed by research and development (R&D) that did not fit the mass-market business model of the time and was a major departure from most of Nestlé’s lines of business. The Nespresso System survived and thrived when it was established as a separate company, in a different building, and an outsider was brought in for new perspectives and ideas.
The antidote to corporate myopia is design thinking itself. Rather than executives determining the value of an innovation, design thinking prototypes are held and actually used by consumers or users. Consumers and users determine value and how to improve or add value.
FOUR PILLARS OF INNOVATION FOR ENABLING DESIGN THINKING
N o one, not even expert mountain climbers or the Sherpas who live in the Himalayas, just shows up one afternoon and starts climbing Mount Everest. The effort takes years of
experience and months of preparation and requires that many things go to plan.
In the same way, design thinking cannot be embedded in a corporate culture without taking the time to build a stable base on which that change will rest. In The Power of Strategy Innovation, Mr. Johnston and Mr. Bate proposed that there are four critical pillars that support advanced strategy innovation. The idea is expanded and adapted to support effective design thinking. The “Four Pillars for Effective Creativity and Innovation” are illustrated in the figure on the right.
Pillar 1: Leadership MandateThe top executives have to commit to innovation using design thinking as a corporate priority; this is the corporate equivalent of Agamemnon hauling his ships onto the beach and burning them. The requirement for design thinking has to be baked into the corporate strategy. The executives have to learn and practice design thinking. They have to be committed to leading its adoption throughout the organization.
They have to design and communicate the case that innovation and design thinking are critical to the future of the organization. That mandate needs to be loud and clear and relevant to employees across the enterprise. They also must give clear permission to do fresh thinking and back this up with funding, people, time and space.
To illustrate: When A.G. Lafley, Procter & Gamble’s CEO, set out to remake that company around design thinking in 2001, he said, “We
will not win on technology alone. Therefore, we need to build design thinking into the DNA of P&G.” And he backed those words up with his own actions.
Mr. Lafley was a regular attendee at workshops focused on design thinking, where designers were paired with senior managers so both could share the principles of design thinking. He also routinely received input from an external design board (those fathers of design thinking, among others), set up to critique P&G’s design decisions. He met regularly with the design executive whom he had tasked with overseeing the transformation, Claudia Kotchka, vice president for design, innovation and strategy, so that he could stay informed about the latest steps in the process. On virtually every business trip, he took time to go into consumers’ homes and observe how they lived. In those ways, Mr. Lafley communicated and led, in both words and actions, the vision and commitment to make P&G a company built around design thinking.
Pillar 2: Dedicated InfrastructureA dedicated infrastructure organizes people, resources, budget, timelines, space and metrics. The dedicated infrastructure always mirrors the seriousness of the mandate. If there are visible resources invested in supporting the mandate, it is taken seriously. If not, it can be seen as lip service. It can include specific organizational roles, such as the office of innovation, a function that goes beyond new products or setting up self-managing teams.
To illustrate: A few years ago a large, successful health care enterprise held a typical executive offsite. The top executives discussed good news. Revenues were steadily increasing. So, too, were margins. They discussed a strategic plan that had been developed to ensure continued growth. But then came a surprise.
“We realized,” says one top executive, “that what had gotten us this
far wasn’t going to get us where we wanted to be in the future. We took a real gut check and asked, ‘What do we need to change to achieve the strategic goals we had set?’ and ‘Are we going to make the investment in those changes?’”
The answers were eye opening. It was decided that the corporate culture needed to be redesigned with a focus on patients. The corporate culture had been centered on fiscal discipline, a heritage that was valued and honored.
Centering on patients would require a transformation. It was also decided that this transformation was worth the investment of money, time and the risk involved in changing the operational values of a financially stable enterprise because the executives were smart enough to realize that the risk of staying the same was even higher.
When an organization takes that kind of risk, though, it does not take it lightly. In this case, they executed systematically, step by step.
Step 1: Conduct a cultural assessment.A cultural assessment of custom-designed questions was used for interviews and surveys of employees from every level, function and geography in the company to reveal the current culture. This process is not unlike the ethnographic tools that design thinking relies on to reveal the needs of consumers whom designers hope to help. The assessment was conducted against the “Distinctive Elements of Corporate Culture” (page 65). The analysis and report from the survey highlighted key aspects of the culture, the aspects that would support the strategy and those that would inhibit it, and recommendations to initiate the transformation.
Step 2: Set up an office of transformation and a transformation leadership team.They called this team “the leadership coalition.” It was composed of 40 people from across all divisions of the organization. While not every team member was dedicated full time, they allocated a set amount of time for their new roles, as if part-time jobs. A full-time transformation executive was appointed and acted as team leader. The CEO’s opening statement on the coalition’s first day was that the group was to leave their titles at the door as they drafted a new vision, a new mission statement, new corporate values and new operating practices for the company.
Step 3: Set a budget and some deadlines.Cultural transformation is neither quick nor cheap. It has hard costs and the need for sustained effort—a test of commitment, all of which should be considered carefully in advance. The company had an 18-month window for its first, most important phase of cultural transformation and allocated a specific dollar amount to make that change happen. The leadership coalition set a timeline working back from the close of the window.
“We will not win on technology alone. Therefore, we need to build design thinking into the DNA of P&G.” —A.G. Lafley, CEO of Procter & Gamble
Step 4: Create a team to win over the team.An enrollment team that drew employees from all levels and functions of the organization was asked to inspire and engage the workforce to adopt the company’s new direction, even as it was being developed. These team members were trained in design thinking, effective communication and enrollment. They designed both the message and delivery methods to fit the company and its people.
Step 5: Create a big commitment, new capabilities and increased capacities, and lots of project teams.This company also created a 30-person Keystone Project Team that, as its name suggests, was responsible for developing and executing a key project that would move the company to its new customer-focused goals. A keystone project is a multiyear commitment to producing critical results that can only be accomplished in the new culture. The Keystone Project Team commissioned project teams to move the keystone project forward and to deliver the intended results.
At the same time, 18 of the company’s top executives were engaged in a yearlong leadership development initiative that would give them the skills to work in an environment where collaboration was emphasized far more than it had been. As part of the leadership program, each executive designed and led a leadership project.
As one executive said, “We developed a real focus on teams. There was much less interest in executives saying, ‘How can I get this done?’ and more on, ‘How can we get this done?’”
Within the 18-month window, the initiative delivered notable change and produced remarkable results, moving the company from the middle of the pack to near the top of its industry in the three key metrics used to measure success.
Note: The first rule of management is that you tend to get what you reward; obviously, everyone knows that a reward structure is needed to support the transformation. However, the second rule of management is that you tend to get what you measure; not so obviously, as part of the infrastructure, you have to put in place a scoreboard to measure the value generated by design thinking. Otherwise, the value of design thinking is lost in the mix of overall business results.
From the time he joined Clorox in 2009, Wayne Delker successfully drove new product development as head of research and development and then as chief innovation officer for the entire company. Dr. Delker invented metrics to measure the value derived from innovation that helped sustain executive management’s investments in innovation, creating a virtuous cycle.
Pillar 3: Proprietary ProcessFor an enterprise’s creativity, innovation and design thinking process to complement its culture, infrastructure and mandate, it must be their process, meaning it must be proprietary. The process needs to reflect
the unique business and assets of the company, as well as its corporate culture; ideally, the process should evolve over time.
Learning from leading-edge businesses and educational institutions can and will provide value, so why not just cut and paste their process into your organization? When an organization tries to wedge another entity’s process into its own business, the background and organizational context that allowed the process to be successful in the originating company is lost. The implementing company often finds that the off-the-rack solution does not integrate with the other elements of its enterprise. Simply put, company X’s process will not fit company Y’s infrastructure or culture—organizational context—because it was not designed to fit. Context trumps content; context is decisive.
Consider this statement made by Norio Ohga, the former chairman and CEO of Sony, a company that has effectively utilized design thinking. “At Sony,” he said, “we assume that all products of our competitors have basically the same technology, price, performance and features. Design is the only thing that differentiates one product from another in the marketplace.” Design, implement and utilize a proprietary creativity, innovation and design thinking process for your company.
Pillar 4: Supportive CultureA supportive culture is friendly to new ideas, ranging from incremental to transformational, and not just those from the top down. The culture has to avoid breeding a fear of risk and failure. Risk management is healthy; risk avoidance is deadly. A supportive culture limits corporate gravity, inoculates against the enterprise immune system and fights corporate myopia, the three forces we discussed earlier in this chapter.
Compare the corporate cultures of Boeing and Airbus, a duopoly of commercial airplane builders, and you will find that the cultures are not even remotely similar, while their businesses are essentially the same. Think of the difference in corporate cultures at General Motors and Toyota.
This is why culture can be a huge advantage to some companies and a huge disadvantage to others. Remember the quote from Herb Kelleher at Southwest Airlines from earlier in this chapter about culture being a differentiator.
Cultures are not one-size-fits-all, and neither cultural transformation nor any serious design thinking endeavor can be a one-size-fits-all solution. These must be specifically designed with the existing culture and the corporation’s purposes and strategic intentions in mind. It must take into account the organization’s history, leadership and the mandate for change. Any plan put in motion to move an enterprise on an innovative path toward the future must first begin by recognizing and revealing where and what the organization is today—for better or worse.
FOUR STAGES OF TRANSFORMING TO A CULTURE OF DESIGN THINKING
OK, what if we have done a good job and convinced you that you need to transform your corporate culture with design thinking embedded in it? What if you have realized that a designed culture with design thinking embedded in it would give your enterprise a competitive
advantage? Beyond the five steps and the four pillars outlined above, there are four stages to move your organization through for a successful cultural transformation (or any organizational transformation, for that matter).
Stage 1: Revealn What are the current aspects of your strategy, culture, processes
and practices, systems and structures that enhance or inhibit design thinking?
n What are the hidden assumptions and deeply held beliefs that operate as an invisible force in the organization, telling people what is possible and not possible?
n What are the unwritten rules for success?n How are new products and services brought to market? Is the
company driven by internal decisions or customer insights?n How do past failures, as well as successes, determine people’s
thinking about the business, market dynamics, the competition and the customer?
n Are you innovating or just keeping up with the competition?n Is your company’s relationship with the marketplace generative
or reactive?n Assess the current culture against the nine Elements of
Corporate Culture.
Stage 2: Unhookn What interpretations and beliefs cloud your view of the facts?n To what degree do you blame forces outside of your control for
your results, for example, “It is the economy,” “Marketing’s data is flawed,” “R&D cannot deliver on our customer needs?”
n Are you listening to what your customers are actually telling you, or do you already know what they are going to say?
n To what degree have your ways of doing things become the only way of doing things?
n What was said in the past and has now become the way it is?n What are the sacred cows that need slaughtering?n What assessments and judgments were made and are now related
to as facts?n Take responsibility for all of those conversations, stop relating to
them as reality and put them aside.
Stage 3: Inventn What will be the marketplace in the future?
n What kind of company would thrive and be wildly successful in that marketplace?
n What will be the purposes and ambitions of your organization that will inspire, challenge and excite the people who are your organization?
n What values will support your commitments? What are the fundamental principles that will inform people’s thinking and working?
n What is your leadership mandate for design thinking?n What will be your proprietary innovation and design thinking
process?n How do you need to design your strategies, processes and
practices, systems, structures and teams to leverage design thinking?
n What rewards and recognitions will reinforce and support design thinking?
n How will you measure the value generated by design thinking?
Stage 4: Implementn Is leadership aligned with the future that is being created?n In what new conversations will you engage the people of your
enterprise?n How are you going to get people to work across functional lines?n How are you going to get the customer present in virtually every
conversation and in every day of work?n What projects and initiatives will utilize design thinking?n Do you have a communication strategy that is sufficient to support
the culture change (communication increased by a factor of 10)?n What education and training will make a difference in
empowering and enabling what people within the company?n Are people held accountable for behaving and acting consistent
with the new culture?
CONCLUSIONThe lesson? Design thinking is a powerful new approach to business. Design thinking would likely be a source of competitive advantage, if it were embedded in the corporate culture, as well as the company’s strategy, processes and practices, systems and structures. Those companies that have embedded design thinking have found that it produces great results for customers, employees and their organizations as a whole.
To embed design thinking means both a strategic and cultural transformation for most large corporations. But cultural transformation is complex, difficult and fraught with risk. To use design thinking to achieve competitive advantage, the corporate culture must at least align with and, ultimately, pull for design thinking. By installing certain structures and by working on specific elements of the culture, executives can achieve this level of performance for their businesses. IQ
Cultures are not one-size-fits-all, and neither cultural transformation nor any serious design thinking endeavor can be a one-size-fits-all solution.
ABOUT THE AUTHORSNathan Owen Rosenberg Sr. co-founded Insigniam. His 30 years in management consulting have catalyzed measurable breakthrough results, valuable innovations and cultural transformations for 17 percent of the world’s thousand-largest companies and the more than 89,000 people with whom he has worked directly. Mr. Rosenberg is an executive board member of Boy Scouts of America, president of the United States Air Force Academy Rugby Excellence Fund and a trustee of the Committee for Economic Development. This chapter is dedicated to his brother, Werner Erhard, who is the inspiration for much of what is written.
Marie-Caroline Chauvet is a partner in Insigniam and a member of the firm’s design and innovation team. She has two decades of corporate experience in financial management and corporate strategy. She received her MBA at the Université Paris-Dauphine. Ms. Chauvet serves on PDMA’s Board (2014–2017). She resides in Toulouse, France.
Jon Kleinman brings more than 15 years of experience in consulting with Fortune 500 companies. As the partner leading Insigniam’s design and innovation team, Mr. Kleinman has researched, designed and executed new interventions for Insigniam that provide extraordinary value for clients. He is on the board of the Jewish Community Center of Southern New Jersey.
CULTURE QUIZ6 questions for executives looking to strengthen their organization’s culture. By Scott Beckett and Guillaume Pajeot
IQBOOST
A primary job of the CEO should be to establish the organizational culture. The proper culture enables and empowers strategy execution like little else can or does. But how do you know if you are leading your culture in the right direction? Start by asking yourself six questions.
1. Do you really understand what culture is? Culture is not fluffy. It is not about perks. Culture comprises the (mostly) unarticulated rules for suc-cess inside the enterprise—whatever is reinforced and rewarded within the organization. It creates the organiza-tional context that shapes and distorts the perceptions, thinking and actions of people within the company. In other words, it influences everything.
2. Is the company executing on its strategy at the pace you would like? If the answer is no, the first question to ask is, “What is our cul-ture not providing that is needed for success?” You will not find the answer in employee surveys; they will tell you the symptoms, not the causes. Instead, talk to as many employees as possible in person. Look for the behaviors and attitudes that slow the company’s strategic momentum and act as impediments to the intended culture being fully realized.
3. Are your sleeves rolled up? When it comes to organizational culture, you cannot “set it and forget it.” Keeping your company on track requires constant atten-tion to culture. Executives at truly competitive, modern companies regularly work on their culture in management meetings. They understand that culture is the air employees breathe.
4. Are you mixing individual self-interests with company in-terests? When building corporate culture, you cannot simply impose a bias of what should be onto the company. A vibrant and meaningful culture that aligns with strategy to support the right business outcomes is best built from the bottom up—and that means employees must be part of the construction process. Remember, people are most enrolled in what they help create!
5. Are you operating in a way that demonstrates the culture you want? Simply put, the fish rots from the head. Employees are watching for dissonance between espoused values and practiced values. “Walking the talk” is a mantra for good reason: People will follow you where you lead them. So be intentional about how you operate.
6. Are you honing your culture as a competitive advantage? Once you have defined the culture needed to fulfill on strategy, go a step further and build it as a distinctive competitive element: what clients, suppliers and stakeholders will experience when they interact with your organization. Investing in your culture is investing in your brand. IQ
Scott Beckett and Guillaume Pajeot are partners at Insigniam.
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