Booz & Company June, 2011

Creating a more innovative cultureJon Katzenbach

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Culture matters

“Everything I do is a reinforcement, or not, of what we want to have happen

culturally. … You cannot delegate culture.”

Steve Ballmer, Microsoft CEO

“If you get the culture right, most of the other stuff will

just take care of itself.”

Tony Hsieh, Founder and CEO of Zappos.com

“Fixing the culture is the most critical – and most difficult – part of a corporate

transformation.”

Lou Gerstner, retired CEO of IBM

“No company can sell employees on a culture if it isn’t practiced, and believed

in, from the very top down.”

Colleen Barrett, former President Southwest Airlines

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But what is this fuzzy “culture” thing, really?

We Say an Organization’s Culture is …

…its self-sustaining patterns of behaving,

feeling, thinking, and believing

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Decision MakingInformation sharing

And what does an innovative culture look & feel like?

Leadership Effectiveness

Work Execution

Relationships

(In-)formal knowledge exchange

Being curious

Open feedback

Quick, informed decisions

Based on expertise

Non-risk averse

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Continuous improvement

Proactive behavior

Collaboration across units

Interacting based on trust

Market & competitor observation

Accountability

Encouraging experimenting

Mistakes as teaching moment

Decision MakingInformation sharing

(In-)formal knowledge exchange

Being curious

Open feedback

Quick, informed decisions

Based on expertise

Non-risk averseWork Execution

Leadership Effectiveness

Relationships

And what does an innovative culture look & feel like?

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Four imperatives when dealing with culture

Work “With and Within” Your Existing CultureWork “With and Within” Your Existing Culture

Use Viral MethodsUse Viral Methods

Mobilize Rational and Emotional ForcesMobilize Rational and Emotional Forces

Start with Changing Behaviors not MindsetsStart with Changing Behaviors not Mindsets

4

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1) Work “with and within” your existing culture

The existing culture can be a powerful source of energy

Culture is usually a product of good intentions and is rarely “all bad”

Understanding “the good” about an existing culture can accelerate change

It’s a long race - culture changes slowly

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Troubled organization in aftermath of Vietnam war

Morale was low; values and discipline severely damaged

Al Gray “resurrected & praised” elements of the traditional USMC culture

Embodied these elements in his own behaviors in highly visible ways

Sit

uat

ion

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Case study: U.S. Marine Corps

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2) Start with changing behaviors, not mindsets — it’s faster and more lasting

Three Levels of Corporate Culture

Invisib

le Elem

ents

Vis

ible

Ele

men

ts

Focus here first

Identifiable markers

Patterns of overt behaviors and interactions Ingrained approaches to performing tasks

and solving problems

Thoughts, feelings, and beliefs Corporate stories

Symbols

Behaviors

Thoughts, Feelings, Beliefs

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Balancing Rational and Emotional

Rational Emotional

Communities & NetworksVision

& Values

Strategy

Structure & Process

Purpose

Commitment & Pride

“Front Line”

Top Leadership

Culture Evolution

3) Mobilize Rational and Emotional Forces

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Three CEOs and their leadership teams had tried and failed

Programmatic change had been successfully resisted by ”nice culture”

Jack Rowe appointed CEO

Initiated behavior change at multiple levels - top, frontline and middle

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Case Study: Aetna Turnaround

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4) Spread the behavior changes virally

Multiple Mechanisms

4

Pride Builder Cells

Communities

Focused Networks

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Largest Telco company in Canada - analogous to AT&T

Behaviors in market with customers were not differentiated

Strategy was revised and operating model redesigned but ...

Frontline employees were still not getting traction with customers

Started small, used viral methods to accelerate behavior change

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Case Study: Bell Canada

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Changing behaviors: Three sources of influence

Messaging

Programmatic

Interactive

Vision Values Engagement

Structures Processes Metrics

Informal networks Affinity groups Communities

Cultural Values

Critical Behaviors in Key Populations

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Example 1: P&G

Open working areas

Experienced, cross-functional teams

Portfolio mgmt capability

Technology game boards

Top10 consumer needs

Cultural Values

Critical Behaviors

Programmatic

InteractiveMessaging

Increasingly complex assignments for promising employees

Sr. level support that connects and develops

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Example 2: Global Technology Company

Executives roaming halls soliciting ideas

High executive salary during cost cutting

All executives resigned from community and civic leadership roles

Global Technology Company

Programmatic

Interactive

Cultural Values

Critical Behaviors

Divisions given autonomy to address unique needs

Stringent manager performance reviews

Indiscriminate cost-cutting

Coffee chats and town halls

Individual accountability requirements replacing team incentives

Messaging

Cursive: Actions detrimental to creating a more innovative culture

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Work “With and Within” Your Existing

Culture

Target Few Critical Behaviors

Mobilize Rational and Emotional

1 2 3

Use Viral Methods

Use Messaging, Programmatic, and

Interactive Approaches

4 5

Five key takeaways to creating a culture that is much more innovative

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For more information

Visit us at www.KatzenbachCenter.com

Contact us at katzenbach.center@booz.com

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