Lecture Materials

STRATEGIC LEADERSHIP ISSUES

Cheryl L. Thomas Director, Strategic Advisory Services

Wipfli LLP Milwaukee, Wisconsin cthomas@wipfli.com

414-259-6729

August 2, 2016

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The Role of Culture in

Leadership

Date or subtitle Graduate School of Banking

August 2016

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Presenter

Cheryl Thomas

Director, Strategic Advisory Services

414.259.6729

cthomas@wipfli.com

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Agenda

Why Culture Matters

What Is Culture?

Culture and Change

Strategic Leadership

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Leadership Questions

1. Do you know your organization’s current culture?

2. How do you know?

• Observations, feedback

• Formal survey results

3. Is it enhancing success, or a barrier to success?

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Why Culture Matters

1. Better financial performance

2. Positive customer experience

3. Greater employee engagement

4. Higher levels of productivity

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Why Now

1.Recovery from Financial Crisis

2.Leadership and Management are undergoing a

revolution—at a minimum, a major evolution!

3.Creating Value for customers and employees is

key.

4.Software/technology has reshaped how people

engage with each other.

5.Remote work is becoming a viable option for more

people.

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Re-establishing Trust

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Success and Culture

Overwhelming research correlates strong culture to:

Intention to Stay

Cooperation/Teamwork

Quality

Adaptability

Satisfaction

Turnover

Stress

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Source: Correlations from Szumal, J.L. 2001

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What Is Culture?

DEFINITION ________________________________________________________

The shared values, beliefs, and

behaviors that underscore:

how things get done,

how decisions get made, and

how people interact

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“The way we are expected to do things around here.”

Culture is cognitive: what people believe and know.

It reflects shared values (what is important) and

beliefs (how things work).

It encompasses norms and expectations that

influence the way members of the organization think

and behave.

However, norms and expectations (Current Culture)

are not always in alignment with shared values (Ideal

Culture).

Copyright © 2015 by Human Synergistics International. All Rights Reserved. 10

Organizational Culture

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The Elements of Culture

Business Environment

Artifacts, Physical Settings, Work

Environment

Values and Beliefs

Heros, “Standard Bearers”, Influencers

Rituals, Traditions, Known History

The Cultural Network

Source: Deal, T.E. and Kennedy, A.A., Corporate Cultures, 2000

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Culture and Engagement Relationship

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Values - Exercise

1. What are your institution’s Stated Values?

2. What does your institution Value?

Why is there a difference?

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Financial Institutions Values

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Assessing Your Culture

Organizational Culture Inventory

(OCI)

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Human Synergistics

40+ years of

research

Valid and reliable

Normed globally

Linked to team and

organizational

behaviors

High-Performing

Individuals

High-Performing

Teams

High-Performing

Organizations

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The Circumplex

Dimensions based on theory

(e.g., Maslow’s Hierarchy of

Needs) and analysis of

thousands of surveys tying

behaviors to style descriptions

and to outcomes

Measures 12 distinct styles that

describe key behavioral styles

Raw scores from the survey

are converted to a percentile

score relative to the database

of thousands of responses

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OCI Circumplex—Cultural Norms

18 Research and development by Robert A. Cooke, Ph.D. and J. Clayton Lafferty, Ph.D. Copyright © 1973-2015 by Human Synergistics International. All Rights Reserved.

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Cultural Style Clusters

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Constructive Passive/Defensive Aggressive/Defensive

Characterizes behavior that

contribute to one’s level of

satisfaction, ability to develop healthy

relationships and work effectively

with people and accomplish tasks

Represent self-protecting

behavior that promote the

fulfillment of security needs

through interaction with

people.

Reflects self-promoting

behavior used to maintain

one’s status/position and

fulfill security needs through

task-related activities

Research and development by Robert A. Cooke, Ph.D. and J. Clayton Lafferty, Ph.D.

Copyright © 1973-2015 by Human Synergistics International. All Rights Reserved.

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Types of Cultures

Constructive Cultures

Defensive Cultures

•Passive

•Aggressive

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Source: Research by Robert A. Cook, PhD. Copyright 2003 Human Synergists International

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Constructive Cultures

Behavioral norms contribute to high levels of

satisfaction, ability to develop healthy relationships,

work effectively with people and accomplishment of

tasks. Examples:

Establishes challenging and realistic goals

Employees develop themselves

Employees are supportive and open to influence in working

with each other

Cooperative

Sensitive to each others needs.

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Humanistic

Affiliative

Achievement

Self-Actualizing _______________________________________________________________

• Employees share a set of relatively consistent values and

methods of doing business

• New employees adopt values quickly

• Seen by outsiders as having a certain “style”

• Strong alignment among strategy, goals, values, and behaviors

Characteristics of Constructive

Culture

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Constructive Cultures Impact on

Performance

Goal alignment

Increased motivation and engagement

Structure and controls without having to rely on

bureaucracy

Efficiency and fewer mistakes/risks

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Defensive Cultures

Behavioral norms are self-protecting or self-promoting

in order to maintain one’s status or position.

Behaviors meet security needs, focused either on the

interaction with people, or accomplishment of tasks.

Examples:

Employees are expected to agree and be liked

Employees do what they are told

Clear all decisions with superiors

Avoid being blamed for mistakes

Oppose new ideas

Operate in a “win-lose” with colleagues.

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Oppositional, Competitive

Power, Perfectionistic

Avoidance, Dependent

Conventional, Approval _______________________________________________________________

• Employees focused inwardly (focus on self-protection,

promotion)

• Many beliefs but no agreement about what is important

• Behaviors that are disruptive or destructive

• High degree of fear ; little innovation; resistance to change

Characteristics of Defensive Culture

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Signs of a Culture in Trouble

No clear values or beliefs about how to succeed;

many beliefs but no agreement on which is most

important; different beliefs in different areas

Behaviors that are destructive or disruptive; emotional

outbursts

Short-term focus; morale problems

Fragmentation/Inconsistency

Subculture values preempt shared company values

26 Source: Deal, T.E. and Kennedy, A.A., Corporate Cultures, 2000

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Constructive Cultures Matter

Better

Financial Performance

Positive Customer

Experience

Greater Employee

Engagement

Higher

Productivity

Research and development by Robert A. Cooke, Ph.D. and J. Clayton Lafferty, Ph.D. Copyright © 1973-2015 by Human Synergistics International. All Rights Reserved.

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In a study of 69 companies across a

variety of industries . . .

Profitability (Over 3-Year Period)1

Strength of Cultural Norms2

Earnings/Sales Ratio

(n=69)

Earnings/Sales

Volatility (n=60)

Constructive + 0

Passive/Defensive 0 0

Aggressive/Defensive 0 ++

+/- signifies positive or negative correlation significant at p<.05.

++/-- signifies positive or negative correlation significant at p<.01.

0 signifies relationship is not statistically significant.

1Financial data for the three-year period provided by Towers Perrin for 69 companies in various industries.

Ratios are averages for the three-year period; volatility scores are standard deviations. 2Organizational culture data provided by Human Synergistics, based on factor scores.

Research conducted by Robert A. Cooke, Ph.D. Copyright © 2003 by Human Synergistics International.

. . . there were positive correlations between Constructive Cultures and

profitability and Defensive Cultures and sales volatility.

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Copyright © 2012 by Human Synergistics International.

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Research and development by Robert A. Cooke, Ph.D. and J. Clayton Lafferty, Ph.D. Copyright © 1973-2015 by Human Synergistics International. All Rights Reserved.

How Culture Is Supposed to Work

Philosophy

Mission

Individual

Level

Group Level

Organizational

Level

Goals

Strategy

Ideal Culture Current Culture Outcomes

Values and Beliefs Norms and Expectations Effectiveness

Focus

Measuring

“What should be

expected here”

“The way

we are

expected to

do things

around

here”

“How we’re

doing here”

Assumptions

Espoused

Values

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Research and development by Robert A. Cooke, Ph.D. and J. Clayton Lafferty, Ph.D. Copyright © 1973-2015 by Human Synergistics International. All Rights Reserved.

Organizational Factors

Philosophy

Mission

Structures

Systems

Technology/

Processes

Skills/Qualities

Individual Level

Group Level

Organizational

Level

Goals

Strategy

Assumptions

Espoused

Values

“The way

we are

expected to

do things

around

here”

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Ideal Culture Casual Factors Current Culture Outcomes

Values and Beliefs Levers for Change Norms and Expectations Effectiveness

Focus

Measuring

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Leadership Responsibility

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“Culture happens. Leaders and

managers can let it happen or

they can manage what happens.

It is a choice!” .

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Organizational Change Model

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Transformational Leadership

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. . . Leadership in which the leader

identifies the needed change, creates

a vision to guide the change through

inspiration, and executes the change

with the commitment of the members

of the group

The non-quantitative ‘stuff’ ultimately is the real

driver of sustained bottom line profitability . . . the

numbers are not the plan!

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Culture and Strategy

Strategy alone is not sufficient.

“Culture eats strategy for

breakfast” - Peter Drucker

Organizations must have a strong culture that

aligns with the strategy and is supported by

structure, leadership, management systems,

processes, and people.

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Current Issues Impacting Strategy

Non-traditional competitors disrupting the industry

Need for competitive differentiation

Cyber-security

Technology to transform core business activity

Technology to enhance customer experience

Integration of Risk Management and Compliance

Big-data—Advanced Analytics

Succession/Talent Management

Mergers/Acquisitions

Diversity and Inclusion

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Why Strategy Fails

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Cultural Barriers

Turf issues

Blame

Bureaucracy

Hierarchy

Self-Interest

Poor Communication

Strategy

Lack of . . .

Agility

Bias for Action

Openness and Trust

External Focus

Alignment at the Top

Success

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Aligning Culture – Top Ten

1. Define the desired culture Values described in terms of behaviors

2. Make the Mission/Vision/Values known

3. Hire for “fit”

Consider behavioral assessments; screen for values

and competencies

4. Best Practices in Performance Management

Clarity of roles and responsibilities (Job descriptions),

SMART goals/clear objectives, regular feedback,

coaching/training, rewards tied to performance

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Aligning Culture – Top Ten

5. Establish and align incentives and rewards

Performance driven rewards

6. Best practices in Staff Development

7. Establish effective lines of defense

Staff and Management attend to the desired behaviors

Human Resources on the Executive Team

Ability to monitor; report issues

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Aligning Culture – Top Ten

8. Assess and measure Culture

Intentional management

9. Establish shared responsibilities for culture

Executives

Managers

All employees

10. It starts at the top – Board Governance

Own the issue; Lead by example; Cascade culture from

the top; Define cultural leadership attributes; Monitor

progress

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Change for Positive Growth

Assess Culture • Look at all levels

• Identify where culture and engagement supports or

detracts from performance

Plan and Manage Change • In the context of culture

• In alignment with strategy and goals

Focus on: • Organization structure

• Management systems

• People

• Measure and monitor progress

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Questions for Effective Change

1. What habits in our culture will get in the way of

achieving our strategy?

2. What qualities do we need to add or strengthen

in our culture to support our strategic goals?

3. Do we have the necessary alignment between

our strategy, structure, systems and behaviors

to execute?

4. What behavioral shifts are needed to align our

culture?

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Challenges by Industry

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“Leaders cannot truly be judged until ten

years have passed after their tenure.”

• Did the company stay the course?

• Did it produce other leaders just as

successful?

“10 Greatest CEO’s” Jim Collins

- Marilyn Carlson Nelson

Chair, Carlson Companies

How We Lead Matters

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QUESTIONS?

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