Knowledge Center: Article
Chief Executive Officer & Board of Directors
The four principles of culture changeSubscribe to Chief Executive Officer & Board of Directors 8/18/2015 Larry Senn
By Larry Senn
When I founded Senn Delaney 37 years ago to focus solely on creating healthy, high-performance cultures and improving the spirit and performance of organizations, I had to do a lot of basic grounding in my discussions with leaders to explain what culture is and why it should be shaped instead of letting the culture shape the organization.
Today, organizational culture has reached a tipping point. In fact, culture was named the most popular word of the year in 2014 by Merriam-Webster. It has now become one of the most important words in corporate boardrooms, and for good reason. Most CEOs know that culture matters and can have a strong impact on business results. Companies that focus on culture are becoming icons for job seekers, especially the future generation of leaders, who place a premium on work-life balance and culture fit in choosing where to work.
That is the good news. The bad news is that despite this broad executive understanding of culture, and the many studies and books written over decades to demonstrate the link between culture and performance, the fact remains that too many culture-change efforts still fail or fall short of their potential.
Culture and engagement is the most important issue that companies face around the world, according to the Deloitte Global Human Capital Trends 2015 survey of more than 3,300 business and HR leaders from 106 countries.1 The survey found that 87% of organizations cite culture and engagement as one of their top challenges, and 50% call the problem “very important.” More than half of the business leaders rate this issue as “urgent” — up from only around 20% in 2014.
Culture is driven from the top down. Yet most executives cannot even define their organization’s culture, much less figure out how to disseminate it throughout the company.
Although culture and engagement plays such a critical role in business performance, most organizations do a poor job of measuring their achievements or shortcomings. Only 12% of those surveyed believe their organizations are excellent at effectively driving the desired culture.
By focusing on driving engagement through the right corporate culture, companies can improve execution, retention, and financial performance.
We have shown through our work with hundreds of companies around the globe, including more than 100 of the Fortune 500, that successful culture transformation is possible. How is this done? We have demonstrated along the way that there are four key principles that must be followed for this to occur.
Every company has its own unique culture, defined by a collective set of values and habits that condition actions of people within the organization. Cultures happen either by default or design. Successful leaders shape their cultures instead of allowing their cultures to shape the company. Leaders who do this best treat culture as a business strategy, with an ongoing commitment to continually refine the culture in response to major changes within the organization to strategy and structure.
A journey, not an event
Leaders who have successfully, measurably, and sustainably shaped their cultures know that culture transformation is a journey, not an event or a series of trainings on how people need to behave and interact. It is a journey that has a destination but no real end point where you can stop and say, “I’ve arrived at my destination and can now relax.”
Culture shaping does have a starting point that can be defined and a desired direction to head toward — along with a road map to follow. Then there are checkpoints along the journey to see whether you are on the right path or need to alter course a bit. But there is really never a true end if culture change is done correctly. Because just when you think you have changed the culture and made the measurable improvement you set out to achieve, things change again.
There might be a new CEO who wants to change things, or a new strategy may be necessary to respond to a rapidly changing market condition. Perhaps the company made a major acquisition or was taken over by a very different parent company with a whole different culture.
These events can cause a culture to be derailed, or the leaders can use them as an opportunity to reinforce the foundational culture they have built or to tweak it to realign with the new situation.
Needed: An integrated approach
CEOs who have been most successful at shifting their company culture have an acute awareness of and focus on the following four principles for successful culture change.
A successful culture-shaping process requires an integrated approach that must begin at the top of the organization and be embedded throughout the company.
- The CEO and senior leadership team must own and lead the culture-shaping process.
- Leaders need to have a clear, compelling purpose for themselves and their organization, coupled with a strong business rationale to inspire a thriving organizational culture.
- The process needs to be supported by resources and a systematic execution plan, like any other business strategy.
- Leaders cast a powerful shadow; A successful culture-shaping process requires an integrated approach that must begin at the top of the organization and be embedded throughout the company, therefore, the culture needs to be explicitly defined through values and behaviors and modeled by members of the senior team.
True and lasting change occurs only through our personal insights. People need to unfreeze existing habits and make personal behavior changes. This occurs on an emotional (not intellectual) level, can only develop through insight-based learning, and is best accomplished in natural work teams to shift thinking and reinforce change.
The more companies focus on shifting their employee's mind-sets and behaviors in a desired direction, the more successful they will be.
People need to understand the purpose/reason for shaping their culture. They need to be clear on the “from and to” of the journey. They need to understand what's in it for them to make a personal connection to the desired change.
Broad engagement with energy, momentum, and mass
- An integrated process to shift behaviors, reinforce principles, apply learning, and measure culture changes should be implemented across the organization.
- Momentum, energy, and critical mass are needed to engage people in the culture at all levels of the organization because cultures resist what is most needed.
- The change process should move as quickly as possible from the CEO team to next-level teams to the whole organization.
- An active, visible group of senior leaders and culture champions who get the culture, demonstrate it, and communicate it in actions and words will ensure the culture remains in us.
- Systematic reinforcement is needed at the individual, team, and organization levels.
- Institutional practices, systems, performance drivers, and capabilities need to drive toward the desired culture — including, but not limited to, communication, training, measurement, rewards and reinforcement, performance management and HR practices, and physical layout.
- Visible application, measurable results with feedback and coaching, rewards, and consequences are needed to make the culture real and create accountability.
Embracing the principles of culture change
Our work with USAA, the top-rated financial services company serving military members, has been inspirational and gratifying.
General Joe Robles took the reins as CEO at USAA in 2007 during the severe economic downturn. USAA had a tremendous track record before he arrived, but he recognized that even with its great culture, the company needed to take it up another level. Robles focused on creating a culture that fosters learning, growth, and innovation, all with the goal of making things simpler, better, and easier for USAA's customers and employees.
As the self-described “chief culture officer,” Robles understood that it is USAA's committed and engaged employees who make the difference every day in the lives of its members. USAA is now a well-documented perennial leader in customer and member satisfaction and loyalty. The “secret sauce” is that more than 23,000 employees serve more than 9.1 million members with compassion and a deep sense of purpose.
One of the things that you learn from Robles is how important it is for a leader to have a compelling purpose for the organization in order to inspire employees in their relationships with customers. Serving the military and their families exclusively is a unique strategy, but what drives its implementation is the company's commitment to helping those members in all aspects of their financial security.
Robles was zealous in living the key principles of culture shaping, particularly in how he served as the highly visible leader of the culture. His leadership from “the front,” grounded in that higher purpose, inspires and drives the employees.
Robles attributed a big part of USAA’s success to the passionate commitment of leaders and frontline employees to USAA’s six “My Commitment to Service” cultural pillars. He understood the importance of bringing USAA's six core values to life, with everyone from top to bottom living and modeling them.
He also knew that the journey is never done and that cultures need to be sustained and invested in, just like every other business strategy. That is why new employees spend as much as four days in an orientation, and a big part of that is being grounded on USAA’s purpose and values.
By having a clear focus on the four principles of culture change, Robles led USAA to become one of the most successful and highly rated financial services companies in America. Under his leadership, USAA grew 53% in members, 45% in revenue, 68% in net worth, and 59% in assets owned and managed — all during one of the worst US economic downturns in recent history. During that same period, which included some of the costliest catastrophes in USAA history, the company returned $7.3 billion to members and customers through dividends, distributions, bank rebates, and rewards and remained among just a handful of companies to earn the highest possible ratings for financial strength from Moody’s, A.M. Best, and Standard & Poor’s.
USAA also receives consistently outstanding awards and ratings for member service, employee well-being, and financial strength. It has become a model of a customer service culture that drives business success. This was again demonstrated in the prestigious 2015 Temkin Group ratings for customer experience. USAA ranked number one in banks, number two in insurance carriers, and number five in credit cards.
When Robles retired in early 2015, he looked back on his 20 years at the helm, writing a poignant parting column where he stated, “If I’ve had a guiding principle in my career, it is this: Take care of your people, and they will take care of your customers. I hope I’ve fulfilled that leadership mandate.”
Too many organizations neglect the role that organizational culture plays in business performance. Through a combination of purposeful leadership, personal change, broad engagement, and focused sustainability, smart leaders help shape their company’s culture — instead of allowing the culture to shape the company.
1 You can find the report, Global Human Capital Trends 2015, on www.deloitte.com.