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Culture, it’s been said, eats strategy for lunch.
Why does one auto dealership perform much better than another when both sell the same cars, have access to the same lending resources, and can hire from the same labor pool?
Why does one consulting firm continue to outpace a competitor when both have the same portfolio of services and access to the same kind of clients?
Why does one leader struggle to get top performance from the C-suite team, when the next leader manages to get world-class work from the same cast of characters?
In each case a lot of variables are at play. But the common denominator is likely culture—the work environment that nurtures the commitment and ingenuity of real people doing real work.
Kevin Oakes, CEO and co-founder of the Institute for Corporate Productivity, provides some of the smartest counsel on culture that I’ve seen in a long time. He shares that counsel in Culture Renovation: 18 Leadership Actions to Build an Unshakable Company.
As author and professor Brené Brown has said, “the best playbooks are a combination of reliable research, relatable examples, and actionable strategies.” I agree with her assessment that Kevin’s book provides great insights on how to establish and maintain organizational cultures “that create competitive advantage, unlock performance, and rehumanize work.”
Rodger Dean Duncan: In discussing culture change, you make a point of using the word “renovation” rather than “transformation.” Why?
Kevin Oakes: As we explored companies that have successfully changed their culture, it became quite clear that none of them “transformed” their culture. They didn’t do a complete tear down and rebuild. Instead, like renovating an old house, they kept the unique and hard-to-replace aspects and upgraded around them. While they often retained most aspects of their purpose and values, successful companies focused on changing aspects that would improve employer brand, consumer brand, and shareholder value.
Duncan: What do you see as the relationships between an organization’s culture and its performance?
Oakes: I’m a firm believer that organizational culture and financial performance are inextricably linked. In his first shareholder meeting as the new CEO, Satya Nadella said, “Our ability to change our culture is the leading indicator of our future success.” He went on to engineer what I consider to be example 1A of how to succeed at culture change, and in the process vaulted Microsoft to the most valuable company in the world.
A big reason this happened at Microsoft is that he and his team, including Kathleen Hogan who is the head of HR, rallied their culture renovation around some simple concepts, the most famous being Growth Mindset. Microsoft was previously a company that valued knowledge and intellect over everything else, and if you had critical knowledge you were quite powerful. That phenomena exists in a lot of organizations but is often damaging to culture. People hoard their knowledge as a protection mechanism and to wield power.
Duncan: How has this been applied at Microsoft?
Oakes: Using the concept of Growth Mindset, Microsoft changed to an attitude that knowledge sharing is power. To reinforce this, Satya very publicly declared he didn’t want a company with a bunch of know-it-alls. Instead, he wanted a culture of learn-it-alls, and continually stressed the importance of growth and development.
These cultural changes created an entirely different environment internally. And while my friends at Microsoft caution that culture change is never complete, the results are clear.
While I’m a believer in this culture-financial success link, I’m also realistic. Sometimes there are successful companies with poor cultures, or companies that previously had less-than-healthy cultures that improved it due to financial success. But those companies are very rare. When trying to lay the foundation for future financial success, building a healthy culture first is a much easier path.
Duncan: Many business leaders are educated in finance, law, or technology and may not have a particular affinity for organizational development issues. What’s your advice on their role with culture?
Oakes: First, don’t dismiss culture as too fluffy or esoteric. It’s one of the biggest reasons the organization will succeed over the long term or not, so if this area isn’t your forte then partner with experts. Typically, those experts are already in the company and in the HR department. If you don’t have strategic HR leaders, then get some.
Second, recognize that successful culture change is leader-led and supported. While creating a co-creation mindset internally is important to executing on culture change, if the leaders aren’t visibly supportive and committed to it, then it’s likely to fail.
Third, keep in mind that most boards are asking for information and measures on culture. The National Association of Corporate Directors is pushing this and has stated that “Oversight of corporate culture should be among the top governance imperatives for every board, regardless of its size or sector.” As a result, boards are initiating the culture conversation and expecting culture metrics, and senior leaders need to be prepared. Boards are also actively seeking new directors with human capital expertise. The pandemic has accelerated this trend as boards realized they did not have the necessary HR skillsets among directors.
Duncan: How can leaders adopt a “growth mindset” that enables them to be effective champions of culture issues outside their (previous) expertise?
Oakes: All leaders contribute to culture whether they know it or not, and their influence is usually larger than they think. The question to ask is what is my contribution…am I improving the organization’s culture and making it healthier day-to-day, or are my actions doing the opposite? Once you honestly answer that question the next step is to listen to your team, your department or division, and the workforce. What are they saying? What is inhibiting their wellbeing, their productivity, their engagement? What will improve it?
Growth mindset is believing that everyone can learn and grow and adopting that learn-it-all mindset vs. being a know-it-all. The best leaders are constantly learning, so my main advice is explore and learn about the culture as much as you can.
Duncan: Genuine listening is clearly important in building relationships of trust and collaboration. And you make a particularly big deal about it. Why?
Oakes: The first step in culture renovation is to develop and deploy a comprehensive listening strategy. This is a big deal because executives often think they know the culture well. But usually they don’t. Information and sentiment are usually filtered the higher up the chain you go, and to truly understand the cultural nuances and issues you need to deploy sophisticated listening methods.
Newer technology utilizes Natural Language Processing and Artificial Intelligence to allow employees to share their thoughts in their own words versus just picking answers from a list. And the system can correctly tabulate and categorize major themes, even in very large companies. We even counsel companies to analyze external sentiment on sites like Glassdoor and Indeed. This will provide a better, well-rounded view of the culture and better inform leaders what are the current strengths and weaknesses of the culture they have today.
This column was first published by Forbes, where Dr. Duncan is a regular contributor.