High Performance Culture Change by. Curt J. Howes Organization Performance Strategies

High Performance Culture Change by Curt J. Howes Organization Performance Strategies What is Culture Culture is to the organization what personality is to the individual. It is the pattern of shared beliefs, values and assumptions that are acquired over time and shape behavior. Culture determines the way things are done around the work place, how decisions are made, how customers are taken care of, and how employees are treated. In essence, it is what gets rewarded formally and informally. Culture is not a stand-alone end state but an integration of all the factors that shape behaviors including processes, policies, systems, rewards, structure and most importantly - - leadership. Examples of culture elements include: open communication, safety, performance focused, customer focused, teamwork, boundaryless, speed, and innovation, to name a few. The selection of attributes needs to be based on the organization s strategies and objectives. They then need to be embraced by leaders with an iron-clad commitment. Relationship between Culture and Performance Culture has been found to have a significant impact on the performance of an organization. Beginning with the landmark book, In Search of Excellence, in the early 1980 s by Peters and Waterman, they found that there were key dimensions or culture attributes in organizations that were determining factors for high performance. This was a step change from the traditional focus on strategy and operating controls wherein managers at the top made the decisions and employees carried out the work as directed. They indicated in their book, without exception the dominance and coherence of culture (has proven) to be an essential quality of the excellent companies. About that same time, Japanese companies began to dominate world markets through a culture built on quality management. Even though Japan is an island with limited natural resources, they were able to galvanize their people to superior performance by capturing their hearts and minds through a common performance system of continuous improvement or Kaizen to meet customer needs. Compelling research on culture and performance was conducted by Kotter and Heskett (Corporate Culture and Performance). By measuring the performance of companies from 1977 1988 they found that companies with an adaptive culture that had a balanced focus on stakeholders, customers and employees, stock share price grew an astounding 900% versus 74%for those companies that did not have those same characteristics. Net income had increased 755% more than the other companies while revenues increased 682% versus 166%. Perhaps the company that best represents the power of culture is General Electric (GE). From the early 1980 s until 2000, GE grew more wealth than any organization in the history of the world. Under a leadership led by Jack Welch, he set a direction for all of their companies to be either # 1 or 2 in their industry or get out of the business initially, although that focus was adapted later on. He developed a business model that required tremendous focus on leadership alignment and development and used mechanisms like GE Workout to embed a culture to eliminate waste, to break across organization boundaries and to engage in the relentless pursuit of eliminating bureaucracy through quick decisionmaking and accountability. Later he built on this success by driving deeper change through Six Sigma. 1

How do you Shape a High Performing Culture? The culture of an organization can be transformed. It is not so much a process of change as it is a process of shaping. In some cases the base culture doesn t need to change, but the standards of performance for that culture need to be elevated. Either way, it takes a strong concerted effort by the leadership of the organization to shape a culture to a desired future state. It is a journey requiring an effort that is sustained over an extended period of time. The first step in the journey is to develop a committed leadership team that has a common vision for the organization. This includes defining the culture attributes that are desired and required for the organization to be successful or high performing. With that, the leaders can develop and leverage their leadership influence to make decisions and to initiate actions that can shape the culture. This requires a different mindset from traditional management. Transforming the culture is not a project that can be engineered, rather it is a process of social architecture. The key words are process and social. This requires the engagement of employees. For leaders to be successful, they need a compass and roadmap on how to proceed. That requires an approach with steps of what needs to be done or addressed. In this way the content for the change is the process or approach that is laid out. Some leaders feel like they need more content of what to do, but the action planning approach of making real time decisions based on the diagnosis of specific issues is the most effective approach. What to do can t always be prescriptive without root cause analysis. Once the diagnosis is conducted, a variety of resources can identify solutions to build a culture change program. Guidebooks, employees, external resources are all available to help define a course of action along with management insight. Since culture is a long-term effort, and since changing employee assumptions, values, and beliefs is challenging, the best way to start a culture change is to focus on behaviors. By focusing on behaviors, employees become clear on the expectations for acceptable and unacceptable actions. The soft side of culture change becomes very hard as behaviors can be observed and measured. Many of the factors that impact behaviors can be analyzed such as policies, practices or just outdated traditions that have evolved over time. Also, behaviors can be changed very quickly. I can decide to start an exercise program in five minutes, a new behavior. If I sustain it over a period of time, it becomes a part of my lifestyle, in organization terms that would be like a new culture. Of course for an organizations culture that would require the majority of employees to have adapted that new lifestyle. In that way, culture change is the story of the majority and not the few and how to create the norms that sustain it. Also, by focusing on behaviors, the key levers in the organization that have a significant impact on the culture or desired behaviors can be analyzed and changed. For example, if teamwork is a desired set of behaviors, but the organization only rewards individual accomplishments, then it is easy to see what behaviors the organization will get. There are multiple dimensions that will have a significant impact on the behaviors of individuals that may need to change. In some ways culture change is an outcome of the coordinated interventions taking effect over time. Key Steps to Culture Change There are three high level Phases to engaging an organization in a culture change process. First is the Planning Phase, followed by the Implementation Phase and finally the Sustain Phase. Each of these phases will be summarized. 2

Planning Phase - - during this phase all the initial planning to develop the approach forward is determined. This begins with: 1) establishing a leadership team around a common vision, 2) determining the desired culture attributes and conducting a high level assessment, and 3) developing the plan and tools for implementation. Leadership Team Alignment: The initial ideas for changing a culture is often initiated by a single leader, however, for the change to be successful, the commitment of the entire leadership team will need to be developed. That way the entire organization can be led with consistent messages and if a key leader is transferred or leaves, the effort can be sustained. For the employee, the change becomes believable. This requires the senior leadership team to meet in offsite meetings to address key business issues, to develop a common vision and to develop a commitment for an overall path forward. Desired Culture Attributes: One of the first actions is to develop a culture model for the organization. This is a combination of conducting a diagnosis of organization issues and challenges, but also envisioning the kind of organization people want to create and to be a part of. The number of attributes should be within the range of 5 8. For each of the attributes, key behaviors need to be defined that illustrate what people would be doing if living that culture attribute on a daily basis. Plan and Tools: The plan forward will need to include the core transformation plan or process and the ancillary plans. The core plan will focus on the process to drive the change from a centralized headquarters group to the local sites. This is where the real actions of organizations are carried out and therefore it is important that the change be impacted locally where the rubber meets the road. The key elements of the overall plan would include: a) building a local leadership team, b) conducting a local culture assessments, b) diagnosing key issues and constraints to the desired culture, and c) developing a local implementation plan. The ancillary plan is an approach to embed the culture through other change initiatives. This would include using the culture model as a basis for assessing and designing business processes. This could include such areas as Procurement, HR, IT, Finance or any other support function. Also, any re-design in company policies, procedures and management practices such as performance management need to ensure they are developed consistent with the desired culture. These areas can be limiting or constraining factors to culture change, particularly since they cut across the entire organization, if not addressed. On the other hand, some of these changes will drive the kinds of behaviors required by the new culture. If being performance focused is one of the desired culture attributes, then implementing a performance management process will help enable the organization to realize that culture attribute. Part of the planning process includes developing tools to help enable the culture change. This includes instruments to measure culture, workshops to communicate and teach the culture elements, team leadership guidebooks, and training materials. These tools provide the mechanisms to cascade key culture behaviors down through the organization. Implementation Phase this entails the next step of taking all the tools and process steps forward into the actual work of the organization. Consistent with the planning phase, the implementation steps usually include: 1) Organizing a central support change group, 2) developing local unit change facilitators, 3) conducting a start-up rollout for each local unit, 4) developing and implementing a localized implementation plan, and 5) supporting the ancillary plans where appropriate. Central Support Team: Even though the core implementation process moves to the local units, it is important that a centralized team be established to develop common tools. A central group can provide consulting support, keep the overall change integrated, identify limiting factors that need to be 3

addressed from a headquarters perspective and facilitate the transfer of learnings and best practices. This change process is very dynamic requiring real time thinking and action planning in the context of an overall plan. In that sense, the organization takes on the aspects of a learning organization as it tries and tests solutions and then adjusts its approach throughout the journey with the support of a central group. Change Facilitators: Local units need dedicated individuals who can focus on facilitating their specific change process. Individuals who know the local organization, have credibility, and have the capacity to manage communications and to help facilitate the change process. Since these individuals do not normally have a background in change management, it is necessary to conduct in-depth training to prepare them for these roles. They will be the right hand person to the local manager in helping the culture change to be successful. The role typically starts with the basic function of coordinating various activities and meetings, then to managing a local communication plan, and then to being able to advise and influence local employees. Higher-level skills are necessary for the change but can be leveraged from the central headquarters team depending on the ability and training of the local change facilitator. This includes designing change approaches and managing the overall change process with an understanding of the key elements that will sustain the change. The change facilitator training will include an understanding of all applicable elements of the organizations change plan that could be larger than the culture element, training in analysis and diagnostic skills and training in the principles of change management and in facilitating groups. Start-up rollouts for local units: For each local unit to get up and running in the culture change effort, a focused start-up of 2 3 weeks would be planned. This is usually staggered across sites to allow the headquarters group to provide concentrated support. Even though culture is the primary focus of this white paper, all changes need to be integrated, so any other changes that would impact a local site, should be included in the start-up and ongoing implementation. The key actions during the start-up are to: 1) visit with the site manager to lay out the approach and to identify who ought to be on their local leadership team, 2) conduct a leadership start-up meeting to review the approach and build a common commitment, 3) conduct a local culture assessment with the involvement of employees as an assessment team, 4) complete a diagnosis and develop a report for the leadership team, 5) based on the diagnosis, develop an ongoing implementation plan to address the key issues, and 6) conduct supervisor and employee communications to give them the results or the assessment, to get further input, to communicate the plan forward, and to indicate the expected role of employees and the value expected as a result of the process. Localized Implementation Plan: Each unit will develop an implementation plan that will take them through the next year. The plan will be based on the actions that can be taken based on the diagnosis developed during the rollout phase and the initial plan will be prepared during the start-up. Since the specifics of the plan will vary based on the culture attributes desired, the key gaps identified as priorities, and the diagnosis for the gaps, a pre-determined plan can t be prescribed at this point. However, the plan will be developed as a result of the process of input from external consultants, local managers, and employees. There are common elements to the plan. A local communication plan linked to a corporate communication plan Local leadership team reviews and action planning Performance and behavior targets and milestones Workshop approach Design and alignment of rewards and recognitions to desired behaviors Redesigning local practices and procedures including the redesign of selected processes. 4

Focus groups addressing specific issues and applying innovation methods There is an unending list of things that can be improved. The key is focus by setting priorities, deploying resources and setting a steady pace. It is important to embed the culture into the ongoing way work is done. Since the strongest determinant of culture is group norms, the change approach needs to cascade the culture down into each work group. Leadership teams can use simplified ways of getting each unit to assess their own behaviors consistent with the culture. Actions can be taken to create alignment. Ancillary Projects Support: Since the culture can be impacted by a variety of organizational processes and practices, the desired culture model should be used as a framework in all aspects of change throughout the organization. That means that each project team should use it as a reference to ensure that any changes they design will support and enable the desired culture. By the same token, when key processes, procedures and practices are found to limit or constrain the desired culture, then they need to be looked at as possible change targets. The central support team under the direction of an overall change manager should take the lead in embedding the culture into the ancillary project efforts. Sustain Phase - during this phase the ongoing monitoring and sustaining of the culture needs to continue. In some ways the implementation phase never ends, as the organization continues to evolve. However, the level of intensity of change activities will decrease as the newly desired behaviors are mostly embedded in the organization and the performance that is expected from the desired culture is achieved. The key elements of this state are: 1) continuous reinforcement, 2) ongoing monitoring and measurement, and 3) intervention where adjustments are necessary. Continuous Reinforcement: Reinforcing the desired behaviors of a culture is the most important aspect of sustaining the culture change. This can be done by integrating the desired culture behaviors with the appraisal process, along with providing rewards and recognition consistent with the desired culture. As new employees are assimilated into the organization, their orientation can be centered on the desired culture attributes. The culture model can continue to be communicated and used as a basis for local self-assessments. The actions and behaviors of leaders will continue to provide the most persuasive examples of what the culture should be. Ongoing Monitoring and Measurement: Periodic measures of the culture will be important to monitor progress and to sustain forward movement. This can be done through an annual organization survey that includes culture-based questions. In addition, it is important to use the core culture assessment tool in conducting periodic local assessments. In both cases, it is important to conduct local focus groups to gain better understanding of the meaning behind a survey instrument. Culture needs to be included as a focal point for leadership discussion periodically at the headquarters level and at the local leadership team level. Interventions and Adjustments: As business needs change, new employees are hired or transferred in, and as new structures are adapted, there will be an ongoing need to adjust the organization around common culture dimensions. There may also be a need to evolve some of the culture attributes over time. In any case, pinpointed interventions will be important to continue to shape the culture and to continue to communicate that the elements of the culture are still important. Much like safety is an ongoing culture attribute of operational and plant based companies, all managers know that as soon as you back off of safety programs, the safety performance of the organization will also diminish. 5

Conclusion Shaping an organization s culture can be a challenging and an exhilarating process. When managers realize that they are in the people business, and that it is only through their people that the organization s objectives are achieved, then the importance of culture begins to be valued. It is then that managers take an important step to becoming effective leaders. In fact, the process of leadership development, which wasn t addressed specifically in this paper, is an important aspect of the culture transformation process. Establishing a high performance culture creates the capacity of an organization to achieve its vision and strategic objectives. This is the ultimate measure of success from the shareholders perspective. From an employee perspective, individuals feel pride in being a part of something special, in achieving a purpose beyond just a job, in contributing to something where they can make a difference and where they feel valued. It would be an organization that employees could confidently recommend to friends and family that their organization is the best place to work. Key questions to Developing a High Performance Culture: Does the organization have a clear definition of what High Performance is? Do leaders and employees have a drive for High Performance? Are the attributes that drive High Performance defined and reinforced? Are the organization s processes and practices aligned for High Performance Are employees engaged in the process of developing High Performance practices? Are leaders and employees excited to attack new challenges and make impact every day? Does the organization have institutionalized practices for excellence and innovation for continuous improvement? For additional information please contact Curt J. Howes at cjhowes@opstrategies.org or visit the website for Organization Performance Strategies at www.opstrategies.org 6