Leading a Successful Cultural Transformation at Your Organization

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Cultural transformation helps organizations evolve their company culture to achieve their strategic objectives. It is also key to ensuring a positive employee experience for the workforce. How can you recognize the need for cultural transformation and make this change a success?

Contents
What is organizational culture?
What is cultural transformation?
Why is cultural transformation important?
How to recognize the need for cultural transformation?
Change management in cultural transformation
9 steps to a successful cultural transformation

What is organizational culture?

Before diving into the definition of cultural transformation, let’s refresh what we know about organizational culture. Simply put, culture can be defined as the consistent organizational behaviors of employees and leaders (norms). Organizational Culture often mirrors the organization’s core values but directly reflects the organization’s leadership.

The culture of an organization is not static. Therefore, it is essential that leadership closely monitors, measures, and manages the culture of the organization they are leading. 

Here are a few questions you can ask to determine the type of culture your organization has:

  • How does decision-making work – top-down or bottom-up?
  • Are employees confident expressing their opinions even if these differ from the crowd? 
  • Are employees fearful of making mistakes, or is learning from mistakes encouraged? 
  • Is work distributed and rewarded individually or by teams? 
  • Is it a collaborative or competitive environment?  
  • Does it promote creativity and innovation, or is following the rules more critical to its success?

What is cultural transformation?

Cultural transformation begins when an organization recognizes its current culture is misaligned with its vision, mission, core values, and strategic objectives. This misalignment signals to the leadership that the culture has become a hindrance to achieving the strategic objectives of the organization. Cultural transformation takes place when the organization engages in a process to realign the culture to its vision, mission, and core values to achieve its strategic objectives. It is a form of organizational transformation.

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There are also other definitions of cultural transformation:

“Cultural transformation is a shift that can take place throughout an entire organization or in individual departments and teams. It requires changing the hearts, minds, and skills of the workforce to support the desired culture. Individuals must first have the conviction (heart) to change their behavior. Then, they must understand what behavior change looks like (mind) and have the necessary tools (skills) to change.” 

According to Prophet, “it is about the accelerated changes made by companies that focus on growing their businesses from the inside out – empowering people and the way they work through a human-centered approach.”  

It has also been described by the International Council of Management Consulting Institutes as “an adaption of norms and behaviors, within the scope of the organization’s core values, to bring these into alignment with a new business strategy or direction.”

The culture can also transform unintentionally if left unattended because of the Volatility, Uncertainty, Complexity, and Ambiguity (VUCA) of our current environment. When experiencing VUCA, organizations may be reactive and less strategic, leaving the culture of the organization vulnerable to unintentional change. Therefore, leadership must spearhead cultural transformation, taking into account the organization’s external and internal environments, vision, mission, strategic objectives, and core values.

Cultural Transformation
Cultural transformation entails change on multiple fronts, including how people behave and how they work. If done well, this has a positive impact on the business outcomes.

Why is cultural transformation important?

Though organizational culture may seem intangible, it is critical to the life and sustainability of an organization. Strong organizational culture is associated with stronger competitiveness in the market, higher employee and customer retention, and talent attraction. A successful transformation results in changing your culture into one that supports your mission, vision, and organizational goals, and empowers your employees.

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According to CultureIQ, some of the benefits of a solid organizational culture are:

  1. Employees’ overall ratings of their company’s qualities — like collaboration, work environment, and mission and value alignment — are 20% higher at companies with strong cultures. These qualities help winning cultures keep employees aligned and motivated.
  2. 86% of employees in strong cultures feel their senior leadership listens to employees, compared with 70% of employees in non-winning cultures.
  3. 90% of employees at winning company cultures are confident in their company’s leadership team.
  4. What’s more, 13 companies that have appeared on Fortune’s annual 100 Best Companies to Work For list every year also see higher average annual returns, with cumulative returns as high as 495% instead of 170% (Russel 3000) and 156% (S&P 500).

How to recognize the need for cultural transformation?

Organizations ripe for cultural transformation may observe consistently low employee engagement scores and high turnover rate of new hires and high-potential employees. The organization’s revenue may be at an all-time low as customers are lured to new competitors joining the market.

There may be a global pandemic that requires employees to work remotely and the organization to become more digitized. For example, organizations that are now moving to a hybrid model of working might need a cultural transformation. The organization’s leadership may recognize the employee population and systems need to become more diverse, equitable, and inclusive. 

Diagnosing your company culture

The above organizational scenarios are all indicators that your organizations may need a cultural transformation.  However, to make a more accurate assessment of your current organizational culture, organizations can employ a culture diagnostic tool such as Organization Culture Assessment Instrument – OCAI.

This assessment was developed by Kim Cameron and Robert Quinn at the University of Michigan and is a validated research method to assess organizational culture.  OCAI is based on the Competing Values Framework, where the organization distributes 100 points among four “Competing Values”.  According to Cameron and Quinn, these four Competing Values correspond with four types of organizational culture. Every organization has its own mix of these four types of organizational culture. They are:

  1. Adhocracy Culture – the dynamic, entrepreneurial Create Culture.
  2. Clan Culture – the people-oriented, friendly Collaborate Culture. 
  3. Hierarchy Culture – the process-oriented, structured Control Culture.
  4. Compete Culture – the results-oriented, competitive Market Culture.

The Competing Values are mapped against two organizational dimensions: Internal-External and Stability-Flexibility.

  • Internal-External Dimension: – organizations might have an internal orientation, focusing inward on development, collaboration, integration of activities, coordination. Or it might have an external orientation; looking at the market, what’s possible with the latest technology, what competitors are doing, what customers want, and it could diversify activities as a result.
  • Stability-Flexibility Dimension: – organizations that prefer to organize for stability value clear structures, planning, budgets, and reliability. They assume that reality can be known and controlled. Organizations that organize with flexibility assume the opposite: you can never predict and control everything. They prefer a flexible attitude and organization to adapt quickly to changing circumstances – focusing more on people and activities than on structure, procedures, and plans.
On the right is the Competing Values Framework with four quadrants. On the left, we see the current and preferred culture of an organization charted.

The OCAI culture profile reveals:

  • The current dominant culture
  • The discrepancy between the present (fuchsia area) and preferred culture (blue)
  • The strength of the current culture
  • The strength of the preferred culture
  • The proposed change: in what direction?
  • People’s current “pain” and any “gain” of change

If the results of the OCAI indicate a disparity between an organization’s current culture and its aspirational culture, a cultural transformation process should be initiated.

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Change management in cultural transformation

As the word implies, transformation means change, usually dramatic and significant change. There are several well-known change management models that organizations can use and modify to navigate cultural transformation. These include the 7-S model, Lewin’s three-step change model, and Kotter’s 8-step model.

The choice of model will vary based on the priorities and objectives of the organization. There are pros and cons to each. However, generally, the models are useful as a framework to guide the change process as opposed to dictating the process.

McKinsey 7-S Model

Follow these steps:

  1. Start with your shared values: are they consistent with your structure, strategy, and systems? If not, what needs to change?
  2. Then look at the hard elements (Strategy, Structure, Systems). How well does each one support the others? Identify where you need to make changes.
  3. Next, look at the soft elements (Shared Values, Styles, Staff, Skills). Do they support the desired hard elements? Do they support one another? If not, what needs to change?
  4. As you adjust and align the elements, you’ll need to use an iterative (and often time-consuming) process of making adjustments and then re-analyzing how that impacts other elements and their alignment. The end result of better performance will be worth it.
McKinsey 7S Framework

Lewin’s Three Step Change Model

  1. Unfreeze – agitate the equilibrium state in order to instigate a behavior that is open to change.
  2. Change – begin to implement your change.
  3. Refreeze – sustain the change you’ve enacted. The goal is for the people involved to consider this new state as the new status quo, so they no longer resist forces that are trying to implement the change. The group norms, activities, strategies, and processes are transformed per the new state.
Organizational Transformation Process - Lewin's 3-Step Model

Kotter’s 8 Steps Model

  1. Create a sense of urgency
  2. Build a guiding coalition
  3. Form a strategic vision and initiatives
  4. Enlist a volunteer army
  5. Enable action by removing barriers
  6. Generate short-term wins
  7. Sustain acceleration
  8. Institute change
Kotter Change Model

Check out our Learning Bite to learn more about the 9 steps to a successful cultural transformation!

9 steps to a successful cultural transformation

Once you’ve recognized the need for cultural transformation, which steps do you need to take to make sure that your transformation succeeds?

The steps below are based on Kotter’s model, which, despite its shortcomings, can be useful for managing cultural transformation. As we go through the cultural transformation steps, we use the transformation of the British telecommunications organization, 3UK, as an example of how these steps may be implemented or realized. Within four years, the organization went through a radical cultural transformation, which resulted in a complete successful overhaul of their company culture.

1. Identify how your culture needs to change

Start with a culture diagnostic, like the OCAI, to understand what your current culture is built on – Adhocracy/Create Culture; Clan/Collaborate Culture; Hierarch/Control Culture or Compete/Market Culture. Look at your organization’s objectives and look for ways to help the culture evolve to a new dimension that supports your strategic objectives and workforce needs more effectively.

For instance, 3UK was making a loss, the business was experiencing problems with network and device reliability and distribution strategy. They recognized that the organizational culture was weak, their leadership team was divided and employee engagement was very low. 3UK used a culture diagnostic tool, an Organizational Culture Inventory (OCI) from Human Synergistics, to assess its current culture and the need for change. 

2. Get leadership support

Employees are inspired by leaders and mirror their behaviors, beliefs, and perspectives. That’s why the leadership team is key to setting the behavioral norms within the organization. These norms should reflect the organization’s values.

Therefore, it is critical that every level of leadership – from the lowest to the highest level – support the transformation by emulating the desired behaviors and embracing the new systems.

Kevin Russell, the CEO of 3UK, had a long history of leading by example. One of the critical success factors was the belief in the ‘Shadow of the Leader.’ The CEO drove the cultural transformation through his management team. He chose individuals who were already well aware of how their behaviors impact business outcomes. “This humility, combined with other characteristics of drive, passion, and intellect, allowed the members of the team to quickly engage their people in the change agenda.”

3. Focus on key behavioral shifts

Create a vision which everyone in the company can understand and remember to set goals. Target your interventions on a couple of critical behavioral shifts you want to achieve. Therefore, if you are attempting to move your organization from a Hierarchy Culture to a Clan Culture, you would focus on doing things together (building teams, people matter), commitment, empowerment, cohesion and engagement. Then, include these new behaviors in your performance management system so that you can effectively measure and develop them.

At 3UK, the leaders expanded on the time spent reviewing behaviors in the employee performance reviews and coaching. The company appointed sixty change champions from different departments. Their responsibility was to provide continuous, real-time guidance and feedback on behaviors. Furthermore, “(t)he target culture behaviors selected to enable the business strategy were consistently role modeled by the leadership since 2007. The broader leadership team was given a framework to use in performance evaluation and coaching.”

4. Implement formal and informal interventions

Formal approaches in cultural transformation would include new policy or policy changes, introducing new metrics, and incentives to achieve the desired results. Conversely, informal interventions would comprise informal interactions between the managers and the employees – opportunities for engagement.

Throughout their transformation process, 3UK introduced new policies and systems as part of the formal intervention. They changed their Flexible Working Policy and Annual leave to better reflect the desired culture. The company integrated the critical behaviors into their performance management system. In fact, these behaviors were given equal weight to outcomes in assessment for individuals. They also tied bonuses to company performances.

Informally, there were “interactive visits to all areas of the business by the CEO. The structure for meetings’ procedure provided unity and an opportunity for all to have a say.”

5. Effectively communicate change

Be transparent about the changes you’re trying to achieve, address employees’ concerns and let them express those concerns. No matter how advanced we become, there is nothing more powerful than communication that is clear, honest and consistent. This type of communication builds trust and would engage employees in the process.  Be aware of the most effective way to reach the different demographics (generational, cultural and geographic) within your organization and customize your communication campaign accordingly.

3UK lacked transparency about how the business was doing financially. The company reasoned that if sensitive information was to reach the market, it could potentially be misinterpreted. Some information was shared, however, the communication was limited and not structured or sufficiently agile. This way of communication made people suspicious and allowed rumors to spread.

The company operated at multiple sites and recognized the need to break down information silos through open and fast communication across all sites, including retail stores and customer centers. “The business also became more mindful of including people in meetings from outside Head Office, either in person or via teleconference. Communications were used to talk about the company’s financials, but more importantly, to embed the cultural change.”

6. Overcome barriers

Find out what the obstacles to success are and address this at your organization. Many times, transformation or change is met with resistance. It is important to quickly identify from where the resistance is coming and intentionally work toward removing the barriers to change.  

Regardless of the change model used, Change Champions play a key role in the transformation process. Change Champions are employees at all levels within the organization who promote the change process formally and informally.

As part of their cultural change process, 3UK even transformed the workplace design to remove physical barriers and to reflect the new open culture. In their head office, the company refurbished their cafe to make way for a central meeting space to further reduce silos and facilitate better teamwork. They also remodeled the foyer to show a more open culture to visitors and employees. In addition, “(f)ree-flow workspaces provided more opportunity for collaboration. Some senior management team members removed accessibility barriers of offices and created team-meeting areas.”

7. Celebrate short-term victories

By setting short term goals (next to long term goals), achieving them and recognizing your success, you will further strengthen the support for the changes you’re making. Short-term goals also provide quick wins. Quick wins further engage employees in the transformation process and and keep the momentum going.

At 3UK, the HR team was looking for ways to quickly reinforce the openness and trust, which were the key characteristics of the transformed culture. In the old reality, the company required employees to be in the office between 9:00 am and 5:30 pm, which didn’t exactly imply trust. To resolve this, the HR team implemented a Flexible Working Policy. Managers and employees gained more flexibility to organize their work days. Employees could also buy five more vacation days on top of the days they were already entitled to.

These changes to the working policy ensured the employees’ engagement in the transformation.

8. Reflect on the changes

What are the positive outcomes of the cultural transformation and how can you build upon those? What can you do differently? How has the transformation impacted your business performance? Has there been the change in critical behaviors and mindsets? 

To answer these questions, conduct another culture profile assessment with the OCAI to observe what changes have been made and how much further the organization has to go achieve its desired culture profile. 

3UK re-assessed its culture using an OCI and an engagement survey. There was a noticeable shift from the former culture profile to the desired culture profile, which became much more constructive, as defined by the OCI tool. They also observed notable improvements in staff turnover, employee engagement, and customer numbers.

9. Reinforce the change

For sustained change, you need to treat the transformation as a continuous process and work on reinforcing it further by recognizing the positive effects of the change.

In your recruiting efforts, focus on hiring people who are organizational fit. Considering the transformation that has begun and will continue, including a cultural fit assessment in the recruitment process will help to more objectively identify the candidates who are the right fit for the new culture.

To buttress the transformation, the organization must also invest in continuous development that builds and strengthens the competencies that support the new culture.

At 3UK, they revised their recruitment system to reflect culture. “The formalization of the new organizational behaviors and Performance Management process enabled clearer choices that should be made around who would work in the organization and the criteria for promotions.”

They also worked on other activities. “In the area of professional development, there were Leadership Conferences for the top 50 leaders and targeted behaviors were disseminated. Culture champions helped to conduct ‘3 Story’ workshops, aiding the managers in introducing the culture to all employees. A leadership program for Mid-Managers was introduced with senior team members attending first. Induction programs and other learning and development programs were redesigned to be consistent with the culture.”

All in all, the cultural transformation at 3UK helped the company significantly grow their business and grow their customer base by 77% while reducing the operating costs. Changing the culture enabled the organization to achieve long-term success.

Wrapping up

Cultural transformation is a long-term effort, but the results are rewarding and well worth the investment, as demonstrated by 3UK. Therefore, cultural transformation shouldn’t be the last resort to save your culture when it’s failing. Instead, focus on constantly monitoring and managing your culture to strengthen your organization and achieve its strategic objectives.

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