How to transform organizational culture
CEOs in the turmoil of organizational transitions often ask their change management consultants: How do I transform my organization? What lessons can I learn from the experience of others?
Changing business organizations is like fixing a racing car while speeding at 200 kilometers an hour. Leaders have to face the challenges and urgencies of running the business on a day to day basis while at the same time build a new organization for the future.
Rule 1: Transformation is the CEO's business
At the risk of sounding redundant, Rule 1 is the first truism of successful change. However it still needs to be said: The CEO must be in the driver's seat and must visibly influence the change. Note the word "influence" as culture change is more complex than just leadership being in the driver's seat and is certainly beyond one individual's control. If you are a new CEO trying to change an old, existing organization, the challenge is doubly formidable.
The basics of leading change are, however, deceptively simple: state your dreams and convictions loud and clear, dramatize the link between your vision and the firm's future survival and success, live the change and do it consistently… everyday. And most importantly, get everyone on board! Your senior management team is a good place to start. You and your senior executives need to be on the same wavelength in terms of your vision and values and behaviors. You may want to start defining a specific brand of leadership, one which embodies the new assumptions and values of the organizational culture you want to reinforce. Working effectively as a team is another pathway which needs to be explored. Identifying key priorities and mapping out a roadmap for the whole organization facilitates the journey. Transformation is the main job of the chief executive, not a task to be delegated to her HR person.
Rule 2: Chart your destination and post signs along the way
Articulate your view of why the business exists, where you want it to be in the future, the most important principles that will guide the organization and the critical performance areas you want the focus on. Do this together with your leadership team. When Andres Soriano, Jr. took the reins of the San Miguel business empire, he took his senior executives to a 3-day business retreat in Honolulu to collectively ponder on these issues.
They came back with a team name and an agenda for culture change. They called themselves "SMC-squared" or the Senior Management Committee of SMC and met on a monthly basis for the next several years to lead the change on San Miguel's century-old culture. Ten years later, the cultural terrain of the new San Miguel was amazingly close to the original map.
Rule 3: Use multiple levers to catalyze change
This rule relies on systems thinking which views organizations as living organisms composed of many "sub-systems" and as part of many "super-systems" above it. As such, any change in its super- and sub-systems affects the whole. In the case of changing corporate cultures, it may be helpful to think of transformation as having the following sub-systems: leadership, structures, systems, competencies and strategy. Systems thinking also suggests that transformation happens as a result of many small things, happening over time.
When SMC2 planned the new San Miguel, it used the multiple-lever approach starting with defining its vision and core values. Under the leadership sub-system, it defined a leadership brand, moving from autocratic to a more participative style, from a reactive to a more future-oriented posture and from a focus on products to a focus on markets and the customer. The company set up an accelerated management succession program, installing new and young managers who embodied the new style into senior executive positions. All supervisors and managers underwent in-depth orientation into the San Miguel Management System, a management development training center was formally established, technical centers of excellence were set up and a formal management succession program was put in place.
Rule 4: Prioritize and sequence your change levers
Your behaviors as well as those of your senior executives are the primary levers to induce culture change. These behaviors include:
• Deliberate role modeling, teaching and coaching. This would include public verbal declarations, memos, as well as highlighting of values and norms in coaching and mentoring situations.
• What you pay attention to, measure and control. A powerful aspect of this attention-giving mechanism is the occasional and purposive "emotional outburst" of leaders to violations of key values and beliefs. The other side of this is what you ignore or don't react to. At a more formal level, planning and monitoring processes (long range planning and budgets) provide the forum through which messages of attention are sent.
• Promotions and pay increases tied up to the practice of new assumptions and values. Also related to this are the criteria for recruitment, derailment and retirement.
Secondary levers of change will work only if the primary mechanism of "leadership by example" is in place. Among the most commonly used secondary mechanisms of change are: structure, systems and procedures, facilities, physical layout and arrangements and formal policy statements. In the early stage, using some element of coercion can also be a powerful lever. This can take the shape of moving aside or even firing some senior executives who could not adapt to the new values. The author, when he was an OD manager in an international chemical company, facilitated a worldwide meeting of the newly appointed CEO who dramatically thrashed two highly visible management reports as a symbol of a new management style.
Rule 5: Use a planned change process
Adopt a systematic process for leading change. There are numerous versions, one of which is a compilation by the author, as follows:
1. Mobilize leadership commitment for change through a collective analysis of issues and challenges
2. Design the desired future state through a shared vision
3. Plan the way and manage resistance to change
4. Execute the plan through the 3C's: Consult, Communicate, Coordinate
5. Align policies, systems and structures
6. Measure, monitor and sustain progress
The process outlined above is just one example of a systematic transformational approach. Organization development specialists use large group summits as a way to involve and engage a critical mass of change agents. A critical mass would typically consist of the second tier of leaders and would include a diverse group of employees coming from different levels, functions and geographies. An im- portant outcome of these dialogues is a collective mindset and commitment to a set of actions leading to a shift in the organization's culture.
In a study of successful corporate transformations, some common threads in terms of initial activities (even before working on a formal change plan) are evident: 1) CEOs leading successful change build initial credibility by attending to the brush fires first, in the process, ensuring short term turnaround of the business; 2) reorganized the senior management team, often by bringing in new blood; 3) used a top down and bottom up approach, creating a critical mass to jump-start the transformation; 4) initiated a steady and continuous build-up of activities instead of stop-and-start mega-initiatives; 5) paid a lot of attention to people issues and provided safety nets to ensure acceptance of change; 6) formed a change agent unit chartered to steer and monitor the transformation; 7) used the authority of their office to proclaim, inspire and even occasionally coerce the new assumptions and norms into the mainstream culture. The privatization story of one of the water utility franchises in Manila provides a classic example of these change steps and how following these steps contributed to a successful cultural change.
An approach by Roland Sullivan, a thought leader in organizational transformation, lays out a systematic four-tier approach called Whole System Transformation. This approach culls Sullivan's vast experience and research on organization development and provides a four-phase progression towards dramatic shifts in mindset and business results.
Your mix of interventions will depend on your collective analysis and change objectives. Do not front-load your interventions. Remember that Rome was not built in a day, so creating a new culture will take some time. Spread out your change initiatives (be guided by Rule 4) and steadily build it up instead of undertaking start and stop mega-initiatives.
Rule 6: Don't monopolize ownership of change
Create as many co-owners of your culture change program. Involvement is the door to ownership and commitment. Enlarge and widen your leadership network. One CEO started with his immediate senior leadership team, then invited the next two levels of managers to a second conference and in the following 12 months, involved the rest of the company through a series of large group dialogues and action sessions. By year-end, the CEO has spread out ownership of the change program to his 12,000 employees throughout the world. Transformation process has been facilitated by conventiontype meetings where large groups of employees dialog and co-create a shared vision of the future. Another tool to consider is to form task forces to work on corporate issues and invite a cross section of employees to be leaders and members of these problem solving teams.
Rule 7: Expect and, then, manage resistance to change--- it's natural
The old culture (especially of successful organizations) is a source of self-esteem and a justification of past successes. Expect resistance to your vision and new ways of doing things----these will be perceived as "untested solutions" until dramatic, positive results will bear you out. So, remember to honor the past… build on strengths of the old culture. In the meantime, what you should do is to constantly challenge old assumptions and consistently declare, articulate, pay attention, reward and even force through these new assumptions.
"Legitimizing" resistance means that you & your senior executives will have to exercise active, empathetic listening. Create a climate conducive to openness, one which will encourage people to air their concerns. Teach supervisors and managers throughout the organization how to listen and encourage feedback.
Rule 8: Dramatize the change
Create drama in order to convey your message of seriousness of intent. The most dramatic to the organization would be changes in yourself and the behaviors of your top executives. Do not hesitate to use all media including use of gimmicks to create a headline effect. Remember, that these are underlinings for emphasis and need to be substantiated with your leadership by example. "Drama" could also include bringing in new blood in your executive teams, promoting young high potentials to highly visible positions, firing a recalcitrant executive, doing away with a "dysfunctional tradition."
One of the hallmarks of the San Miguel Corporation transformation from a family style organization to the professional stature it currently enjoys was the highly visible and accelerated movement of young midlevel managers to senior management positions in a dramatic period of just 3 years! The company also in- stituted a new corporate image program consistent with its new values and strategies.
Rule 9: Build change structures and networks and provide resources for the change process
The new CEO of an international food conglomerate used TQM as his platform and structure for culture change. He chartered all his divisional presidents to transform their management committees into Quality Councils and used the Malcolm Baldrige Quality Award as his metric for success. Likewise, transform your current structures or create new ones to lead and provide support to the change program. Ensure that you get an adviser who is knowledgeable on organization development and change management. Build up the change management skills of your HR people. They will become your change agents on the ground. Provide sufficient budget for the change process itself---this is often underestimated in most change efforts. The most important resource for the change process is yourself. Take care and love yourself. Taking care of yourself means giving yourself credit and not disparaging your own efforts. Loving yourself means taking a balanced view of life and staying in touch with your purpose. Take time to invigorate yourself and your life as you step up to the challenge of recreating your organization. Good luck!