"The basic philosophy, spirit and drive of an organisation have far more to do with its relative achievements than do technology or economic resources, organisational structure, innovation and timing."
Few people in business today would recognise the author of this quote. It is Thomas Watson Sr., the founder of IBM. And although he made the observation more than 30 years ago, the truth and relevance of it is still acknowledged today. For employees and managers, perhaps especially for managers, there is a large part of what makes their organisation effective - or ineffective - that lies beyond strategy, beyond structure, even beyond process.
As Human Resources executives have helped manage their company's human capital, they have also been testing, adding and refining tools and approaches for shaping a high performance culture, based on what has worked and what hasn't worked. Here is a quick overview of what our clients have told us about what works, and what doesn't work, in managing cultural change.
What works: Elevate Human Resources, and make the Head of Human Resources the owner of the change process. Every program and process in the Human Resources function, whether talent, compensation or benefit related, will either support or undermine change. That is, it will serve to get a company's "human organisation" better prepared to understand and carry out change. If not aligned, they can serve to confuse or undermine the change. It is HR's policies, programs and processes more than those of any other function in the company, that bring powerful reinforcement and seamless execution to the process of changing the culture.
For example, in changing the culture at Home Depot, as described in the April 2006 issue of Harvard Business Review, one of the first things the new CEO, Robert Nardelli, did after arriving was to hire a trusted colleague from GE, Dennis Donovan, as corporate head of Human Resources. He also made Donovan one of the highest paid executives in the company. By turning to someone he trusted, Nardelli signaled both his intent to change Home Depot's culture and the key role that HR would play in the process.
What works: Make it concrete and specific for all employees. Develop a global competency model in which the competencies are core to the change you are making. Develop behavioural descriptions of success and failure for each competency, for every job category, from entry level to transformational leader. What doesn't work is being unclear with employees about what behaviours on their part are consistent with that change.
What works: Start at the front door. Involve your exemplary incumbents heavily in the selection process, especially for middle-level and senior-level positions. At the entry-level, as much as possible, hire for fit and train for skill. Develop selection mechanisms tied to your global competency model.
What works: Measure it in a granular way at the manager level. There are a variety of normed and validated instruments available that can enable you to measure, in effect, how employees view your current culture, how they would describe the "ideal" culture, and the gap between the two.
But it can be much more useful to take measurement down to the individual manager level and measure - in a multi-rated process - how consistently they use/model the competencies most important to your culture. To make this possible, build competency-centered assessment into the short-term variable pay program and your performance management system. Particularly at higher levels (i.e. manager level and above), structure the variable pay program so that to earn above target or maximum awards, managers must perform above standard in both the "What/Financial Targets" and the "How/Competency Rating" dimensions of performance.
What works: Target your key populations to accelerate the process. For managers and leaders, be sure to define the behaviours that lead. These are behaviours that create the environment in which the culture can flourish. For example, if you are seeking to establish a culture that emphasises cooperation across organisational boundaries, define what managers need to do to encourage employees to do that.
For high potentials, or those that are an important part of the future of your company, provide sufficient time and developmental resources that each of them understands, practices, masters and spreads the skills and behaviours most closely associated with the change you are seeking to make.
What doesn't work? As controversial as it may sound, an "average investment" approach in which you expend the same amount of energy on all employees.
What works: Align every detail of your Learning and/or Career Development programs. It may sound extreme, but no one in your company should attend a single day of training that is not, at a minimum, aligned with the overall change you are seeking to make. Or at least, they should never do so at the company's expense. Ideally, every day of training should clarify the change, share new techniques on how to be part of it and provide support for practicing and mastering those techniques. If you offer in-house training options, have a team review every program and every document to ensure its alignment. If your company provides a full-featured career development program, make sure that all of the competency models, assessment tools, developmental resources, as well as the look and language of the program, are synched up with the new culture.
What works: Change your organisational structure late in the process or not at all. Carving out new units, reintegrating old ones, redefining the "go-to-market" organisation or demand chain: these methods do not get at the core of what needs to change, what needs to change is the work people do and how they do it. Worse, structural changes can serve to, among other effects, create new classes of winners and losers. For that reason, they can even divert real energy and commitment away from true change.
As Doug Smith noted in Taking Charge of Change, "Only people change skills, behaviours, and relationships, and only in the real work that they do. Not systems or strategies or structures. Not visions or cultures or processes. People... but new directions and designs help only when the people who must change behaviours engage in understanding and shaping them. Until managers enlist people to perform and change in the context of real work, elements of organisational direction and design as well as discussions about them remain, like quicksand, no better than the illusion of change."